Full text of Economic Report of the President : January 1952
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The Economic Report of the President TRANSMITTED TO THE CONGRESS *o-i* Januafy 1952 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 16, 1952 Together With a Report to the President THE ANNUAL ECONOMIC REVIEW By the COUNCIL OF ECONOMIC ADVISERS UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1952 Additional copies of this report are for sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. G. Price of single copy, 55 cents (U) LETTER OF TRANSMITTAL THE WHITE HOUSE, Washington, D. C., January 16, 1952. 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 1952, prepared for me by the Council of Economic Advisers in accordance with section 4 (c) (2) of the Employment Act of 1946. Respectfully, (in) Contents Page THE ECONOMIC REPORT OF THE PRESIDENT The Nation's economy grows stronger How we use our strength The harder job ahead The real meaning of economy Top issues for policy action . Reaching our objectives for defense strength Aiding other free nations Expanding our productive capacity Supporting civilian strength Controlling inflation Requirements for additional taxation Saving Credit control . Price control Rent control Wage stabilization Equality of sacrifice Summary of legislative recommendations Summary of economic developments in 1951 1 2 4 8 13 15 15 16 17 18 19 21 21 22 23 23 24 24 24 25 THE ANNUAL ECONOMIC REVIEW, JANUARY 1952 (a report to the President by the Council of Economic Advisers) 33 (V) To the Congress of the United States: The past year has been marked by great gains in our basic economic strength. These gains have enabled us to move forward toward our security objectives with far less strain upon the economy than would otherwise have been possible. It is the tragic necessity of our time that we and other peace-loving peoples must devote so large a part of our resources to building up our military strength. But it is because we seek peace—a just and lasting peace—that we have shouldered this burden. If, despite our best efforts, another world conflict should come, the cost would be beyond description. If we succeed in the effort for peace, our productive ability will enable us to achieve a material well-being never before known. This effort for peace finds the people of the United States substantially in agreement. We all know that we must stand firm against aggression, build up our defenses, cooperate with other free peoples, and hold the door open for the fair settlement of international disputes. Our basic international policy is backed by national unity. But our foreign policy cannot succeed, if there is excessive division on domestic matters. Economic issues and international issues are now inseparably connected. It is a fundamental fact that the defense program itself, and our aid to friendly nations, must be related to the capacity of our economy. If we overestimated the strength of our economy, we could weaken our power to resist aggression. If we underestimated its strength, we could fall short of doing the things that can and must be done to prevent aggression. Without continued economic growth, the defense burden could make us weaker year by year. Without economic stability and control of inflation, the resulting hardships could disastrously affect millions of our people. Without agreement on economic fundamentals at home, group conflicts or political conflicts could weaken our ability to withstand the communist threat. It is only natural that the scope and operation of a program of this magnitude should evoke some disagreement and criticism. This can be constructive. But it would be most unfortunate if, in those economic matters which affect our world security, we were divided by narrow partisanship rather than united by the desire to find the best possible solution. To agree upon wise policies, it is essential to know and understand the facts. These facts are available, and they are compelling. They show that our basic economic strength is greater than it was a year ago. They point the way to the necessary policies that we should follow. They reveal why all of us can and need to stand upon common ground. The Nation's Economy Grows Stronger The decision to resist aggression in Korea was not the first postwar evidence of American strength which confounded the communist imperialists. The first and equally important evidence came earlier, when the American economy after World War II, instead of slipping into a depression, moved forward to greater strength. Comparing the year 1947 with the year 1950, before our economy was greatly affected by the new defense program, civilian employment rose from 58 million to 60 million. Unemployment during those years averaged about 2.7 million, which was low by previous peacetime standards. Our total annual output, measured in uniform (1951) prices, rose from about 270 billion dollars to about 300 billion. This growth in our economy accelerated rapidly after the Korean outbreak. In the year and a half since then, our annual rate of total output, in terms of 1951 prices, has risen by about 30 billion dollars, or 10 percent, to 330 billion dollars. By the end of 1951, civilian employment mounted to about 61 million, and unemployment was about 1.7 million. Thus, comparing 1947 with the current situation, the annual output of the economy, in constant prices, has risen by about 60 billion dollars. Total civilian employment is now about 3 million higher than 4 years ago. This expansion of our economy has occurred because the American people have never lost faith in progress. They have rejected the idea that we have reached, or will ever reach, the last frontiers of our growth. Businessmen, workers, and farmers have dared to produce more and more, confident that we had the ingenuity and the imagination to utilize this increasing abundance. They have not been held back by the fear that we would get into a depression by not knowing how to make use of the blessing of full production and full employment. An expanding economy has paid particularly rich dividends, in helping us to assume new burdens of world responsibility. In 1947, we justly regarded ourselves as having reached remarkable levels of production and productivity, compared with any prewar year. Our total output, measured in 1951 prices, was more than 90 billion dollars higher than in 1939, and more than 100 billion above 1929. But since 1947, the 60billion-dollar increase in annual output has been greater than the total cost of the security program in 1951. (See chart 1.) The high level of production helped to hold inflation in check during most of 1951, despite a rapidly rising security program. The growth of production during the last few years now enables us to carry the security program without undue impairment of CHART 1 BUILDING OUR STRENGTH GROSS NATIONAL PRODUCT IN 1951 PRICES In 1952, we should be able to increase total production by about 5 percent. This will help to meet the needs of the expanding security program. 100 BILLIONS OF DOLLARS 200 1929 1939 1947 I960 .NATIONAL SECURITY BOTHER 1951 FEDERAL.STATE, LOCAL \ 1952 OBJECTIVE -^DEVELOPMENT OF NATURAL AND HUMAN RESOURCES. NOTE: NET FOREIGN INVESTMENT IN ALL YEARS, AND NATIONAL SECURITY IN 1929, NOT SHOWN SEPARATELY SINCE AMOUNTS ARE RELATIVELY VERY SMALL. SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS. the rest of the economy. Despite the defense burden, the past year witnessed a production of tools, factories, automobiles, housing, household goods, and food that was very high—and, in some cases, record-breaking. In the light of this experience, we should hold fast to the principle of an expanding economy. During 1952, we can and should lift employment by another l1/^ million. Some further reduction in unemployment may be possible, despite the fact that additional defense-created unemployment in some local areas appears inevitable. We can and should lift our total output by at least another 5 percent, or by 15 to 20 billion dollars. We should adopt policies which pave the way for a continuation or acceleration of these productive gains in the years further ahead. Such progress will have many advantages. It will give us even greater strength to meet any aggressor. If the world situation stabilizes, so that we can after 2 or 3 years taper off the defense program, we will then be producing enough to remove many unpleasant controls without risking inflation, and to have a higher standard of living than we had even in 1951. And if we succeed in attaining a durable peace, our expanding economy can double our standard of living within a generation. Viewing the next 2 hard years, the productive capacity of the United States leaves no room for faintheartedness or defeatism about our ability to carry whatever necessary burdens the international situation may impose upon us. But we cannot afford to be complacent. In moving ahead confidently to what must be done, we should not overlook the points of weakness or vulnerability in our economic system. Our resources are bountiful, but we must make the most of them by careful use. How We Use Our Strength Economic strength, in these times, is not only a matter of size. If we should devote too much of our productive power to building up our standard of living, while the communists build up their armaments, we could fall far behind despite our immensely greater economic potential. We must use our strength in the right way. In a total war, our course would be plain. We would build up our striking forces as rapidly as possible, and sacrifice all else to that purpose. In a fully peaceful situation, our course would also be plain. We would reduce armaments, and devote our full resources to the pursuit of what we count as the good things of life. But for the time being, and perhaps for a long time, we must sail a middle course in an uncertain sea. The whole mobilization effort is based upon the economic strategy of following this middle course. This means keeping strong all three components of our total strength—military, industrial, and civilian. We are making allowance for the possibility that war could come suddenly. But we are also making allowance for the possibility of a long period of international tension without total war. It is a mistake to oversimplify this problem by calling it a conflict between guns and butter. We must strive for the amounts and kinds of "guns," of "tools," and of "butter" which will do most to advance our security and well-being in the long run. While too slow a defense build-up would imperil the Nation, too rapid a build-up also has dangers. It could burden us with a mass of out-ofdate weapons, deplete our economy, and weaken public support for a program which may be needed over a long period. If the build-up of our industrial capacity were too slow, the very foundation of our economic and military strength would be impaired. But if our industrial build-up were too fast or were made indiscriminately, it CHART 2 GROWTH IN BASIC CAPACITY AND PRODUCTION STEEL PRODUCTION MILLIONS OF NET TONS 0 25 50 75 r I r ELECTRIC POWER GENERATING CAPACITYU MILLIONS OF KILOWATTS 0 25 50 100 r 75 100 1939 [ 1950 F 1952^/1 ALUMINUM PRIMARY PRODUCTION MILLIONS OF SHORT TONS 0 .25 .50 .75 I 1939 I PETROLEUM 1.00 1.25 ~T~-| REFINERY CAPACITY MILLIONS OF BARRELS (DAILY AVERAGE) 0 5 10 I I n 1950 1952-2/f c ' EXCLUDES INDUSTRIAL. •2/PROJECTIONS BY DEFENSE PRODUCTION ADMINISTRATION. SOURCES: AMERICAN IRON AND STEEL INSTITUTE, FEDERAL POWER COMMISSION, AND DEPARTMENT OF INTERIOR (EXCEPT AS NOTED). could feed an inflationary boom by placing too heavy a demand upon scarce materials. If we maintained civilian consumption at too lush a level under current world conditions, we would be deceiving ourselves tragically. But excessive cutbacks of civilian supplies and essential public services would weaken the ultimate source of our collective strength—155 million Americans. The defense mobilization effort thus far has been based upon this rounded concept of total national strength for the long pull. Since the Korean outbreak, the size of our armed forces has more than doubled. Deliveries of military goods, including military construction, have totaled 20 billion dollars. Nearly 5J/2 million workers are now engaged directly or indirectly in defense production. Government outlays for the major national security programs—the military services, atomic energy, stockpiling, military and economic aid abroad, Defense Production Act programs, civil defense, and merchant marine activities—have increased from an annual rate of 17 billion dollars to about 45 billion. While increasing these major security programs, we have also been rapidly building up our productive economic strength. Since the Korean outbreak, private investment in producers' equipment and nonresidential construction has averaged 37 billion dollars a year, compared with a 32-billiondollar rate from 1947 through the middle of 1950, 14 billion in 1939, and 22 billion in 1929, all measured at the 1951 price level. In 1951, steelmaking capacity increased 4 percent and electric power capacity 10 percent, and the year's steel output of 105 million tons exceeded the previous record by 9 percent. Aluminum output at present is running 17 percent higher than during the middle of 1950. (See chart 2.) Additions to farm equipment and larger use of fertilizers have made it possible to set a realistic 1952 agricultural production goal above any previous year's output, and almost 50 percent higher than the Nation's average farm production in the years before World War II. This growth in the productive sector of our economy indicates that neither the size of the military build-up, nor the high level of taxation enacted to finance that build-up, has repressed business investment initiative. Instead, the problem has been to hold the expansion down to noninflationary proportions. Despite the great demand for resources to enlarge the military build-up and to expand the industrial mobilization base, the year and a half since Korea has witnessed an extremely high level of general civilian supplies. While per capita consumption in constant dollars declined about 3 percent from the pre-Korean level to the final quarter of 1951, this was mainly because of a fall in demand for durable goods. Considering the increase in consumers' stocks of durable goods since the end of the war, and the steady improvement in housing accommodations, it seems clear that living standards have thus far been rising. Compared with 1939, per capita consumption expenditures, after adjustment for price rises, have'increased about one-third. (See chart 3.) There have been some shortcomings to set off against these evidences of progress. Bottlenecks and shortages, and problems of design, have delayed production of some important military items. Some of the materials expansion programs have not moved forward as rapidly as we had anticipated. As was to be expected in the first stages of a mobilization effort, the development of smoothly operating administrative machinery took time to accomplish. In some areas of the country, although not generally, dislocations have resulted in unemployment and business hardship. Furthermore, particularly during the first months after the Korean aggression, a rapid inflationary upsurge caused undue hardship to many families. Nonetheless, the facts which have been recited make it clear that the Nation has been gaining steadily and vigorously in economic strength. CHART 3 GAINS IN LIVING STANDARDS By almost any measure, the standard of living has improved-markedly since the pre-World War II period. CONSUMPTION EXPENDITURES, PER CAPITA -V INDEX, 1939 = 100 0 50 100 150 1 FOOD CONSUMPTION, PER CAPITA U INDEX, 1939 = 100 0 50 100 1939 1951 HOMES WITH FARMS WITH ELECTRICITY PERCENT OF TOTAL FARMS ELECTRIC REFRIGERATORS PERCENT OF TOTAL HOMES 0 50 100 0 ' 50 1939 1951 PASSENGER CARS, PER HUNDRED PERSONS NUMBER 0 25 SCHOOL CONSTRUCTION EXPENDITURES, PER STUDENT ENROLLED ** INDEX, 1939 = 100 0 50 100 I 1939 1951 •U INDEXES BASED ON EXPENDITURES IN I9SI PRICES. SCHOOL CONSTRUCTION EXPENDITURES FOR 1939 INCLUDE WORKS PROGRESS ADMINISTRATION PROJECTS, AND ARE ADJUSTED FOR PROBABLE LOWER PRODUCTIVITY. & END OF YEAR DATA. SOURCES: DEPARTMENT OF COMMERCE, MCGRAW - HILL PUBLISHING COMPANY, DEPARTMENT OF AGRICULTURE, FEDERAL SECURITY AGENCY, AND COUNCIL OF ECONOMIC ADVISERS. Moreover, the utilization of our resources, under the mobilization program, has kept the three major components of our strength in reasonably balanced proportion. But the defense program is still in the build-up stage; the main effort lies ahead. This will impose new strains upon the economy. It calls for improvement in existing programs, and new adjustments to meet new events. The Harder Job Ahead As 1952 opens, we face a period during which the burden of the defense program will increase greatly—both in absolute terms, and relative to the total size and strength of the economy. This increasing burden, while indispensable to our security, will place an additional strain upon our manpower, our physical plant, our natural resources, and our standards of living. It will inescapably cause Government expenditures to rise greatly, and, even with the additional taxes I am recommending, it is estimated that there will be a large deficit this year and a larger one next year. This deficit, along with the other strains upon the economy, will increase inflationary dangers. We must analyze these strains carefully, and decide how best to meet them. With sound policies, there is no doubt that we shall be able to meet them. Government outlays for the major security programs are estimated to rise from a current annual rate of 45 billion dollars to almost 65 billion by the end of this calendar year. As a proportion of total output, the increase will be from 14 percent to more than 18 percent. These over-all figures do not fully portray the impact. In 1952, more than a third of the output of the construction and metalworking industries will be taken for military purposes. Military production and construction will claim more than a fourth of our copper supply, and half of our aluminum supply. Though the major expansion will take place this year, the program which I am submitting will call for a further increase in the rate of security outlays during calendar 1953. We cannot hope that security program expenditures will start declining toward a lower rate until 1954. But the most difficult problems will be within the next 12 months. After we cross this hurdle, continued expansion of our raw materials base, and slackening of military requirements for materials, will considerably ease the strain. In the meantime, however, it will be necessary to curtail the use of critical materials for many peacetime products. Serious problems will be faced by some smaller manufacturing firms, unable to convert their plants to defense production or to find substitute materials. I want to direct special attention to that part of our security effort which is aimed at increasing the strength of other free nations. Most of our aid is going to Western Europe. During the 2 years of the Marshall Plan 8 prior to the Korean outbreak, industrial production in Western European countries rose 30 percent. Nevertheless, their recovery was far from complete when they had to undertake heavy new defense burdens. Since June 1950, they have added substantially to their armed forces and have more than doubled their defense expenditures. While their industrial production has risen another 15 percent during this period, it still is far below the level required for defense and for economic stability. The Western European countries can shoulder only part of their heavier defense outlays through increased productivity. In addition, cuts must be made in their domestic consumption, which only recently has been restored to the prewar levels, and in capital investment, which is needed to build long-run economic strength. Exports, which are necessary if self-support is to be achieved, are also being limited. If these countries tried to produce or buy abroad, solely with their own resources, all the goods needed for defense, the probable result would be drastic cuts in living standards, intolerable inflation, and grave danger to political stability. It is only a matter of intelligent self-interest on our part to add something to the resources of these countries. And it is essential for us to understand that, whether we make this addition in the form of "military aid" or "economic aid," the objective and the function are the same: common security. When we supply military goods, some of the most dangerous cutbacks in European civilian production can be avoided. When we supply economic assistance, some European productive facilities and foreign exchange are released for defense. The form of aid that best serves the purpose in a particular case is not something which can be decided in the abstract. It depends upon the changing circumstances in the individual European countries. We are also providing aid to the nations in the Near East and Africa, in Asia and the Pacific, and to the other American Republics. Much of it is military aid. A somewhat lesser amount—but one which has been steadily increasing—is being directed to attacking the more general problems resulting from underdevelopment. Chronic poverty now affects the ability of some of these countries to maintain independence in the face of threatened aggression or subversion. This calls for a demonstration—by positive and sustained action by the free nations as a whole—that the economic aspirations of underdeveloped countries can best be realized in association with the rest of the free world. Our reliance on other nations of the free world is not simply a matter of combined military strength. Our productive potential is vitally dependent on supplies of critical raw materials—particularly metals—coming from abroad. We are joining with the other free countries in efforts to encourage the production and achieve a fair distribution of such materials. In addition, we must undertake in 1952 some other efforts which will make us stronger for the long pull, even though they will increase immediate strains. Steelmaking capacity, already above 108 million tons, is to be expanded to more than 120 million by 1954, with related expansions of iron, coke, and ore-producing facilities. The aluminum program should double the mid-1950 rate of output by 1954. Electric power capacity is scheduled to expand 13 percent this year, and a 40-percent expansion by the end of 1954 is proposed. Petroleum refinery capacity is scheduled to expand about 14 percent between now and the end of 1953. These and the other highpriority Government-assisted industrial expansion programs will absorb this year about a quarter of the supply of copper available for civilian uses, and about one-third of the civilian supply of steel. There are also a few public programs which must be continued at fairly high levels or expanded, because they are essential to supply our defense requirements and to expand our mobilization base. Federal expenditures for long-range conservation and development of natural resources must be adequate to assure maintenance of the resource base, and to prevent the gradual deterioration of this fundamental segment of our economy. Programs for conservation and development of minerals are being enlarged. Public electric power projects, which will make up about a fourth of the 30-million-kilowatt total expansion programmed for completion in the next 3 years, are going forward. Many of these public developments are multi-purpose hydroelectric projects, which also yield other important benefits. Initial development of certain hydro projects, which will be required in 4 or more years, must also go forward now. These various types of defense-related expansion—both military and civilian—will absorb scarce resources, such as steel and copper, at a much faster rate than we can expand the supply during the next 12 months or so. The meaning of this is simple: In order to accomplish what we cannot afford to do without, we must give up many of the things that we can afford to do without. It is even more true of 1952 than of 1951 that we cannot have business as usual, consumer enjoyments as usual, or Government programs and services as usual. The demand for vital business expansion means that many nonessential forms of private investment must be deferred. The total of private investment in construction and producers' equipment, which was close to 50 billion dollars in 1951, should be held in the neighborhood of 42 to 44 billion dollars in 1952. This will cause some hardships and dislocations, although we are doing our best to minimize them. But measured against earlier years, the general level of private investment, even outside of the industrial mobilization base, will be relatively high and profitable. The holding back of some less essential investment will be helpful immediately by reducing inflationary pressures; and helpful in the long run by creating backlogs of opportunity for investment when the security program levels off. The American consumer—which means all Americans—will also have to relinquish some of the enjoyments which would be possible if the cost 10 CHART 4 PRODUCTION OF CONSUMER DURABLE GOODS CONTRASTED WITH FIRST HALF OF 1950 Fourth quarter 1951 production of major consumer durable goods was sharply below the first half of I960. For the first quarter of 1952, the allocations of steel-are only 50 percent of usage in the first half of 1950. 17 PERCENT OF FIRST HALF isso- 0 25 1 50 75 100 i 1 1 4th QUARTER 1951 PRODUCT ON WASHING MACHINES 1 VACUUM CLEANERS 1 ELECTRIC RANGES t.. 1 j TELEVISION SETS ? RADIOS 1 1 ' i..... ' 1 ii i PASSENGER CARS , ( i,, ELECTRIC REFRIGERATORS • 1 l-r1 1 4th QUARTER 1951 ^-^STEEL ALLOTMENT 1st QUARTER 1952 "-- STEEL ALLOTMENT 1 1 1 -' BASE PERIOD FOR CALCULATION OF STEEL ALLOTMENT. NOTE: PRODUCTION DATA BASED ON DAILY AVERAGES. BASE PERIOD OUTPUT FOR REPORTED OUTPUT DUE TO ADJUSTMENTS FOR WORK STOPPAGE. PASSENGER CARS DIFFERS FROM SOURCES: VARIOUS TRADE ASSOCIATIONS AND NATIONAL PRODUCTION AUTHORITY. of security were not so high. The over-all level of consumer supplies, particularly food and clothing, should remain at least as high as last year. Such items as food and clothing do not compete sharply with the defense program or with the industrial build-up. But housing starts, which were 1.4 million in 1950 and about 1.1 million in 1951, will have to be reduced to 850,000 units or less. And to reach even this number will require substantial economies in the use of scarce materials. Less than 4 million new passenger cars will be made, compared with 5.3 million last year. Household appliances, radios, and television sets must also be cut back from recent levels. (See chart 4.) Current production of most metal-using durables will be below the level of the 1947-49 period. But, with very high existing stocks of these durables in the hands of consumers, supplies will be ample to meet all essential needs. II 977891—52- During a national emergency, when business and consumers are being called upon for larger sacrifices, we cannot expect to have normal peacetime Government services. This presents a difficult problem, because world conditions since 1940 have required us to hold many types of outlays below the needs of an expanding economy and a growing population. For example, measured in uniform prices, construction expenditures for both highways and natural resources, excluding atomic energy, were considerably larger in 1939 than in any year since. New public construction expenditures for these and other development programs, including education, health, and housing, have fallen from about 3 percent of the gross national product in 1939 to less than 2 percent in 1951. After World War II, the American people properly looked to their Federal, State, and local governments to resume certain programs and services devoted to their well-being. We were able to make substantial progress for some time, but in the present defense emergency we have necessarily had to cut down again on many government programs. We must continue to hold back on the construction of hospitals. Total construction expenditures for schools, although at record levels, must be held below the real need. New natural resource development projects, including flood control, navigation, and reclamation projects, are being postponed unless they are essential because of electric power or other urgently needed features. Low rent public housing starts in 1952, as in 1951, will be well below the levels contemplated in recent housing legislation. The postponement of these programs is unfortunate. But like deferred business investment, it may have some good effects later on. When the defense program levels off, the resumption of these programs can help to take up any slack. The year ahead, and 1953 also, will pose more difficult problems in the management of the fiscal affairs of the Federal Government than any we have faced since World War II. Total budget expenditures by the end of the fiscal year 1953, ending on June 30, 1953, will be running at an annual rate between 85 and 90 billion dollars. The security effort, together with veterans' services and benefits, and interest on the national debt—both, in the main, resulting from World War II—will comprise roughly 85 percent of total expenditures in the fiscal year 1953. The remainder reflects persistent efforts to bring other outlays to the lowest point consistent with recognition that a nation of 155 million people cannot survive through armament alone. For the fiscal year 1952, the total of Federal expenditures is estimated at approximately 71 billion dollars, and receipts at about 63 billion. While the resulting deficit is undesirable, it has not prevented effective economic stabilization during the past 10 months. But with expenditures for security programs rising sharply, a dangerously large deficit of close to twice that size is estimated for the fiscal year 1953, if there is no additional taxation. 12 Even with the additional taxes that I am recommending, the deficit will remain large, until the security program has passed its peak and tapers off, as we hope it can do in about 2 or 3 years. In this period, substantial problems will also arise in connection with the management of the national debt, and the financing and refinancing operations of the Treasury. Rising expenditures and rising deficits add to inflationary pressures. The expansion of defense production will cause the spendable incomes of consumers to rise during the year more than civilian supplies. Moreover, price and wage movements, responsive to the decisions of business and labor, could add fuel to the inflationary fires. Ample funds will be available to most businessmen to engage in excessive inventory buying, if they should desire to do so. There are large reserves of liquid savings in the hands of consumers and business. Looking at the situation as a whole, however, the essential security program neither imposes excessive strains upon the economy, nor makes it impossible to contain inflation. If we realize, as fully as possible, our productive potential, business investment and real consumption, while curtailed, will still be high, except when measured against the last 2 years— the highest in our history. Certainly these are not large sacrifices, in view of the dangers against which we must protect ourselves. Further, if the people as a whole are willing to avoid excesses and extravagances, the recent containment of inflation can be made more effective during this year. We contained inflation, under more difficult circumstances, during World War II, although we did not do a good enough job of forestalling postwar inflation. We must learn from past mistakes as well as from past successes. The Real Meaning of Economy True economy is desirable at all times. It is imperative during a national emergency. But, as shown by the foregoing review of events since 1947, true economy means conserving and expanding the economic strength of the Nation as a whole. It can, therefore, be achieved only by recognizing all the basic factors in that strength—and not neglecting any of them. When we look at the whole picture, we find that true economy embraces two equally important elements: The first is the avoidance of unnecessary outlays; but the second, and equally important, is the making of necessary outlays. A nation which spent its resources foolishly would dissipate its strength. But a nation which was too timid or miserly in applying its resources to urgent needs would fail to build up its strength. We must exert every effort—through business action, consumer action, and government action—to avoid unnecessary outlays. But we cannot by this method alone achieve world peace or a highly productive economy. 13 The main reason for not spending on the things that we do not need, is to afford the things that we do need. We must hold defense outlays to the lowest levels consistent with safeguarding our national security. This means constant weeding out of waste. But it would be false economy to cut the defense program below the requirements for our safety. Our economic and military aid to free nations banded with us against aggression must be kept under vigilant and continuous review. It must be coupled with assurance that the countries receiving it are doing their full share. But it would be false economy, after all our efforts since World War II to help rebuild economic life and maintain political stability in war-damaged countries, to reverse the process by weakening the aid program. We must recognize that strength or weakness at any point in the free world adds to strength or weakness at every point. It would not be true economy to spend a dollar for the common defense on one side of the Atlantic, when it would contribute more to the common defense if spent on the other side of the Atlantic. There has recently been growing appreciation in the United States that the defense programs of the countries of Western Europe should not move so fast as to reduce standards of living below a level consistent with political stability and immunity against internal subversion. Some adjustments are now being made to take account of this fact. But it would not be true economy, because some partners in a joint enterprise have not the resources to do all that would be desirable, for the strongest partner to relax from doing its best. If our own security efforts, through their demand upon raw materials and their effect upon world prices, are imposing an excessive burden upon other nations, there are right and wrong ways to meet this problem. We are lessening the pressures upon prices and raw materials, not by relaxing our security program, but rather by cutting somewhat into nonessential consumption and investment; by holding down domestic inflation through an effective anti-inflationary program; and by making cooperative efforts to share scarce materials and to stabilize international prices. This is the right approach. The proposal to solve the whole problem by drastically cutting the security effort everywhere is false economy—because the nub of the problem is to maintain a mutual security program which in total is adequate to the danger confronting us. It would be superficially easy—but disastrous—to reduce the defense strain by torpedoing the defense program. We must cut nonessential spending, both private and public, so that, unnecessary shortages and unnecessary inflation do not imperil the defense effort. But it would be false economy to repress the types of private and public investment which are building up our essential productive power. It would be false economy to set revenues at a far lower level than the Nation can well support under current circumstances, and then to say that the defense garment must be cut to the revenue cloth. A balanced budget, achieved the easy way by sacrificing the defense program and putting the balance of world power in the hands of the Kremlin, would be false economy. The sound course in these times is to base outlays upon essential national needs, and then obtain the funds to cover these needs by current taxation insofar as possible. But if the only choice is either to run a deficit of limited size and duration in the Federal budget, or to run a deficit in our national security effort, by far the lesser hazard now is to run a deficit in the budget. There is also a superficially easy way, and a genuinely sound way, to combat inflation. The superficially easy way would be to avoid inflation by reducing the security program below safe levels. The sound way is to achieve and maintain a strong and vigorous anti-inflationary program. Top Issues for Policy Action Policies to promote the success of the security program, and to ease the burden upon the economy, were recommended to the Congress in 1950 and 1951, and, with some important omissions, were adopted. We must apply these policies with maximum effectiveness. To do this, some legislative changes and additions are now desirable. Reaching our objectives for defense strength The military program which I am submitting to the Congress calls for steady increases in military output during the next 18 months, and for continuance at a high level for at least an additional 12 months. Meeting these production schedules will require for at least two more years the authority under the Defense Production Act for those controls which promptly channel scarce materials and tools into defense production. I urge the Congress to adhere to the sound policy it followed, in the original act, of not encumbering it with detailed prescriptions concerning how materials should be distributed. The administering agencies need to exercise flexibility and discretion, based upon up-to-the-minute study, in order to avoid or remedy hardships upon business and workers whenever this can be done without hurting the defense program. Under the present law, we are administering a system of priorities and allocations to channel scarce materials into the most essential uses. Stockpiles of strategic materials are being built up. While shortages of materials are bound to cause many inconveniences and some hardships, the Controlled Materials Plan operates to reduce these, and to promote the more important types of production while reducing the less important. The great expansion of productive facilities for defense makes it essential that there be the widest possible distribution of defense business, with particular emphasis upon maintenance of free competitive enterprise. 15 The Government has for a long time, particularly through the leadership of the Department of Commerce, assisted small business in playing its significant role in the economy. The Reconstruction Finance Corporation has also been engaged in this effort. These services have now been adapted to the defense effort. In addition, the Department of Defense and the mobilization agencies have in a variety of ways promoted the placement of contracts wherever feasible with small businesses. This is important not only to obtain a faster build-up of defense output, but also to avoid unnecessary unemployment and distress, and to help preserve the competitive vigor of our economy. The Small Defense Plants Administration has recently been established to coordinate Government policies and programs in behalf of small business, and to expand the role of small plants in defense and essential civilian production. This part of the Government's economic program is one of great urgency. It is most important that the Congress make available the necessary funds for the Small Defense Plants Administration. Aiding other free nations We must maintain a realistic attitude toward foreign aid. Mindful of the limitations of our own economy, we must also be mindful that some other countries are confronted by economic and political strains far more serious than ours. In the final analysis, the free world must be made more secure if we are to be secure. Our foreign policy objectives require continued provision of both military and economic aid to free nations. Both types of aid are necessary. Our North Atlantic Treaty partners, in particular, are undertaking heavier burdens, whether they rebuild their defenses by buying military equipment from other countries, or by cutting civilian production to produce military goods themselves. These countries are making great efforts to shoulder these burdens through their own productive efforts. This requires, among other things, that they have outlets for some of the goods which they can produce and want to exchange for other goods which they need to import. In this connection, I again recommend the repeal of Section 104 of the Defense Production Act, which restricts our imports of certain goods which the European and other countries have available for export to us on mutually advantageous terms. It is necessary to encourage the efforts which underdeveloped countries are making to further their own economic development, and to support these efforts by providing as much technical and economic assistance as we can afford and as they can effectively use for that purpose. We shall continue to share scarce capital goods by providing priority and other supply assistance for the export of such goods for essential purposes abroad. We shall also continue to participate actively in international ar- 16 rangements to encourage production and equitable distribution of scarce raw materials in the free world. Such measures help to expand the supply of goods and to restrain dangerous inflationary forces. Expanding our productive capacity Building up our productive capacity is a many-sided operation. The mainspring of this expansion is private initiative and investment. But the Government has had to exercise important responsibilities. It has had to program and guide expansions in various key industries. This has been effected by materials allocations, and by selective aids and inducements such as tax amortization, loans, loan guarantees, and purchase agreements. The authority provided by the Defense Production Act and related legislation to use these aids to expand production has been very valuable, and will continue to be necessary. A number of public programs play an important role in expanding the total productive capacity of the economy. Roads, other transport facilities, public power developments, and pilot plant research in metals and fuels, are illustrations. The Government is equipping and building certain facilities for the production of war materiel, and is carrying out a large atomic energy program. To support needed expansion of production, certain urgently needed development projects, particularly the St. Lawrence seaway and power project, should be started now. The report of the Materials Policy Commission, which I appointed a year ago, will be finished shortly, and should provide long-range policy guides for increasing and improving supplies of raw materials. In general, the labor force thus far has proved adequate to meet the needs of increased production and a growing military establishment. But in certain categories of skill, and in certain industrial and farm areas, shortages exist. Appropriate measures are being taken to encourage training, recruitment, and the movement of workers when necessary, and to promote efficient use of the labor supply by employers. Manpower problems will probably grow more difficult, as defense production approaches its maximum level. A serious need has already appeared for additional housing and community facilities and services in defense areas. While there are labor shortages in some areas, there are other areas where localized but serious unemployment exists, particularly in centers of automobile production. Strong efforts are being made to find ways of reducing this unemployment, including the placing of defense contracts in labor surplus areas. Experience has proved that our basic labor-management statute hampers the maintenance of the sound and healthy labor relations and the uninterrupted production which are so essential to a sustained mobilization effort. The law should be promptly revised to accord the fair treatment to both labor and management which is vital to industrial harmony and steady production. 17 Farmers are now being asked to produce more than ever before. The "sliding scale" in existing price support legislation has aroused concern in the minds of many farmers, who fear that their cooperation in expanding production to meet the present emergency might later result in serious losses to them. The Government's price support operations obviously should further attainment of production objectives, and they should not penalize producers for their full and patriotic cooperation with the agricultural program. I therefore recommend that the sliding scale provisions of the present agricultural legislation be repealed for this purpose. We need to strengthen the agricultural program by finding a more effective way of supporting the price of perishable farm commodities. One method is by direct payments to farmers. This and other methods are now being studied by the Congress. I hope that the Congress will provide legislation authorizing a sound and workable program for supporting prices of these perishables. Price supports in this emergency period must, of course, continue to be administered in a manner which achieves a proper balance between the goals of adequate production and of economic stabilization. The Secretary of Agriculture and the Director of Price Stabilization will continue to work together toward this end. In addition, I recommend that the Congress enact legislation to make clear the Government's policy of encouraging the organization and sound growth of cooperatives. The tax bill which was passed last year included a tax on the unallocated reserves of farmer cooperatives. This should be modified in such a way that newly-organized cooperatives will not be subject to it, until they have had a limited period of years in which to establish themselves. Farmers are marketing their products and purchasing their supplies through more than 10,000 cooperatives, with an estimated membership of more than 6*/2 million. Their organization in this form of business has had a healthy effect on the rural economy, and it is especially important to encourage this form of self-help when farmers are being asked to do a record job of production. Supporting civilian strength Faced with the necessity of maintaining a large national security program for an indefinitely long period, we should not lose sight of the importance of human productiveness and morale. These depend upon adequate supplies of food, shelter, and clothing, and adequate education, health services, and social security. However, for the next year or so, while the defense program is placing such heavy demands upon materials and the labor force, we must recognize that only limited progress can be made in this direction. Some increase in food and clothing can be achieved without adding to the demand for scarce materials. On the other hand, many types of civilian metal-using output will have to be curtailed further, because of competing higher priority uses for certain metals, notably copper and steel. While 18 housing also must be curtailed, a sufficient quantity should be built this year to take care of the most essential needs. In education, health, and social security programs, we must continue to be highly selective, deferring improvements and extensions not clearly necessary now in support of the total defense effort. Education of children, however, cannot be postponed, nor should health standards be allowed to fall. I recommend a program of general Federal aid to help meet teaching and other school operating costs, and a more adequate program of Federal aid for school construction and operation in critical defense areas. To meet urgent needs in the health field, programs for Federal aid to medical education and the strengthening of local public health services should be enacted promptly. I have recently appointed a Commission on the Health Needs of the Nation, composed of professional and lay persons, which will make an objective study of vital health problems, including the provision of adequate health care to all our people at prices they can afford to pay. Certain extensions and changes in the old-age and survivors insurance program, in line with longer-range objectives, would, if undertaken promptly, yield the additional advantage of helping those groups who have been hit hardest by past inflation. Raising the level of benefit payments is especially desirable, and other improvements should include raising the taxable wage base, extending the coverage to farmers and certain other groups, and providing for permanent and total disability. To provide more adequate protection against unemployment, I recommend the enactment of legislation to strengthen the present Federal-State unemployment insurance system, along the lines suggested in my message to the Congress on April 6, 1950. Legislation for this purpose is now pending before the Congress, providing specifically for extension of coverage to additional workers, establishment of nation-wide minimum levels for amounts and duration of unemployment benefits, establishment of adequate methods to assure payment of benefits to workers who move from one State to another, and improvements in administration of the system. Controlling inflation In determining the national economic policies necessary to maintain stability in the economy in the coming year, the basic fact to take into consideration is that the progress of the security program will involve a steady increase in the requirements of the Government for goods and services. The increase will bring Government demand at the end of the year to a level 20 billion dollars higher than the current annual rate of Government purchases for this purpose, and will entail a corresponding increase in the amount of labor, materials, and other productive resources diverted from the civilian economy to the security program. At the same time, the security program will place large additional buying power in the hands of businessmen and consumers. Consumer spending is the most uncertain factor determining the general inflationary outlook for 1952. While it is possible to make a reasonably satisfactory estimate of the volume of new business investment in plant and equipment this year, since it will be limited by the allocation of scarce materials, there is no certainty at all in any estimate of consumer spending. For the last three quarters of 1951, consumers have voluntarily elected to buy at a level no higher, in total physical units, than in the period before the initial attack in Korea. Instead, they have added to their personal saving much of the large increases which have taken place since that time in their income after taxes. The exceptionally high rate of personal saving has not been due to any general lack of goods available to consumers. Even in the case of durable goods which have been cut back in production by allocation orders, such as automobiles and major household appliances, no market pressure has been noticed since the first quarter of 1951. Textiles and some other types of soft goods have been produced at a rate well below capacity, not on account of any shortage of labor or materials, but because consumer demand has fallen off in many lines. Manufacturers and retailers have been struggling with overlarge inventories, which in many cases have not yet been brought down to the levels they desire. It is impossible to foresee how long this extraordinarily high level of personal saving will continue. It is not even certain that it may not be raised. But national economic policy may safely be based upon these assumptions: the progress of the security program will bring an increase in personal incomes and enlarge the potential market demand of consumers; the longer consumers elect to save rather than to buy goods, the larger will become the accumulated fund of liquid assets; and the fund of liquid assets, when coupled with the higher current income of consumers, will add greatly to the potential consumer demand, and may increasingly tend to turn potential demand into abnormally active buying. This is a precarious situation, and any day some combination of events could cause consumers to reverse the prudent attitude of recent months. It is essential that we maintain and perfect the policies which will effectively curb such an inflationary outburst. The effective policies open to us for use if private demand begins again to expand rapidly are those which enlarge output, those which limit the size of demand itself, and those which prevent surging demand from causing price increases. Since consumer output cannot be increased very much because labor and materials must be diverted to defense-related production, primary reliance must be upon those measures which limit demand or restrain its effect upon prices. Taxation, by a very direct process, reduces disposable income. An increase in voluntary saving reduces spending. Restrictive credit policy limits the expansion of business and consumer 20 buying. Allocation and limitation orders prevent businessmen from piling up inventories again, and from stepping up their investment plans in an effort to exploit the larger markets they envisage when there is a great market boom. Price and wage controls are directed both to restraining income increases, and to holding the price line against unavoidable increases in demand. Requirements for additional taxation. Adequate taxation is essential, both to assure a sound fiscal position and to maintain economic stability. If the added Government spending for the defense program is not to lead to price inflation, private spending by consumers and business must be held in check. Taxation pays for the Government spending, and at the same time reduces funds available for private spending. Three major tax laws have been enacted during the past 18 months. They have increased the annual yield of the Federal tax system by about 15 billion dollars, or approximately by one-third. This is a good record. But it falls short of the amount of additional revenue needed. Early last year, I asked for a minimum tax program to yield 10 billion dollars or more. The bill enacted by the Congress came late in the calendar year, added only about one-half of this amount, and included a number of provisions which lost the Government revenue and reduced the equity of the tax system. A budget deficit of about 8 billion dollars is expected for the current fiscal year ending June 30, 1952. This is expected to be followed by a budget deficit approaching twice this size for the fiscal year 1953, unless further vigorous action to raise taxes is taken very soon. In view of this fiscal outlook, I urgently recommend that the Congress, as a minimum, provide additional revenues in the amount by which last year's legislation fell short of my recommendations. This can be achieved by eliminating loopholes and special privileges, and by some tax rate increases. While new tax legislation along these lines could scarcely affect the deficit for the current fiscal year, and would not restore a balanced budget in the fiscal year 1953, it would make a major contribution to the Government's budgetary position and to the stabilization program. The additional tax revenue will help to minimize borrowing by the Government from the banks. Borrowing from banks, more than borrowing from any other source, tends to enlarge the spending stream and thus to increase inflationary pressures. With the tax system strengthened as I recommend, there should be sufficient revenue, under the security program now planned, to cover fully the Government's expenditures after the peak of the defense build-up has been passed, and defense expenditures have been adjusted downward. It is important that we return, as quickly as possible during the period of defense mobilization, to a current pay-as-we-go basis for Government financing. Saving. If we are to hold down private spending to the level of available supply, while the national security programs are expanding, it is necessary 21 also to promote a high level of saving. Dollars of income which are not spent by consumers or businesses do not add to inflationary demand. During most of 1951, personal saving was at an unusually high rate. Relatively stable prices encouraged increased saving, and increased saving helped to stabilize prices. We must continue to maintain conditions which will favor both saving and stable prices. Increasing the investment of private savings in Government securities will reduce the need for the Government to borrow from banks for the purpose of refunding maturing security issues and financing deficits. Buying United States savings bonds and other Government securities is a good method of saving, and it is also a good method of supplying the Government's borrowing requirements in a noninflationary manner. Holders of maturing Series E savings bonds now have the privilege of maintaining their investment in these bonds for another 10 years, during which the bonds will continue to earn interest at the same over-all rate. The efforts of the Treasury and other Government agencies will continue to be directed toward encouraging individuals to buy and hold savings bonds and other Government securities. Credit control. Since private borrowing can augment the spending power of individuals and businesses, and thus add funds to the aggregate spending stream, credit control is also being used to help stabilize the economy. This type of control cannot be used indiscriminately, since credit plays a vital role in the functioning and growth of the economy, especially now when rapid expansion in certain vital sectors of the economy is necessary. Periodic reviews are being made, at my request, of the policies of the Government lending agencies, to make certain that they promote the objectives of the defense effort by restraining less essential lending. The Voluntary Credit Restraint Program, which operates under the sponsorship of the Board of Governors of the Federal Reserve System, continues to be helpful in discouraging loans for less essential purposes, although continuous care needs to be exercised not to discourage activities important for a strong defense economy. Selective credit controls are particularly useful under current conditions, because they reduce borrowing and spending for some of the less necessary kinds of goods, particularly those which compete for scarce materials. The Board of Governors of the Federal Reserve System is using its powers under the Defense Production Act to limit borrowing for the purchase of durable consumers' goods and new housing. The Congress last year reduced the authority to control these forms of credit. I recommend restoration of full administrative discretion in setting these credit terms. During the months ahead, we may face considerable pressure for excessive expansion of bank credit. I repeat my earlier recommendations that the powers of the Board of Governors of the Federal Reserve System to impose reserve requirements be enlarged. A related problem is control of margins for trading on commodity ex- 22 changes. The Congress has not acted upon the recommendation that the Secretary of Agriculture be authorized to regulate margins, in order to head off excessive speculative trading on the commodity exchanges. Fortunately, we have had no runaway commodity markets recently, but it is desirable to grant this authority in advance of any such situation. Price control. The relative stability of prices during most of 1951 was encouraging. But this does not mean that we can now afford to relax price controls. In many important areas, prices are straining at the ceilings. In others, softness exists which cannot be counted on to persist for long. Greater pressures loom ahead. At this stage of the mobilization program, it is more prudent to strengthen controls than to weaken them. We must continue the effort to hold the price line. Prices and profits are, in general, high enough to provide ample incentives to producers, and to permit considerable absorption of cost increases. The Office of Price Stabilization has made great progress during the past year toward a balanced price structure which can be held firmly. It is developing simple, enforceable regulations to cover individual industries and commodities. But if we are to hold the price line, adequate legislative authority must be granted. When the Defense Production Act was renewed last summer, the power to control prices, instead of being strengthened, was seriously weakened. One weakening amendment permits any producer or seller of services, regardless of his need, to pass on all increases in all costs incurred from the first half of 1950 to July 26, 1951. Another weakening amendment requires the maintenance of customary percentage margins for distributors, thus virtually guaranteeing that every dollar in cost increase will become much more than a dollar in the price paid by the consumer. Still another weakening amendment forbids the establishment of slaughtering quotas. Slaughtering quotas were a strong bulwark of the beef ceilings by providing a fair distribution of the available supply of cattle among slaughterers and areas, thus helping to avoid black markets in meat. Last fall, this amendment upset the distribution pattern, forced very high cattle prices, and endangered the continuance of the beef ceilings. Temporarily, the situation has improved, but we cannot afford to take another chance. To achieve our stabilization objectives, these defects in price control legislation should be corrected and the law should be strengthened when it is extended. We cannot afford to gamble further with inflation. Rent control. Although rent controls cover only a part of the total rental housing in the country, they are of great importance in stabilizing rents in many major industrial areas, and should be continued. Vigorous use is being made of the authority provided last July by the Congress to reinstitute rent controls, where necessary, in critical defense housing areas, including areas around military posts. Thus far, full rent control has been, or is about 23 to be, reimposed in 96 of these areas, and will be reimposed in other areas as needed. Wage stabilization. Wage stabilization, like price control, cuts the inflationary spiral and limits the rise of prices and costs, and should be continued. It also helps to prevent buying power from rising too far above the available supply of civilian goods. The policies of the Wage Stabilization Board are designed to put a brake upon excessive wage adjustments, while at the same time recognizing that some adjustments in a free and dynamic economy are essential from the viewpoint both of equity and of incentives. Adjustments to take account of increases in the cost of living are a matter of simple equity, because price inflation is not a fair way to impose the burden of national defense. The fair way to impose the burden of national defense is by taxation and other restraints which can be equitably imposed. Wage adjustments to allow for increases in productivity, if carefully limited and firmly administered, can provide incentives which outweigh any possible inflationary effect. There are a few other specialized problems with which the Wage Stabilization Board must deal. To avoid inflation, we must maintain a firm price policy and a firm wage policy throughout the peak of the defense effort, and we must maintain a fair relationship between the two. Equality of sacrifice Where sacrifices are necessary—and many are—they must be equitably imposed, so as not to inflict public hardship in order to support private gain. That is a main purpose of a strong anti-inflation program. Special attention is also being directed toward the problems of small business and those who are unemployed in local areas, so that a limited segment of the population shall not be made to bear an excessive part of the burden of national defense. The year 1952 is not going to be an easy year for the economy. It is going to be a year of strain. We must expect this, and prepare to bear some inconveniences and hardships. For most of us, the hardships will be minor. There will be plenty of food and other essential commodities, and the highest civilian employment in our history. As the economy becomes adjusted to the new conditions and grows in size, and especially when defense expenditures decline, we may confidently look forward to the relaxation and removal of many kinds of controls and restrictions. In the meantime, all of us must join in the vast effort to safeguard our national security. Summary of Legislative Recommendations I summarize below the legislative recommendations contained in this Economic Report, to promote the defense effort, strengthen the economy, and maintain economic stability. 1. Renew the Defense Production Act for two more years, and strengthen its provisions, particularly those relating to production expansion and to the control of prices and credit. 2. Provide continued military and economic aid to free nations; and, as a step toward removing^ trade barriers, repeal Section 104 of the Defense Production Act, which restricts our imports of certain goods which European and other countries could export to us on mutually advantageous terms. 3. Aid small business by providing the necessary funds for the Small Defense Plants Administration. 4. Provide for certain urgently needed development projects, particularly the St. Lawrence seaway and power project. 5. Provide for the construction of needed housing and community facilities in defense areas. 6. Revise the basic legislation concerning labor-management relations, so that it will not hamper sound and healthy labor relations and uninterrupted production. 7. Repeal the sliding scale provisions in existing agricultural price support legislation; provide a workable support program for perishable commodities; and modify the tax on unallocated reserves of farmer cooperatives. 8. Provide at least enough additional revenues to reach the revenue goal proposed last year, by eliminating loopholes and special privileges, and by tax rate increases. 9. Provide powers to the Board of Governors of the Federal Reserve System to impose additional bank reserve requirements; and provide authority to control margins for trading on commodity exchanges. 10. Raise the level of benefit payments, and make other improvements, in our system of old-age and survivors insurance; and strengthen the Federal-State unemployment insurance system. 11. Authorize Federal aid to help meet school operating costs, and increase aid for school construction and operation in critical defense areas. 12. Authorize Federal aid to assist medical education, and provide for strengthening local public health services. Summary of Economic Developments in 1951 Government outlays for national security programs almost doubled during 1951. In the fourth quarter, these outlays were running at an annual rate of 45 billion dollars, compared* with 24 billion a year earlier. They represented 14 percent of the total output of goods and services, compared with 8 percent at the end of 1950. The impact was much greater in some industries. Currently, more than a quarter of the output of the metalworking and construction industries is being taken for defense. Production of goods and services (gross national product in 1951 prices) was about 327 billion dollars in 1951, or 8 percent higher than the 1950 output of about 300 billion dollars. (See chart 5.) In the fourth quarter of 1951, total production reached an annual rate of about 330 billion dollars, a gain of 5 percent over total output in the fourth quarter of 1950. The bulk of the increase took place during the first half of 1951; in the second half, total output was practically stable. Industrial production fluctuated within a narrow range through most of 1951. In December, it was at the same level as a year earlier, and 22 percent higher than in December 1949. Defense and defense-supporting activities continued to increase. The output of consumer goods declined, because of materials cutbacks and sagging demand. Agricultural production, despite adverse weather developments in the fall, was near the previous record year. Average civilian food consumption was slightly above the pre-Korean level, while we met the food requirements of a,n expanded military force. Employment of civilians at the end of 1951 was 61 million, the same as the average level for the year. This was about 1 million higher than in 1950, although the civilian labor force was 200,000 less because of the rapid increase in the armed forces. Nonagricultural employment averaged 54 million, and was 1J/2 million higher than in 1950. The largest increases were in the industries associated directly or indirectly with defense production, which now engage 5J/2 million persons, compared with 2 million at the outbreak of hostilities in Korea. Agricultural employment continued its long-run decline, amounting in 1951 to about 7 million, or 450,000 less than in 1950. The workweek, which had averaged more than 41 hours in manufacturing industries in the last half of 1950, dropped slightly during the first half of 1951, and averaged almost 40J/2 hours during the second half. The workweek expanded in defense industries, while it declined somewhat in the consumer goods industries. Unemployment decreased from 2.2 million persons, or 3.6 percent of the civilian labor force, at the end of 1950, to 1.7 million, or about 2.7 percent, at the close of 1951. However, the impact of materials shortages and sagging demand for textiles and other consumer goods has increased unemployment in a number of areas. Work stoppages resulted in less loss of man-days of labor than in any comparable postwar period. Less than one-fourth of 1 percent of total working time was lost by strikes. Prices were relatively stable during most of 1951, in sharp contrast to the violent waves of general price increases which marked the second half of 26 CHART 5 ECONOMIC INDICATORS CHANGES FROM 1950 TO 1951 PERCE NTAGE CHANGE + 10 PERCENTAGE CHANGE - EMPLOYMENT ^ P7773 0 + 10 § WZ\ yy/; V77* 0 -10 -10 -40 -40 -50 -50 + 30 + 20 + 30 " + 10 PRODUCTION 888 + 20 11 1 1 S B - 0 + 10 0 EQUIPMENT (NONFARM) -10 -10 RESIDENTIAL CONSTRUCTION -20 -20 + 30 + 30 INCOME + 20 - + 20 + 10 + 10 0 0 TAX +20 + 20 PRICFS + 10 0 ~ ..,.„. 1 ! ij n * • i ALL COMMODITIES FARM PRODUCTS SOURCE: APPENDIX B. 977891—52 3 i FOODS fm, W INDUSTRIAL ALL (OTHER THAN FARM ITEMS PRODUCTS AND FOODS) FOOD |ri ~ + 10 0 1950, and which were quieted after the imposition of the general price and wage freeze late in January. Wholesale prices, which had advanced almost 17 percent between the outbreak of the Korean aggression and the general freeze, then declined 3 percent by the end of the year. The drops took place mainly in some farm commodities, textiles, hides and leather, and fats and oils. Consumers' prices, which had risen 8 percent from the Korean aggression to the imposition of general price controls, continued to creep upward, advancing another 2.6 percent between February and November 1951. The largest increases have occurred where controls, under the law, could be imposed only partially or not at all. Wages rose during 1951, although at a much lower rate than in the second half of 1950. Wages and salaries were at an annual rate of 174.6 billion dollars in the fourth quarter of 1951, contrasted with 157.9 billion a year earlier. The rise was greater in the durable goods industries than in nondurables. Average weekly earnings advanced proportionately less than the increase in hourly earnings, because of the decline in working hours. In manufacturing, average weekly earnings rose from $62.23 in November 1950 to $65.25 in November 1951, a rise of 5 percent. Corporate profits before taxes in 1951 were the highest on record, reaching an estimated 44.8 billion dollars. The previous peak was 41.4 billion reached in 1950. However, because of lower sales and prices in many industries, profits declined substantially after the first quarter. Corporate profits after taxes were much lower in 1951 than in 1950, because of the higher tax rates. In 1951, they were an estimated 18.1 billion dollars, compared with 22.8 billion in the peak year 1950. Unincorporated business and professional incomes for the year were 23.6 billion dollars, compared with 22.3 billion in 1950. After rising sharply in the first quarter of the year, they declined substantially until the fourth quarter, when it is estimated that they again rose. Farm income in 1951 was 17.0 billion dollars, compared with 13.7 billion in 1950. It rose slowly throughout the year, reaching a level of 18.0 billion in the final quarter—2.2 billion higher than the fourth quarter of 1950. • Personal income in the aggregate kept growing in 1951, although at a slower rate than in 1950. For the year as a whole, it was 251.3 billion dollars, compared with 224.7 billion in 1950. In the fourth quarter, personal income was at an annual rate of 258 billion dollars, compared with 238 billion a year earlier. Despite increased personal tax liabilities, spendable personal income was 15 percent above its pre-Korea level in the fourth quarter of 1951. When the figures are adjusted for price changes, however, total spendable income in 1951 did not regain late 1950 levels until after midyear. Personal consumption expenditures were 204.4 billion dollars in 1951, compared with 193.6 billion in 1950. They dropped sharply after the first quarter peak, and then rose gradually to an annual rate of 205.0 billion in the fourth quarter, or 6.6 billion higher than a year earlier. Adjusted for price changes, however, the volume of consumer purchases in the second half of 1951 was about 3.5 percent lower than in the second half of 1950. Consumer supplies, in the main, were extraordinarily abundant. About 1.1 million new houses were built. About 5.3 million automobiles were assembled, and about 12J/2 million radios and more than 5 million television sets were produced. Food consumption was above the 1947-50 average. Clothing supplies exceeded the demand. Personal saving, the difference between disposable income and expenditures, bounded upward from 4 percent of income in the first quarter of 1951 to a rate above 9 percent for the rest of the year. This high rate of saving was almost twice the pre-Korean postwar average. In 1951, personal net saving was 18.5 billion dollars, contrasted with 10.7 billion in 1950. In the fourth quarter of 1951, the annual rate was 23.0 billion dollars. Domestic investment was higher in 1951 than in any previous year, the total being 58.8 billion dollars contrasted with 48.9 billion in 1950. Mainly because of the bulging of new inventories in the first half of the year, the rate of growth was uneven. Gross private domestic investment accounted for 18 percent of total national output, or slightly more than in 1950. Expenditures on nonfarm plant and equipment grew throughout 1951, with increasing emphasis on programs for urgently needed expansion in key industries. These expenditures totaled 31.6 billion dollars in 1951, compared with 25.6 billion in 1950. More new construction was put in place in 1951 than in any previous year. The total for 1951 was 30 billion dollars, compared with 28 billion for 1950. But starting in September, the total rate dropped below that of the comparable month in 1950, with the principal reductions occurring in commercial and recreational construction. The volume of public construction exceeded 1950 by nearly 2 billion dollars, as new defense and defense-related projects more than offset reductions principally in highways and conservation and development projects.. Inventories were accumulated by manufacturers and distributors in 1951 at the highest rate on record—8 billion dollars. The annual rate reached a peak of 14.8 billion in the second quarter, as consumer buying dropped sharply; it dropped to 3 billion in the fourth quarter, with retailers once again achieving a more comfortable inventories-sales position. Corporations financed expansion programs during 1951 without great difficulty. A smaller proportion—about 40 percent—of total funds used came from internal sources than in recent years, and a larger proportion came from outside sources. New stock and bond issues totaled almost 60 percent higher than in 1950, with the proportion of bonds relatively high. Government financial aids stimulated expansion in selected areas, but contributed only a small fraction of total funds used. Private credit expanded at a much slower rate in 1951 than in 1950. Nonbusiness loans of commercial banks—including their consumer and mortgage loans—increased by about 1.5 billion dollars in 1951, compared with 4.4 billion the year before. Such loans totaled 31.8 billion dollars at the end of 1951. As a result of the financial needs of defense-supporting activities, commercial and industrial loans by banks grew almost as rapidly as in 1950. The privately-held money supply expanded nearly 9 billion dollars in 1951 as a whole. It declined sharply in the first quarter as heavy tax payments were made, and then grew steadily in the last three quarters of the year. International transactions of the United States during 1951 saw the expansion in exports of goods and services, which reached a peacetime record of more than 20 billion dollars, exceed the expansion in imports. Imports also reached a new high, despite a slump in commodity imports in the second and third quarters. Exports of semi-finished and finished products increased in quantity as well as price. The export surplus, which had fallen to an annual rate of 1.5 billion dollars in the second half of 1950, increased to a rate of about 6.5 billion in the second half of 1951. Foreign aid extended during 1951 increased by much less than the export surplus, and the gold and dollar outflow was reversed. Exports of private capital dropped below their 1950 level. United States private investors continued to encounter obstacles to investment abroad. In other free nations, total industrial production, money incomes, and prices rose in 1951 compared with 1950, but agricultural production showed little change from the preceding crop year. The balance of payments positions of some countries, notably the United Kingdom and France, became worse during the year, and the general economic situation deteriorated in a number of countries. The worldwide rise in prices, set off by the Korean hostilities, slowed up or was partly reversed in most countries during the first half of 1951, although in many it was resumed during the second half of the year. Government finances involved, for the Federal Government, a shift from a sizable surplus to a substantial deficit during the course of calendar year 1951. For the year as a whole, Federal expenditures were 56.8 billion dollars, and net budget receipts were 53.5 billion. This left a calendar year budget deficit of about 3/s billion dollars—3 billion more than in 1950. Expenditures for the major national security programs totaled 37.3 billion dollars. On a "cash" basis, which includes the cash receipts of the social security and other trust funds, a surplus in the first half of 1951 and a deficit in the second half added up to a cash surplus of 1.2 billion for the year as a whole. In its management of the public debt, the Treasury not only did some new borrowing, but also refinanced a substantial portion of the outstanding debt during the year. Of importance in keeping the debt outside the banking system, and hence minimizing its inflationary potential, was the exchange of 13.6 billion dollars worth of marketable long-term bonds for nonmarketables and the legislative extension of the interest-bearing period for Series E bonds. State and local governments, with revenues increasing slightly more than expenditures since 1950, showed a deficit of 400 million dollars in 1951, a reduction of 500 million from 1950. HARRY S. TRUMAN. JANUARY 16, 1952. The Annual Economic Review January 1952 A Report to the President By the COUNCIL OF ECONOMIC ADVISERS 33 LETTER OF TRANSMITTAL COUNCIL OF ECONOMIC ADVISERS, Washington, D. C., January 11, 1952. The PRESIDENT: SIR: The Council of Economic Advisers herewith submits a report, the Annual Economic Review: January 1952, in accordance with section 4 (c) (2) of the Employment Act of 1946. Respectfully, ' ./ Chairman. ( 35 Contents Page I. THE ECONOMIC STRATEGY OF THE DEFENSE PROGRAM II. DETAILED DEVELOPMENTS DURING 1951 The basic security build-up Production and employment Production Employment Prices, wages, and profits Prices Wages Profits Credit and money supply Credit Money supply The flow of goods and purchasing power Personal income, consumption expenditures, and saving . Investment and finance International transactions Government fiscal operations III. CENTRAL PROBLEMS FOR 1952 Advancing the security build-up The proposed build-up Speed of the build-up. Allocating scarce materials The availability of metals Major required adjustments Major problems in materials allocation Increasing production Production and inflation Factors limiting increase of total production Increasing the supply of raw materials. Enlarging the labor supply Guiding investment Increasing agricultural production Over-all production objective for 1952 Minimizing business dislocation Minimizing local unemployment and geographical dislocations ' Utilization of small business 37 39 46 47 49 49 52 55 55 61 64 66 66 68 69 69 74 84 88 95 95 95 97 98 98 100 102 103 103 104 105 106 108 112 113 114 114 115 III. CENTRAL PROBLEMS FOR 1952—Continued Supplying consumer needs Outlook for consumer goods Housing Essential public services Helping to strengthen other free nations Western European developments and their appraisal. . The economically underdeveloped countries Sharing of scarce commodities World aspects of inflation and stabilization Financing the Government program Savings through budget economies Tax legislation of 1950 and 1951 Nature of the financing problem aheacl State and local government fiscal policies Maintaining economic stability Outlook for inflationary pressures . Relationship among stabilization measures Credit policy Separate note by Mr. Clark upon monetary and credit policy Price control Wage stabilization The problem of longer-range stability. APPENDIXES A. Statistical tables relating to the Nation's Economic Budget. . B. Statistical tables relating to employment, production, and purchasing power INDEX page 117 117 118 120 121 122 126 128 130 131 131 131 132 136 137 137 140 141 142 144 147 148 153 153 165 215 I. The Economic Strategy of the Defense Program T HE United States has undertaken an economic strategy—and supported it with a program—to achieve national security, and that degree of general well-being essential to security throughout a dangerous period of indefinite duration. We must be prepared either for a sudden shift to total war if others force the issue, or for a gradual transition to the more peaceful conditions for which we strive. Meanwhile, this generation must deal with something new in American experience, a prolonged neitherpeace-nor-war existence in which this Nation has a major responsibility for world leadership. National economic policies—both private and public—must serve our ultimate goals of security, peace, and a sound economy. But we need to view in broad perspective the basic purposes of current economic policy, before turning to a more detailed review of 1951, the objectives and problems of 1952, and policy issues raised thereby. The basic purposes of economic policy listed in the next few pages are not new in January 1952. Our approach to these purposes in the past, however, too often has been of a piece-meal character, with inadequate attention to the meaning of the whole pattern of our national effort. Under current conditions, economic policy must cope with more unpredictable factors than would beset the country in either a total war or a completely peaceful situation. But the unavoidable presence of many uncertainties does not mean that all policy actions should be kept fluid. True, some policies must be kept more flexible than would be necessary under other circumstances. Nonetheless, we must seek a course of policy which is sufficiently far-sighted and firm to elicit general understanding and support. The great effort now under way clusters around these central purposes, toward which the operations of the whole mobilization effort are being vigorously directed: (1) A clear definition and prompt execution of the basic defense program Since the aggregate demand for resources is expected greatly to exceed their supply, achievement of the goals of national economic policy requires that resources be allocated and used as efficiently as possible. If this is to be accomplished, it is of major importance that the definition of the military program—whatever its substance—be as clear and firm as feasible. 39 Otherwise, with such a considerable portion of the.total economic effort going to basic defense, it would be virtually impossible to keep the other components of the effort consistent with the military program and among themselves. It would be impossible to determine the portion of resources that would be available for the expansion of basic productive facilities, or to design policies needed to restrict private consumption and less essential private and public investment. From the viewpoint of general economic policy, the speed of the military build-up is of similar interest. If the rest of the economy is to keep in step with basic defense and serve it properly, it is necessary both to know what the schedule of the defense program is and to achieve the goal on schedule. In thus stressing the need for clearly defining the military program and achieving it on schedule, the Council is passing no judgment on the defense program as such. The Council has the responsibility of seeking to throw ligh* on the implications for the economy of all Government programs, including the defense program. There is always the necessity of appraising the economic costs of different programs, and of developing the information and analysis that will make it possible for the ultimate decisions to reflect a correct balancing of costs against expected benefits. However, the Council does not claim any special competence to make recommendations regarding the size, composition, or timing of the basic defense program that may be required by the international situation—except in the event that the program became so large that there was real doubt about the adequacy of the Nation's economic resources to meet it. The program for this emergency, promising at the most to involve about half the relative burden shouldered at thfe peak of World War II, has not, in the Council's judgment, reached that size. (2) Expansion of output General economic growth is one of our primary objectives in peacetime. It has properly been regarded as the main avenue to an increasing abun-^ dance more generally enjoyed throughout the Nation. For this growth, we have relied mainly upon the enterprise of producers, coupled with the voluntary expression of popular wants. In the early stages of a defense emergency, when our resources are clearly not adequate to support all types of expansion at once, the emphasis upon economic growth must be selective. Currently, this involves concentration upon munitions production, basic materials-providing and energyproducing industries, such as agriculture, steel, aluminum, electric power, and oil, and such basic economic services as our transportation system. To achieve this concentration, and to restrain types of expansion which would interfere with it, requires public policies for the guidance of production to which the Nation would not resort in more normal times. However, the rapid expansion of these vital types of production has desirable consequences besides serving our immediate defense needs. The capacity now being built up would go a long way toward meeting the needs of full mobilization, should events suddenly thrust that upon us. Moreover, productive growth in these fields (except munitions) will provide a base for further growth in civilian supplies and in civilian-serving industries later on, even if defense outlays remain high. As this process continues, it hastens the time when the relative portions of defense and nondefense output can move closer toward their pre-emergency patterns. Thus the expansion programs now under way, if skillfully adjusted and timed, will in the longer run ease the relative burden and the relative inflationary pressures of the defense program. Provided that the expansion of output is conducted on this balanced basis, it can make a highly important contribution toward carrying whatever burdens the Nation may have to bear. Toward this end, we should draw fully upon our still incompletely utilized resources of technology, manpower, and managerial skills. (3) The maintenance of a strong civilian economy A strong civilian economy is a foundation of military power. We must maintain civilian strength, first, with respect to private consumption. Much has been said about "guns and butter." No one in a responsible position has claimed that we can have as much "butter," while the basic defense program grows, as we could have if our supply of "guns" were not being increased. The defense program during the coming year will affect many civilian durable commodities. The cutbacks will be real. Unless demand in particular markets behaves in an unexpected fashion, some shortages as measured by market demand also are to be expected. But there is every reason to believe that Americans will continue to have enough "butter," in terms of ordinary standards of consumer well-being, if the distribution of goods and services is not badly distorted by further inflation. There will be adequate civilian supplies to maintain the indispensable public support upon which execution of the defense program depends, if stabilization is effective, and if the people and the Government join in a clear understanding of the nature of the program and its urgency. But "guns and butter" is deficient terminology. It is much too categorical in its assumption of a sharp line between the factors that are essential for security and those that are not. In a race which promises to be more a marathon than a sprint, good diets, health, shelter, education, recreation, and the good morale that depends upon all of these, are essential for endurance in our national security effort. Striking a balance between our needs in these respects and for primary defense is a vital problem. Striking this balance also requires a judicious comparison of services rendered through the private economy and those rendered by government. Undoubtedly, at all levels of government, there are peacetime pro- 41 grams which must be cut. True economy and efficiency in public operations, desirable at all times, is imperative at a time when our resources face a persisting strain and when public financial burdens are unavoidably heavy. Yet there can be no general presumption that public outlays are wasteful or nonessential compared with private outlays. The building of a highway or a school may be far more essential to the conservation and advancement of our national strength than the building of a motion picture house or the production of luxuries. In an emergency, a sense of priority is highly important, and while many desirable public services need to be restrained until we can afford more of them, it would be false economy to strip them excessively in order to preserve materials and manpower for nonessential or wasteful private investment and consumption. We should also seek to preserve civilian strength by avoiding unnecessary inequities and dislocations. The very essence of a rapid shift toward defense production is a substantial reallocation of economic resources. Some consequent dislocations are unavoidable. But it is an important objective of economic policy to avoid unnecessary dislocations, and to minimize the inequities among different producer and income groups. The worst potential inequities, of course, are those that would arise from serious inflation. Beyond this, however, it is highly desirable to minimize the dislocation of both employment and enterprise resulting from materials curtailment, with particular attention to the problems of small business. (4) Maintenance of economic stability The curbing of inflation is necessary to facilitate the defense production program, to prevent inequities, to maintain public support for the defense effort by moderating conflicts among economic groups, to minimize the financial burden of defense, and to avoid unnecessary burdens upon our allies. Consequently, the prevention of inflation is a vital element in the success of all our efforts. For this very reason, it is important to recognize that the problem of inflation does not exist in isolation, and that stabilization measures cannot be effectively administered in a vacuum. Stabilization, in large measure, is a means to other ends. Stabilization policies are constantly being tested, not only by their immediate effect in reducing inflationary pressures, but also by their longer-range effect upon production and the utilization of our resources. Stabilization policies which are desirable for a presumably long period of partial mobilization are different from those which would be necessary in the more acute situation of total war. The programs now under way are intended to reconcile the application of controls adequate to the current situation, with allowance of sufficient play in the workings of our enterprise system for it to function more productively and more efficiently year by year. (5) Integrating our efforts with those of our allies In all of its economic endeavors, the United States needs to strive for a free-world-wide perspective. This is not only a matter of calculated selfinterest, but is dictated by our basic concern for improving the economic and social underpinnings of democratic institutions throughout the world. As a logical consequence of processing and consuming a major share of the free world's resources, the United States must make available to others some of its resources, including its productive techniques and skills. (6) Unity of programs and policies There is no question that this Nation has the over-all resources to do the job, if it uses them wisely. In governmental operations under emergency conditions, the basic principles to guide the wise use of resources are similar, in some respects, to those in a business organization. A business feels that it is using its resources well when ft appraises accurately the whole situation with which it has to deal, decides upon its objectives, and determines how much of its total resources it can afford to allot to various purposes. From the viewpoint of the economist, the same criteria should be applied to the immense array of complex undertakings which the Government is now performing in the mobilization effort. It would be no answer to say that the job is too big and difficult to be brought within any such vigilance. The very size of the job, and its impact upon the whole Nation, make the cost of avoidable inconsistencies or mistakes beyond the limit of what we can afford. There are necessary limitations in this matter, arising from the very nature of our system, and from the fact that we are not now engaged in a total war. Confidence cannot be placed safely in any overrefined or overdeveloped "master planning" concept which seeks to blueprint every detail and to cover every contingency. The capacity and desire to think for ourselves is one of our greatest assets. Nonetheless, it is of the essence in defense mobilization that the decisions made at various points within the Government be interrelated. Thus, if the defense program proper is not reasonably firm and clear, the civilian programs are left in the dark. For example, a specialized agency may best determine how much housing or schools the localities need. But while supplying these needs in full would be desirable under other circumstances, the specialized agency needs guidance when a defense program and an industrial expansion program must be given some priority because of the pressure of large total demands upon limited total supplies. The Council has called this necessary process during the current emergency "programming." In our Midyear Economic Review last July, we broke down this "programming" process into four main parts: (1) The clear definition of major goals—military, international, industrial, and civilian—and continuous testing of their feasibility one against the other to keep them in balance. The desired balance, of course, may change with changes in the international situation. 977891—52 4 (2) A continuing determination of the relative part to be played, in achieving these goals, through the expansion of some supplies on the one hand and the reduction of some demand on the other. This means an integration of all major economic policies toward a common purpose. (3) A continuous scheduling and timing of specific major program objectives. (4) A reasonably complete and continuous synthesis or inventory at one central point of all the vitally important facts about the progress of the whole effort, so that those concerned with policy may have immediate access to what is happening as a guide to what needs to be done. With all the sizable gains which have been made, the Council believes that for ensuing stages of the mobilization effort the "programming" process should be further advanced. As the impact of the defense effort upon the economy increases, the importance of over-all policy integration will increase correspondingly. (7) The enlistment of public support In a democratic nation, particularly during a defense emergency, one cannot draw a sharp line between the exertions of the government and the exertions of the people whose government it is. What the Federal Government does is only a fractional part of our total national effort; most of the planning and work are carried forward by industry, agriculture, labor, and the other major elements in our enterprise system. The great danger that we face, in the long run, is not an inadequacy of our combined private and public resources. The great danger is rather that, faced with problems so different from any confronting us before, we might get an admixture of private and public action not best suited to our native genius and not compatible with advancing the strength of our free institutions. The emergency indeed requires that the Government do more things than in normal peacetime, and influence the economy in more ways. But this fact does not diminish the force of the proposition that the Government should do only what is essential and what others cannot do as well. But whatever may evolve as a proper dividing line between private action and public action, the scope of public action will remain large during the emergency. Consequently, the sharing of responsibility for public action should be upon a broader base than in normal peacetime. While progress in this direction has been made during the past year, the Nation has not yet found an adequate formula for welding together the brains and experience of our enterprise system with that of our public service in dealing with problems at the national level. This is not simply a matter of recruiting people from private enterprise into government jobs, although that too is important. The leadership of our great economic 44 groups, while functioning as such, must be brought into a sympathetic relationship to some of the great decisions of national economic policy. It is no answer to this need to recite the old cliche about avoiding conflicts of interest. The conflicts of interest are there, whether we see them or not, and the only question is whether they are allowed to mount to the point where they could imperil our security and impair our whole economy, or whether some way can be found to reduce these conflicts to manageable proportions. And the only way to reduce such conflicts, in a democracy, is for people to find ways of working together. The active and integral participation by major group leaders in the shaping of national economic policy, through the channels of their organizations, carries a keener sense of active responsibility for the defense effort to great numbers of our people. In addition, there is need for efforts to increase the effectiveness of broad-scale citizen participation in the over-all defense program through local and regional activities. The success of these attempts will depend heavily upon the extent to which those at the center of the effort are able to convey to the Nation at large a comprehensive picture of national policies and problems. These problems arise out of the essential nature of our economic system— a system in which freedom and flexibility are held precious; a system in which command can never take the place of assent; but a system in which, nonetheless, group interests have become so strong that their apathy or defiance could imperil the whole national effort. Many steps have been taken, during the past year, to face up to this problem of unity as it arises out of the relationship between a free people, a free enterprise system, and a free government in a time of emergency. No one would claim that the solutions thus far attempted have yet been entirely satisfactory. But in this connection, the National Advisory Board on Mobilization Policy represents a prime vehicle and a great forward step. This Board has made a good beginning, and may become even more effective with further improved staffing and agenda. But this problem cannot be solved simply by the creation of more machinery; it requires that the will to solve it exist in the minds and hearts of men both inside government and outside government. It depends upon the common consciousness that we are confronted by world dangers which make the things that can hold us together infinitely more important than those that might tear us apart. 45 II. Detailed Developments During 1951 TIKE March in the old adage, the economic year 1951 came in a •^ lion and went out a lamb. The inflation that raged at the beginning of 1951 was replaced near the end of the first quarter by stability of such persistence that the causes and probable duration of "the lull" became a foremost topic of speculation among economists and businessmen. Broadly speaking, the dominant trends of the year were the rise in Government buying for the security program and the change in the pace of consumer buying, which surged to a crest in the first quarter, then abated, and remained relatively stable during the rest of the year. In the first months of 1951, private demand for goods reinforced an ascending Government demand to bring inflation; later, it counteracted an expanding Government demand to help bring stability. The bad news from Korea in the first weeks following the intervention by China caused consumers to continue buying at a high rate after the close of the Christmas season. Though retail sales dropped from 14.8 billion dollars in December 1950 to 12.2 billion in January and to 11.2 billion in February, this was less than the usual seasonal decline. At seasonally adjusted annual rates, retail sales rose 8.5 percent from the fourth quarter of 1950 to the first quarter of 1951. Manufacturers and merchants took an exceedingly optimistic view of prospective market demand, and the former expanded their output while the latter flooded their suppliers with new orders. The increase in Government purchases for national security programs combined with the heavier buying in civilian markets to extend and in some cases to speed the rapid rise in prices that had begun in 1950. The situation was reversed in the second quarter. Retail sales were 3 percent greater than in the first quarter, but this was much less than the normal increase for those months. On a seasonally adjusted basis, retail sales were 6.5 percent lower in the second quarter than in the first quarter. The inflow of many kinds of merchandise ordered in the optimistic mood of the first quarter piled up in the inventories of merchants and in the warehouses of manufacturers, to hang over the market for the remainder of the year. During the second half of 1951, retail sales (seasonally adjusted) were not much above the second quarter level. National security expenditures continued to rise, though more slowly than in the first half of the year, but private investment fell off, principally because of a lower rate of inventory accumulation. Prices remained fairly stable and total output, after remaining steady in the third quarter, rose moderately in the fourth. The lull that had begun near the end of the first quarter persisted through the second half of the year. The first months of active inflation were marked by some financial factors which are believed by many people to reduce inflationary pressures, while the 9 months of relative quiet were characterized by several factors which similarly are believed to generate inflationary pressures. There was a record Government cash surplus in the first quarter of 1951 and an accompanying decline in the privately-held money supply. Outstanding consumer credit, after rising rapidly through December, fell to a lesser degree in the first quarter of 1951. On the other hand, during the months of stability, there was a Government cash deficit which rose steeply from quarter to quarter, the money supply climbed more sharply than in the same period of 1950, and, after midyear, consumer credit and loans of commercial banks resumed their expansion. In the case of these series, the year 1951 demonstrated the hazards of interpreting short-range developments in the economy as a whole, through the use of a limited number of indicators, many of which are likely to reflect seasonal movements. Some important financial factors showed a different pattern. Total bank loans increased more than twice as much during the 9 months from July 1, 1950, to March 31, 1951, as during the following 9 months. During the former period, long-term Government securities found a ready market without risk of loss in the Federal Reserve banks, which was not true during the latter period. Heavy tax increases passed in 1950 became fully effective in 1951, and further increases were hanging over the heads of consumers and businesses through most of 1951. The Revenue Act of 1951, passed in October, applied higher rates to 1951 corporate income, and imposed increased withholding and excise tax rates which became effective November 1, 1951. Moreover, the lags in the impact of the financial factors must not be overlooked in interpreting their effects on inflationary pressure. In general, 1951 was a year of some surprises and, in a sense, of some paradoxes. We shall try in this Part to set down the facts of the year's economic record. In Part III, we shall consider the principal economic problems which will confront the Nation in the year ahead as a result of the combination of these facts and of our broad policy objectives. THE BASIC SECURITY BuiLD-Up During the past 12 months, the annual rate of expenditure for the major national security programs—both domestic and international—increased by more than 20 billion dollars, reaching a rate of 45 billion dollars in the fourth quarter. Currently, the national security programs are taking about 14 percent of gross national product, compared with 8 percent a year ago. (See chart 6.) 47 CHART 6 NATIONAL SECURITY EXPENDITURES FOR GOODS AND SERVICES IN 1951 PRICES During 1951, the annual rate of national security expenditures increased by about 20 billion dollars. The build-up of our military establishment and military aid to other countries accounted for more than 85 percent of total Security expenditures. BILLIONS OF DOLLARS* 25 50 I960 4th Qtr. 1951 2nd Otr. TOTAL SECURITY .EXPENDITURES 1951 4th Qtr.^ DEFENSE DEPARTMENT AND MDAP FOREIGN^ ATOMIC^OTHER AID ENERGY * SEASONALLY ADJUSTED ANNUAL RATES. \J PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS. The rate of expansion of the security programs slackened toward the end of 1951. During the last quarter, security expenditures are estimated to have increased only 3 billion dollars, at an annual rate, compared with an average increase of 6 billion dollars in each of the previous three quarters. Since the middle of the year, foreign economic aid expenditures have not increased, and there has been a considerable reduction in stockpiling expenditures. The decline in stockpiling expenditures reflected not only a general reduction in purchases for the stockpile, but also an actual suspension of purchases of some strategic materials, a reduction in the availability of some that come from foreign areas, and sharply rising domestic requirements for defense production and expansion of industrial capacity. During the first half of last year, military expenditures, including expenditures for foreign military aid, increased steadily and rapidly, partly as a result of the large increases in military pay and purchases of soft goods associated with rapid expansion in the size of the armed forces. In the second half, as the composition of the program shifted more towards expenditures on hard goods and military construction, expansion in total spending was necessarily slower. At the present time, about half of total military outlays are for hard goods and military construction. While deliveries of military hard goods and military construction put in place increased by about 250 percent from the fourth quarter of 1950 to the fourth quarter of 1951, the increase in actual military production during the period was somewhat greater. It was to be expected that, during the earlier phase of the program, expansion of military production pipelines would be larger than the increase in actual deliveries. Deliveries of types of military equipment which are easier to produce—like ammunition, weapons, and vehicles—increased enormously over the levels of the autumn of 1950. On the other hand, the gain in aircraft deliveries, which will account for about 25 percent of the military production program, was more moderate. As will be indicated in Part III, future increases in security expenditures will be very largely for military hard goods, especially for items which are more difficult to produce. PRODUCTION AND EMPLOYMENT Production Total output of the economy, measured by gross national product adjusted for changes in prices, rose about 5 percent from the fourth quarter of 1950 to the fourth quarter of 1951. The bulk of the increase occurred in the first half of the year; in the second half, aggregate output was nearly stable. For the year as a whole, total national output was 8 percent above 1950, and the rise in the private sector of the economy was 7 percent. (See chart 7 and appendix tables B-2 and B-3.) Industrial production. Industrial production fluctuated within a narrow range through most of 1951. The index, estimated at 218 in December 1951, was at about the same level as a year earlier. (See chart 7 and appendix table B-16.) This relative stability of total industrial production for the past year resulted from differing trends in the defense and consumer goods sectors of the economy. Defense and munitions output continued to increase. Aircraft manufacture, railroad equipment production, and shipbuilding activity rose on the average by about 50 percent from January to November. Machinery output climbed during most of 1951, and by November was 7 percent above the beginning of the year. Output of both durable and nondurable consumer goods decreased after the first quarter of the year. Consumer durable goods output dropped by about one-third from March to November, partly in response to cutbacks in materials, partly in response to the decline in consumer demand. Passenger car production fell from an annual rate of 6.4 million units in the first quarter to a rate of 4.4 million in the last quarter. The rate had been 6.7 million in the fourth quarter of 1950, and 4.6 million in the same quarter of 1949. Output of major appliances, such as washing machines, refrigerators, 49 CHART 7 PRODUCTION Total output of goods and services continued to climb in the first half of 1951, but leveled off in the second half. Total industrial production was somewhat lower in the second half as the continued advance of producers 1 durable equipment and munitions was more than offset by declines in the consumers' sector of durable and nondurable manufactures. TOTAL PRODUCTION 2nd Qtr. 1950 =100^ TOTAL PRODUCTION OF GOODS AND SERVICES^/ 2nd Qtr. 3rd Qtr. 4 t h Qtr. st Qtr. 2nd Qtr. 3rd Qtr. 4 t h Qtr. 1950 INDUSTRIAL PRODUCTION JUNE 1950 120 — I 15 - 110 - 105 - 100 100 95 95 J J A S 0 1950 JL/ INDEXES BASED ON SEASONALLY ADJUSTED DATA. 2/ INDEX BASED ON GROSS NATIONAL PRODUCT IN 1951 PRICES. 3/ PRELIMINARY ESTIMATES. SOURCES: DEPARTMENT OF COMMERCE, COUNCIL OF ECONOMIC ADVISERS, AND BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. stoves, and vacuum cleaners, suffered particularly sharp declines, and the production of radios and television sets fell steeply after February. Total production of nondurable goods industries declined gradually during most of the year. By November, production was 7 percent below January. The textile industry, in particular, greatly curtailed output during the second half of the year. Even the production of chemical products, which had risen continuously since early 1950, reached a plateau toward the end of 1951. Minerals output moved irregularly higher during the year to a new record in October, largely because of the rising production of crude petroleum. The latter was at an all-time high in October, and then tapered off somewhat as production allowed in the Texas fields was cut. Bituminous coal output rose substantially in the latter part of the year, as exports to Europe increased. Production of electric power, which is not included in the industrial production index, reached record levels in 1951, and averaged 13 percent above the previous year. The year's developments in the construction industry are summarized in the discussion of investment activity during 1951. Agricultural production. Despite adverse developments in the fall months in the outturn of some crops, notably cotton and corn, agricultural production in 1951 maintained the high level of recent years. (See appendix table B-16.) High-level agricultural output enabled us to meet the expanded demands for food and fiber of a military force which more than doubled in the past year, to increase shipments of food to friendly foreign countries, and to raise average food consumption in this country slightly above the pre-Korean level. The 1951 production record is all the more impressive in view of the handicaps of drought and floods, and a continuation of the long-run decline in agricultural employment, as some farm workers shifted to defense industries. There were also shortages of some materials, particularly fertilizers. Current estimates for cotton indicate a crop of 15.3 million bales in 1951, 53 percent larger than in 1950. Expected domestic and foreign demand for cotton in relation to total available supplies point to little, if any, buildup in the present relatively low cotton stocks. Record supplies of fats and oils are available. But production of feed grains and concentrates indicates that supplies for the 1951-52 feeding year will be about 5 percent smaller than for 1950-51, when carryover stocks were being reduced. Poultry and egg production in 1951 was nearly 7 percent higher than in 1950, and hog slaughter was up about 8 percent. Cattle slaughter was relatively small in 1951, partly because producers expanded their breeding herds. The number of cattle on farms in early 1952 was at record levels, several million head above a year earlier. Reduced feed supplies and a continued high output of livestock and livestock products point to a further cut in reserve stocks of feed grains during the 1951-52 feeding year. Services. Personal expenditures for services, in constant prices, rose about 3 percent above 1950, a smaller increase than that recorded in any other recent year. (See appendix tables B-2 and B-3.) Employment The total labor force, civilian and military, increased from about 64.7 million in December 1950 to more than 66 million in December 1951. But because of the growth in the armed forces, the civilian labor force increased only slightly during the same period—from 62.5 million to 62.7 million. Total civilian employment rose from 60.3 million in December 1950 to 61.0 million in December 1951. Over the year, total civilian employment averaged about 1 million higher in 1951 than in 1950. (See chart 8 and appendix table B-ll.) While the long-run decline in agricultural employment continued, nonagricultural employment during 1951 averaged about 1.5 million above 1950, with each month of the year outstripping the same month of the previous year; but the margin became generally smaller as the year progressed. December employment in nonagricultural activities was 54.6 million, compared with 54.1 million a year earlier. The number of employees in manufacturing in 1951 averaged 15.9 million, the highest since World War II. The shifting pattern toward increased defense activity was evidenced by the fact that employment in durable goods industries was 280,000 higher in November 1951 than a year" earlier, while employment in the nondurable goods field was about 180,000 lower. (See appendix table B-l2.) The increase since Korea of about 3.5 million persons engaged directly or indirectly in defense work was made possible primarily through the shifting of workers from nondefense work, and also through a considerable absorption of unemployed persons. About 5.5 million persons are now engaged directly or indirectly in defense production, excluding work on privately-financed facilities construction. Of this total about 750,000 are in aircraft, private shipyards, and ordnance; the rest are employed in Federal defense agencies, or work in mining, in the production or transportation of metals, machine tools, machinery, scientific instruments, chemicals, or rubber products, or in other activities needed for supplying the armed forces. These adjustments in employment were made while we continued to maintain our civilian economy at a high level. Material shortages have, in some instances, restricted the output of certain specific goods, but so far, lack of manpower has not played a significant part in holding down civilian output. In fact, layoffs in many consumer goods industries in the latter part of 1951 were the highest recorded for that time of the year since 1945. The workweek, which had averaged more than 41 hours for total manufacturing in the last half of 1950, dropped slightly during the first half of 52 CHART 8 CIVILIAN LABOR FORCE The civilian labor force in 1951 was almost as large as in I960, .despite the growth of the armed forces. Total employment averaged 61 million, or an increase of I million compared with the previous year. Agricultural employment, continuing its long-run decline^ decreased about ]/2 million, while nonagricultural employment rose by 1^ million. MILLIONS OF PERSONS^ 70 MILLIONS OF PERSONS* 70 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 1949 1951 Unemployment for the year averaged about 2 million — a decrease of about \% million, or 40 percent, from the I960 average. 10 /vs ,«, p «, - 10 I N EM PL 0>'M ENT PE RC EIN T OF c VltJA N LA 30 R FO RC r rm J F M A M J J A S O N D TIT ill J F M A M J J A S O N D J F M A M J J A S O N D 1949 1950 *I4 YEARS OF AGE AND OVER SOURCE-' DEPARTMENT OF COMMERCE 53 1951 1951, and, after the vacation months, leveled off at about 405/2 hours. For the year as a whole, the workweek averaged slightly higher in 1951 than in 1950. Many plants in the durable goods area, particularly in the machinery and metalworking groups, were on a 48-hour week. Curtailment in nondurable goods production reduced the workweek in that sector slightly more than 1 hour from November 1950 to November 1951. (See appendix table B-13.) Unemployment. Unemployment decreased from about 2.2 million persons, or 3.6 percent of the civilian labor force, at the end of 1950 to 1.7 million, or about 2.7 percent, at the close of 1951. (See chart 8 and appendix table B-l 1.) Important changes have occurred in the duration of unemployment. Over the year the number who had been seeking work 15 weeks or more declined more than 40 percent, from 410,000 to 230,000. The national averages obscure somewhat the unemployment which has developed in some areas as a result of the shift from civilian to defense production. In some geographical areas, the increase in defense output has failed to provide enough employment to offset the declines resulting from the defense program. In Michigan, for example, the number of persons drawing unemployment compensation in November 1951 was nearly 2 1 /2 times that in November 1950. In Detroit, the impact of material and production regulations and a slackening in automobile demand have carried to the point where, in the Nation's largest durable goods producing center, somewhat more than 100,000 people are reported out of jobs. In November 1951, despite the low level of unemployment nationally, there were 15 major labor market areas, as well as 5 minor ones, which were characterized as areas of substantial labor surpluses. Some of our larger metropolitan centers such as New York and Providence are included in this group. Few, if any, of these 15 areas have been pushed into this surplus labor category by the controls required by the defense program; many, in fact, are communities in which unemployment has been a problem for some time. Defense production in these places is either relatively unimportant or has been insufficient to absorb the labor surpluses which have developed as a result of long-standing economic problems. Among the States where unemployment has been growing are Michigan, Wisconsin, Massachusetts, Tennessee, Georgia, North Carolina, and Rhode Island. Cutbacks in orders for such consumers' goods as textiles, apparel, shoes, and jewelry aggravated the persisting unemployment problems in such local areas as Lawrence, Lowell, Manchester, Providence, and Brockton. Work stoppages. During 1951, less than one-quarter of one percent of total estimated working time was lost by strikes. Total man-days of labor lost through work stoppages during this period were lower than in any other postwar year. 54 A work stoppage on major railroads of the country began near the end of January when several hundred yard workers took "sick leave". Eventually the stoppage involved about 70,000 workers in the industry. The last workers returned to work about February 10. Steel production was affected by a work stoppage at various locations of the Tennessee Coal, Iron and Railroad Company in Alabama, which lasted from February 22 to March 6, and idled 18,000 workers at its peak. Another significant labor stoppage in the first part of 1951 was in the textile industry. Between mid-February and late April, 70,000 members of the Textile Workers Union (CIO) engaged in strikes of varying durations at some 160 woolen and worsted mills, mostly in New England and the Middle Atlantic states. On August 27, there was a serious work stoppage curtailing copper production. It involved an estimated 40,000 workers, mostly members of the Mine, Mill, and Smelter Workers Union. On August 31, about 10,000 of these workers returned to their jobs after a settlement was reached with the Kennecott Copper Corporation. Following an injunction issued under Federal labor laws ordering a return to work and a resumption of collective bargaining, settlements also took place with three other major copper producers. PRICES, WAGES, AND PROFITS Prices During most of 1951, prices were relatively stable, with wholesale prices showing a moderate decline, and consumers' prices rising slowly. This pattern of price movements was in striking contrast to the violent waves of general price increases which marked the second half of 1950 and early 1951, and which were finally curbed only after the imposition of the general price and wage freeze late in January. Since the General Ceiling Price Regulation was issued, consumers' prices have advanced 2.6 percent; wholesale prices have declined 2.9 percent; and the index of 28 "sensitive" primary market commodities has shown a large drop of 15.7 percent. But consumers' prices are 10.8 percent higher than at the Korean outbreak, wholesale prices are 13.4 percent higher, and the prices of primary commodities, 23.2 percent higher. (See charts 9 and 11, also appendix tables B-22 and B-23.) Wholesale prices under controls. Wholesale prices have gone through three periods since the general freeze. (See table 1.) First, they continued to rise for a short time after price controls were imposed, but much more moderately than in the period immediately preceding control. The rise was primarily concentrated among those agricultural and food prices left uncontrolled for legal or technical reasons. The rise in these prices virtually ended in February. 55 CHART 9 WHOLESALE PRICES Average wholesale prices declined during the spring and summer of 1951 and at the end of the year were moderately lower than at the time of the general price freeze. INDEX. JUNE 1950 «IOO 125 INDEX, JUNE 1950 » 100 125 120 — — 120 105 — - 105 100 100 A M J J 195! A S -^PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCE: DEPARTMENT OF LABOR (EXCEPT AS NOTED). In the middle of the second quarter, as excessive inventories developed, a selective drop began in wholesale prices which continued until autumn. The markets particularly affected were those closely tied to consumer demand, notably textiles, hides and leathers, and some farm products. Inflationary pressures continued heavy in markets where the expanding security program exerted a strong pull. (See chart 10 and appendix table B-23.) By the beginning of the fourth quarter, the period of major price declines was over, as inventories had been brought more closely in line with sales. Subsequently, there was only a moderate stiffening in price trends. In December, wholesale farm prices were 4.1 percent lower than at the time of the general freeze. The declines began in late spring and continued through the summer. They were caused by the expectations of very good crops, the sagging demand for such commodities as cotton and wool, seasonal declines in fresh fruits and vegetables, and the relaxation of general inflationary pressures. But by early autumn, farm prices began to strengthen again as crops proved to be smaller than expected. Particularly noteworthy was the recovery of cotton prices, which brought them at times close to the ceilings. The lagging demand for textiles, however, prevented a full return to ceiling levels. TABLE 1. Changes in wholesale prices I5ercentage chang8 Korean out- General Ceiling break to Korean outRegulaGeneral Ceiling Price break to tion to Price December 1951 > Regulation » December 1951 1 Commodity group All commodities ... Farm products Grains Livestock . Foods . ._. Meats 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 Housefumishmg goods . Miscellaneous,., _ .^ .^^« ._ ._ . ... ... .... 1 .. . ._ .. _ U ^ _ J ___... 4-16.7 +22.1 +13 4 +20 5 +15 7 +13.8 +15 5 +30 4 +32 4 +4.1 +9 4 +12.9 +28 6 +19.4 +24.4 -2 9 -4.1 +2 9 —11 7 — i —3.2 —2 6 —18 4 —11 3 +.8 +1 8 —1.4 —6 5 —1 9 +.5 +13 4 +17.1 +16 7 +6 4 +15 7 +10 2 +12 6 +6 5 +17 5 +5 0 +11 4 +11 2 +20 3 +17 1 +25.0 i June 1950 data used for computing changes since the Korean outbreak and February 1951 data for changes since the Genera) Ceiling Price Regulation. The latter most nearly reflect the level at the time of the general price freeze injate January. Source: Department of Labor. (See appendix table B-23.) Beef cattle prices continued strong through most of the period. The abolition of slaughtering quotas created considerable difficulty for the control of beef prices during late summer and early fall when marketings continued small as farmers further built up their cattle herds. There was great pressure for the elimination of all controls on beef, which may have contributed to the unusually small marketings of beef cattle. Prices of some grades of cattle rose at times to levels considerably above those which reflected the retail beef ceilings. However, by November the seasonal increase in marketings became heavier than usual, leading to alleviation of the supply situation and to a moderate decline in cattle prices. Hog prices, which were strong during the first half of 1951, became weaker beginning in late summer as marketings increased seasonally. However, the total decline in the autumn was a little less than usual in percentage terms, and prices at their seasonal low in December were about the same as a year before. The parity ratio reached a post-Korean peak of 113 in February, and then declined to a 1951 low of 103 in September. This drop reflected primarily changes in prices received by farmers, as prices paid by farmers fluctuated within a very narrow range after April. The ensuing strengthening of farm prices resulted in a rise in the parity ratio to 107 in December, which was slightly lower than a year earlier. In June 1950, the ratio was,97. (See appendix table B-24.) 57 CHART 10 WHOLESALE PRICES OF INDUSTRIAL PRODUCTS Industrial prices showed mixed trends in 1951. Metals and metal products were strong because of the impact of the growing security program. Sagging consumer demand and excessive inventories caused declines, particularly in soft goods. INDEX, JUNE 1950 = 100 INDEX, JUNE 1950=100 140 I ' 130 | 140 130 CHEMICALS AND ALLIED PRODUCTS **V. 120 120 ..** •* 110 BUILDING MATERIALS *••• no •FUEL AND LIGHTING MATERIALS I 100 J J A I S I O i l l 1 N D J F I M I A I M I960 I J I J I A -I I S 0 I N 100 DJ 1951 INDEX, JUNE 1950 = 100 INDEX, JUNE 1950 = 100 140 140 130 — 120 — — 120 110 130 — 100 100 J J A S O N D J F M A I960 * ALL COMMODITIES OTHER THAN FARM PRODUCTS AND FOODS. j/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCE: DEPARTMENT OF LABOR (EXCEPT AS NOTED). M J J 1951 A S O N D Unlike farm and industrial prices, wholesale food prices were virtually unchanged at the end of the year, compared with their level at the time of the general freeze. After mid-February they fluctuated irregularly within a narrow range, with compensating price movements, largely seasonal, in different groups of foods. (See chart 9.) During the same period, industrial prices declined 2.6 percent. (See chart 10.) The drop was highly selective. Many prices fell below ceilings, some drastically, while at the same time many other prices strained at the ceilings. The declines affected large areas where problems of "excessive" inventories developed in the spring. The sharpest declines were in commodities like cotton, hides, rubber, tin, wool, and tallow, in which there had been great speculative price increases immediately after Korea. The price decline in most commodities in this group was concentrated in the spring and summer. By autumn, the downward movement had more or less spent itself and some minor upturns in prices took place. The textile and the hides and leather products groups showed the largest average declines from the general freeze to the end of 1951, the former dropping 11.3 percent and the latter, 18.4 percent. Within these subgroups, the declines, like the earlier rises, were greatest at the raw material levels, and least at the final stages of fabrication. Thus, hides registered the largest decline and shoes the least; cotton grey goods the most, and cotton clothing the least. Other industrial products in which there were substantial price declines were chemicals, which fell 6.5 percent after the general freeze, mainly as a result of a sharp drop in the prices of fats and oils following steep rises prior to the freeze. Prices of industrial chemicals, fertilizer materials, and drugs and pharmaceuticals were firm, or advanced. Both metals and metal products, and fuels and lighting, accounting for more than 40 percent of the industrial products group, advanced after the general freeze, the former by 1.8 percent and the latter by 0.8 percent. The metals and metal products group is particularly subject to the impact of the expanding security program. The large demand for fuel contributed to strength in the prices of petroleum and other fuels. Since these groups are subject to price control, little upward movement was recorded, except to reflect permitted adjustments in ceiling prices, as in the cases of automobiles, and lead and zinc. (See appendix table B-23.) Consumers3 prices under controls. The trend of consumers' prices following the general freeze was quite unlike that of wholesale prices. After the general freeze, the consumers' price index continued to rise until May, then leveled off, and remained virtually unchanged until September, when it began a new rise. The greater strength of consumers' prices during this period, compared with wholesale prices, is accounted for by a number of factors. For many commodities, winter clothing, for example, it normally takes a considerable 59 977891—52 ~5 TABLE 2. Changes in consumers' prices I3ercentage change Korean outbreak to General Ceiling Price Regulation i Item +8 0 All items Food . Apparel Rent Fuel electricity and refrigeration Housefurnishings Miscellaneous - -- +11.3 +9.4 +2.4 +3.5 +13.5 +5.6 General Ceiling Price Regulation to November 1951 1 Korean outbreak to November 1951 * +2 6 +10 8 2+2.4 +2.8 +3.7 +6 +.5 +3.2 2+13. 9 +12 5 +6.1 +4 1 +14.1 +8.9 1 June 1950 data used for computing changes since the Korean outbreak and February 1951 data for changes since the General Ceiling Price Regulation. The latter most nearly reflect the level at the time of the general price freeze in late January. 2 A preliminary survey indicates that food prices advanced by 0.2 percent from November 15 to December.15. Source: Department of Labor. (See appendix table B-22.) time for price increases at wholesale to show up at retail. Part of the strength of the index was due to the rise in food prices, as consumers maintained a high demand for what are basically nonpostponable purchases. The consumers' price index includes many items over which controls are lacking or are only partial, thus permitting further price increases. In addition, part of the increase in the index was due to the new excise taxes. All major components in the index have continued to advance since the inauguration of price controls, with the largest increase, 3.7 percent, occurring in rents, which are subject only to partial control. (See table 2 and chart 11.) The tempo of increases in rents, which have been rising steadily during the postwar period, has been sharply stepped up in the last year and a half, as more and more areas have been exempted from controls, and more liberal rent adjustments have been required by law. In addition, the increased demand for housing under the impetus of the defense program has played an important role in many areas. Progress has been made, however, in returning areas to rent control under the new law. Prices of the miscellaneous group of goods and services have increased 3.2 percent since the imposition of the General Ceiling Price Regulation. More than 1 percent of the rise came in November, following the imposition of increased Federal excise taxes which became effective in that month. The 2.8 percent rise in apparel prices—the major part of which occurred in September—reflected the accumulated effect of the cost increases since the year before in the pricing of the new lines of fall merchandise. Retail food prices have been generally strong throughout the period February to November 1951, with only minor dips. The rise in retail meat prices has been slightly greater than the average rise in food prices, amount- 60 CHART 11 CONSUMERS' PRICES Consumers1 prices were relatively stable for several months after February 1951, but in September they began a new rise. INDEX, JUNE (950 = 100 120 115 INDEX, JUNE 1950 = 100 120 - - - MO 110 — 105 115 - - 105 100 100 95 I I J I J I A i S i O I JI I N O J F i M I A I M I J I J l A I S l O I N 95 D SOURCE: DEPARTMENT OF LABOR. ing to 2.7 percent, compared with 2.4 percent for all foods, and 2.6 percent for the consumers' price index. Wages The upward creep in wage rates was one of the most important factors responsible for the increased total labor income in 1951. In manufacturing industries, average hourly earnings rose 11 cents, from $1.51 in November 1950 to $1.62 in November 1951. Workers in the durable goods manufacturing industries received average hourly wages of $1.70 in November 1951, an increase of 12 cents, or about 7 percent, from November 1950. The rise in the nondurable goods sector was smaller, from $1.42 in November 1950 to $1.50 in November 1951. (See chart 12 and appendix table B-14.) Hourly earnings in manufacturing exclusive of overtime pay rose 10 cents or about 7 percent from November 1950 to November 1951, somewhat less than the rise in gross pay. From February 1951, the first month of operation of the v/age stabilization program, to November, gross hourly earnings rose 6 cents, or 4 percent. Straight-time hourly rates also increased by 6 cents, or 4 percent. Average weekly earnings in manufacturing rose by less than hourly rates, since average hours of work were lower in November 1951 than in the 61 CHART 12 AVERAGE EARNINGS IN MANUFACTURING INDUSTRIES Average' hourly earnings rose slowly throughout 1951, but when adjusted for price changes were fairly constant. There was a smaller rise in a v e r a g e w e e k l y earnings, due to a slight decline during the year in the workweek. 1.70 - 1,50 — 1.30 - — - 1.70 - 1.50 — 1.30 AVERAGE WEEKLY EARNINGS .CURRENT PRICES 70.00 70.00 DURABLE GOODS CONSTANT PRICES .CURRENT PRICES 60.00 NONDURABLE GOODS 60.00 _ 50.00 50.00 I 1 J I J I A t S I t O N O J F M 1950 uEARNINGS JN CURRENT PRICES A M J i J A S 1951 DIVIDED BY CONSUMERS' PRICE INDEX ON BASE JUNE 1950-100. SOURCES: DEPARTMENT OF LABOR AND COUNCIL OF ECONOMIC ADVISERS. i "T 62 O N D same month of 1950. In all manufacturing industries, average weekly wages rose by about $3.02, or 5 percent, to a level of $65.25 in the 12 months beginning November 1950. In the durable goods sector, weekly earnings advanced by $4.08, while the rise in nondurable goods industries was $1.50. (See appendix table B-15.) It has been estimated that average weekly earnings of clerical and professional workers, as distinct from wage earners, rose around 6 percent in the 12-month period. Wage negotiations. During the year, wage negotiations were conditioned by the wage stabilization program, which affected practically every contract signed in 1951. As a necessary prelude to the development of a wage stabilization program, the Wage Stabilization Board froze wages on January 26, 1951. Just prior to this freeze an unusually large number of settlements took place. Many new contracts were negotiated at that time through mutual consent, since the terms of existing contracts did not contain wage reopening provisions effective in January. Many deferred increases negotiated in 1950 also became effective in that month. In addition, there were numerous instances of consent to the immediate payment of increases which were scheduled to become effective later in 1951. The freeze was relaxed on January 30, by a regulation which authorized increases that were to become effective before February 10, when called for by agreements antedating the freeze. The bituminous coal and anthracite agreements, which raised wages $1.60 a day, fell within this category. In the 4 or 5 weeks following the freeze order, wage settlements were few. With the removal of the freeze and the initial development of Board policy, wage settlements became more numerous. These settlements represented mainly a completion of pre-stabilization wage movements and negotiations interrupted by the freeze. As a result, wage increases were agreed upon or put into effect for more workers during March than in any of the preceding 12 months. A wage settlement, which contained a cost-of-living escalator clause, and which affected about 1 million railroad workers, was reached on March 1. Announcement of the BLS consumers' price index for January brought cost-of-living wage increases for more than a million workers covered by contracts with automatic escalator clauses. Many of the settlements negotiated during this period, particularly in the textile industry, provided for general increases and supplementary benefits in excess of the limit allowable without prior approval of the Wage Stabilization Board. In other instances, employers voluntarily raised wage rates of large groups of workers to the maximum permitted without specific Government authorization. In May, the Wage Stabilization Board, in a decision that was the forerunner of the Board policy of gearing wage stabilization to changes in the 63 cost of living, allowed the meat packing workers, who had received an increase of 11 cents in 1950, an additional increase of 9 cents. The Board held that it would not be fair to penalize the parties because, in their previous contract, they had decided to use a reopening clause rather than a formalized escalator clause as a protection against higher living costs. Later an additional amount averaging 2 cents an hour was allowed, to increase the differentials among job classes. In June, a wage increase of 15 cents was approved for the Atlantic Coast shipbuilding workers, on the ground that wage rates in shipbuilding were abnormally low in the base period which WSB had included in its general adjustment formula. Many settlements later in the year provided for wage increases to offset the rise in the cost of living, as well as for fringe benefits. Among the more noteworthy settlements in the second half of the year were those in the paper, glass, electrical, rubber, nonferrous mining and smelting, and food industries. Contracts also were signed covering many workers in transportation, communications, and construction. In addition, wage increases were granted most Federal Government workers and many State and local government employees. At the year's end, a most significant contract negotiation was taking place between the steel industry employers and the steel workers union. The CIO Steelworkers Wage Policy Committee presented a 22-point set of proposals covering some 1 million workers. Key bargaining points included a "substantial wage increase, a guaranteed annual wage, a union shop, a 'drastic' revision of the incentive system, time and one-half for Saturday work and double time for Sunday, as such, 8 paid holidays and a more liberal vacation program." On December 22, after the parties had failed to reach an agreement, the case was referred by the President to the Wage Stabilization Board. Profits Corporate book profits before taxes in 1951 were the highest on record, reaching an estimated total of 44.8 billion dollars. In 1950, the previous peak year, corporate book profits before taxes amounted to 41.4 billion. (See chart 13 and appendix table B-32.) The profits trend, however, changed drastically in the course of 1951. After reaching a postwar peak of 51.8 billion (annual rate) in the first quarter of 1951, corporate profits before taxes declined sharply, reaching a level of 40 billion in the third quarter. Lower levels of sales and prices in many industries, as well as the upcreep of costs, accounted for the change. In the fourth quarter, as sales increased somewhat and prices firmed slightly, corporate profits before taxes, according to preliminary indications, rose to an annual rate of approximately 42 billion dollars. Corporate profits after taxes were an estimated 18.1 billion dollars in 1951, compared with 22.8 billion in 1950, most of the reduction being a result of higher tax rates. In 1951, the combined Federal, State, and local taxes on profits took about 60 percent of profits before taxes, compared with about 45 percent in 1950. The level of corporate profits after taxes was exceeded in only 3 previous years, 1947, 1948, and 1950. Although corporate profits as a whole were substantially lower at the end of 1951 than at the beginning, there were significant differences among industries. (See appendix tables B-33 through B-36.) Petroleum refining, and printing and publishing (except newspapers) showed, before taxes, a higher rate of return on sales in the third quarter than in the first. Profits of the following industries dropped moderately during the same period: food, tobacco, furniture, chemicals, leather and leather products, stone, clay and glass, nonferrous metals, iron and steel, machinery (except electrical), transportation equipment, instruments, and motor vehicles and parts. CHART 13 CORPORATE PROFITS Profits before tax were in 1951 at an all-time high, but in the latter part of the year fell substantially. Profits after tax for the year 1951 were reduced below the 1950 level because of higher tax. rates. BILLIONS OF DOLLARS B I L L I O N S OF DOLLARS 60 60 - 20 10 - - 1951 SEASONALLY ADJUSTED ANNUAL RATES. ]/ NO ALLOWANCE FOR INVENTORY VALUATION ADJUSTMENT. 2/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED). 10 Steep declines were reported by corporations producing textiles, apparel, and lumber and wood products, where inventories were particularly excessive. The decline in profits during 1951 affected both large and small firms. However, the largest manufacturing firms, those with assets of 100 million dollars or more, reported a smaller decline in their profit-sales ratio (before taxes) than did those with assets of $250,000 or less. CREDIT AND MONEY SUPPLY Credit Most forms of private credit expanded during 1951, though at a lower rate than in 1950. Total loans of commercial banks, which had jumped 9.2 billion dollars or 21 percent in 1950, rose about 6 billion or 12 percent during the past 12 months. The difference was largely accounted for by the behavior of nonbusiness loans. While commercial and industrial loans of banks rose close to 5 billion dollars during 1951, about the same as in 1950, loans of all other kinds, such as consumer and real estate loans, expanded approximately 1.5 billion in 1951, compared with 4.4 billion the year before. (See chart 14 and appendix table B-27.) A major factor that sustained the growth of commercial and industrial loans, while the expansion of most other classes of bank loans slowed down considerably, was the rising demand for credit to finance defense-supporting activities. Approximately 40 percent of the increase in outstanding business loans during the second half of 1951, as reported by banks in leading cities, represented borrowing by firms engaged in defense or defense-related production. Much of the rest of the increase in commercial and industrial loans during this period was seasonal. Commercial bank holdings of U. S. Government securities showed little change during 1951, while the drop during 1950 had been 5.0 billion. Investments in other securities rose by nearly 1 billion during 1951, compared with 2.2 billion in 1950. The combined effect of changes in the three major components of commercial bank earning assets was to lift total loans and investments about 7 billion dollars or 6 percent during 1951. The rise in total earning assets of banks in 1950 had been 6.5 billion or 5.3 percent. Outstanding consumer instalment credit declined 0.6 billion dollars during the first 4 months of 1951, and then rose slowly, but at the end of the year it was still below the December 1950 level. During 1950, consumer instalment credit had grown by 2.6 billion or 24 percent, with nearly half of the increase occurring in the third quarter. (See appendix table B-26.) Farm mortgages held by all groups of investors rose approximately 0.5 billion dollars or 8 percent during 1951, which was about as much as in 1950, while total nonfarm mortgages of $20,000 or less increased about 66 CHART 14 BANK LOANS AND INVESTMENTS The increase in total bank loans was only about two-thirds of the 1950 increase, although commercial and industrial loans expanded nearly as much in 1951 as in the previous year. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 150 150 125 - 100 25 25 J F M A M J J A S O N D J F M A M J J A S O N D ^ 1949 1950 END OF MONTH 1951 50 50 COMMERCIAL AND INDUSTRIAL LOANS (GROSS) -i/ 25 25 \ I /i * • i 0 J F M A M J J A S O N D 1949 J F M A M J J A S O N O J F M A M J J A S O N D ^ 1950 1951 END OF MONTH JL/ ZJ VALUATION RESERVES INCLUDED IN GROSS LOANS; EXCLUDED FROM NET. PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (EXCEPT AS NOTED). 6.5 billion dollars or 15 percent during 1951, compared with 7.8 billion or 20 percent in 1950. Money supply The privately-held money supply (deposits adjusted and currency) expanded nearly 9 billion dollars or about 5 percent during 1951, compared with 7.1 billion or 4.2 percent in 1950. (See table 3.) The rise in the last three quarters of 1951 exceeded substantially that of the comparable period in the previous year. (See chart 15 and appendix table B-28.) After declining 4.4 billion dollars in the first quarter of 1951, or more than half again as much as in the same months of 1950, largely because CHART 15 MONEY SUPPLY The privately-held money supply, after a seasonal contraction in the first quarter of 1951, rose at an accelerating rate during the next three quarters. The growth for the year was considerably larger than in I960. BILLIC)NS OF DOLLARS 200 BILLIONS OFDO LLARS 200 TOTAL DEPOSITS AND CURRENCY 175 **"* "* N_ii.i»»" •""•*"' — 175 X TOTAL EX CLUD1NG U. S. GOVERMrtENT DEPOSITS (PRIVATELY-HELD MONEY SUP PLY) 150 150 - 125 125 - 100 100 DEMAND DEPOSITS ADJUSTED 75 75 TIME DEPOSITS 50 - 50 CURRENCY OUTSIDE BANKS *^k 25 K-S>_^>-<>-O-O-^^O-X)-^-^-<^ ' 2 5 *—O—O--O- O O —Q--O—O— O-O"-*0—< U.S. GOVERNMENT IJEPOSITS 0 J F M A M J J A S O N D J F M A M J J A S O N O 1949 J F M A M J J A S O N D -!/ I960 END OF MONTH LIMINARY ESTIMATES BY COUNCIL OF E CONOMIC ADVISERS. SOURC E: BOARD OF GOVERNORS OF FHE FEDERAL RESERVE SYSTE M 68 1951 (EXCEPT AS NOTED). 0 of the surplus of Treasury cash receipts, the money supply moved upward in each succeeding month. TABLE 3.—Factors changing the volume of the privately-held money supply * [Billions of dollars] 1950 Factors total Total Loans of commercial and mutual savings banks -H.4 +10.8 Securities of U. S. Government held by bank-.1 -3.6 ing system 3 . Securities of State and local governments held by commercial and mutual savings banks. . +1.2 +2.1 —.5 Treasury deposits * + 4 +.2 Monetary gold stock _ _ _ _ —1.7 — 9 1.5 Other factors, net Net change in privately-held deposits and currency 8 - 1951 1QXQ +.7 +7.1 First half Second Total 2 half First half Second half 2 +2.5 +8.4 +7.9 +3 5 +4.4 —1.7 -2.0 +1.8 —2 0 +3 8 +1.0 +1.1 +1 1 —1.5 — l +1.0 — 2 —.2 —.7 —.1 —1 6 +.4 —3 0 —1 0 — 1 +.6 +2 8 +9 —1 5 +.2 +7 0 +8 8 —2 2 +11 0 i Includes State and local government deposits. * Estimates based on incomplete data; second half by Council of Economic Advisers. Includes commercial banks, mutual savings banks, and Federal Reserve banks. * A decrease in Treasury deposits is denoted by a positive figure, and an increase by a negative figure. In the case of other specific factors the reverse is true. 8 See appendix table B-29 for aggregate money supply and its components! NOTE.— Detail will not necessarily add to totals because of rounding. Signs preceding figures in columns Indicate effect on the money supply. Source: Board of Governors of the Federal Reserve System (except as noted) : 3 The monetary expansion of more than 13 billion dollars in the past 9 months reflected (1) the growth of the loans and investments of the banking system, including mutual savings banks, (2) the drawing down of U. S. Government deposits to meet part of the cash deficit, and (3) to a lesser extent, the reappearance, beginning in the third quarter, of net gold imports after more than a year and a half during which the United States had lost gold to other nations. THE FLOW OF GOODS AND PURCHASING POWER Personal income, consumption expenditures, and saving Personal income. Personal income has gained quarter by quarter since Korea, but the rate of increase was slower in 1951. (See chart 16 and appendix table B-7.) One important component of consumer income, unincorporated business and professional income, reached a peak in the first quarter of last year. Labor income advanced less and less rapidly as the momentum of increases in wage rates slackened, the average factory workweek was reduced, and employment gains were only moderate. Farm income, which declined sharply from 1948 to 1950, continued upward from the postwar low reached in the second quarter of 1950. In the fourth quarter of 1951, personal income attained an annual rate of 258 billion dollars. This was more than 40 billion above the pre-Korean level; but CHART 16 PERSONAL INCOME, SPENDING, AND SAVING Consumption expenditures in the second half of 1951 remained below the first quarter peak despite the continued rise in income. Saving rose to 10 percent of disposable income. BILLIONS OF DOLLARS* 300 BILLIONS OF DOLLARS* 300 250 - -250 200 - — 200 150 - - 150 100 -? — 100 10 NET SAVING AS PERCENT OF DISPOSABLE INCOME •SEASONALLY ADJUSTED ANNUAL RATES. •^PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED). 70 only 14 billion of the increase took place in the second half of the 18month period. Tax increases since Korea have slowed down gains in spendable income. Personal tax liabilities rose from 19.5 billion (annual rate) in the second quarter of 1950 to about 30 billion in the fourth quarter of 1951. Nevertheless, personal disposal income rose by more than 30 billion dollars or 15 percent over the period. Total disposable incomes in real terms have gained by about 5 percent since Korea, but the sharp price rises in December 1950 and January 1951 caused a temporary drop in real income. It was not until the third quarter of 1951 that total consumer purchasing power regained the level of the fourth quarter of 1950. On a per capita basis, real disposable income did not regain the level of the fourth quarter of 1950. (See chart 17 and appendix table B-10.) Although, in general, gains in income have more than kept pace with the cost of living, they have been unevenly distributed throughout the population. Since Korea, farm incomes have risen somewhat more than those of other groups, compensating for the decline that extended through the CHART 17 PER CAPITA DISPOSABLE INCOME Per capita disposable income in constant prices rose very slightly during 1951, but in the final quarter of the year was still below the peak reached in the last quarter of I960. DOLLARS* DOLLARS* 1,600 1951 PRICES CURRENT PRICES 1,200 — 1,600 m 1,200 800 400 800 400 — I960 1951 * SEASONALLY ADJUSTED ANNUAL R A T E S . i/PRELlMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS. first half of 1950, while annuitants and other fixed-income recipients have, of course, become worse off. Average hourly earnings of workers in durable goods manufacturing industries increased by 18 cents between June 1950 and November 1951, compared with 14 cents in nondurable goods industries. After adjustment for price increases and trends in average weekly hours (but not allowing for higher taxes) > real earnings of workers in nondurable goods manufacturing in November 1951 were slightly below June 1950, while real earnings of workers in durable goods manufacturing were moderately above. Average weekly earnings in the construction industry rose more than those in manufacturing, while those in trade and services rose much less and fell behind the rise in living costs. The gains in income of a large proportion of Government workers were commensurate with those of workers in private industry. Consumption expenditures. After the December 1950-February 1951 buying wave, total consumption expenditures declined abruptly, falling at the seasonally adjusted annual rate of 6.5 billion dollars, or 3 percent, from the first to the second quarter. Since then they have moved up slightly, but CHART 18 PERSONAL CONSUMPTION EXPENDITURES FOR DURABLE GOODS There was a significant decline in demand for most categories of consumer durable goods from the second half of I960 to the second half of 1951. Expenditures for passenger cars and major appliances both dropped almost one-third while all other durable goods were 10 percent lower. BILLIONS OF DOLLARS* BILLIONS OF DOLLARS* 20 20 ALL OTHER DURABLE GOODS 15 15 10 10 MAJOR HOUSEHOLD APPLIANCES J 1 I 2 I 3 4 1 1949 * SEASONALLY ADJUSTED ANNUAL RATES. •J-'PRELIMINARY ESTIMATES. SOURCE: COUNCIL OF ECONOMIC ADVISERS. 2 3 1950 2 3 1951 have not regained the first quarter level. The decline in demand was concentrated in durable goods purchases, which fell from the almost unprecedented annual rate of 31.5 billion dollars in the first quarter (compared with 29 billion dollars in 1950 as a whole) to 26 billion dollars in the second quarter, and remained somewhat below that level for the rest of the year. Sales of automobiles and major appliances declined substantially, as is shown in chart 18. Purchases of nondurable goods, which had moved up as prices rose in 1950, remained fairly constant in 1951, while expenditures for services continued to expand slowly. (See appendix table B-4.) The extent of the decline in consumer demand is indicated by the fact that the volume of consumer purchases in the second half of 1951, after adjustment for price changes, was below the level of the second quarter of 1950, despite an increase of 5 percent in real income. In terms of 1951 prices, expenditures for durable goods were lower by 3.5 billion dollars, while outlays for services increased by a somewhat smaller amount. Expenditures for nondurable goods remained at about the level of the second quarter of 1950 despite a population increase of 3 million. (See appendix table B-3.) Personal saving. The drop in spending in the second quarter was associated with a rise in the rate of saving from 4 percent of disposable income in the first quarter—a rate not far below the postwar average—to 9 percent. Later in the year, as incomes continued to increase, saving rose to an even higher rate. (See chart 16 and appendix table B-9.) This rate of saving, the highest reached since World War II, undoubtedly reflected a combination of factors, some temporary and some of a more permanent character. The rate appears unusually high in contrast with that of the rest of the postwar period, during which special reasons, ranging from the backlog of demand and purchasing power built up during the war to scare buying following Korea, tended to raise spending, especially for durable and semidurable goods. The increase in the rate of saving in 1951 may have represented primarily the disappearance of backlog demands, particularly for automobiles, the temporary saturation of some other markets for durable goods, and the desire to replenish liquid reserves. Other factors, such as restraints on consumer credit and resistance to high prices, were also undoubtedly among those contributing to this development. Moreover, the price calm of the last three quarters of 1951 probably helped to moderate the previously high level of spending that had been initiated in part by the anticipation of rising prices. In recent years, there has been a marked preference for tangible forms of personal saving, such as investments in homes and in the assets of unincorporated businesses, compared with more liquid types of saving. The buying of durable goods, which has many of the characteristics of saving, has also been at a high rate. In fact, in the period 1947 through 1950, the in- 73 crease in mortgage, consumer, and personal business debt, in connection with investment in tangible forms of saving and consumer durable goods, was greater than the increase in the ownership of such assets as deposits, stocks and bonds, and insurance equities. This tendency was reversed in 1951, when total saving expanded. As shown in table 4, the high level of saving in the second and third quarters of 1951, compared with the corresponding period of 1950, largely reflected a rise in liquid saving. Estimates of the change in personal business debt are not yet available, but consumer debt rose much less rapidly than in the previous year, while additions to currency, deposits, and corporate and other securities were greater. TABLE 4.—Liquid and total personal saving [Billions of dollars] 1950 Type of saving Liquid saving: Currency, deposits, and savings and loan shares Private insurance reserves . . ___ Securities: U S. Government State and local government . Corporate and other Debt liquidation: Mortgage .. OonsiiTTier Total liquid saving - Total personal saving s 1951 Second quarter Third quarter Second quarter +0.7 +.9 +2 3 +1.0 +1 1 +.9 +.5 —.1 —.4 —.2 +5 +.4 +1 1 -1.7 —1,9 —1.7 —1.7 +.2 -f.4 —1.3 Third quarter » +4 5 +1 0 —. i +6 —1.4 — 1 —.5 —.3 +2 0 +4 7 +3.5 +2.0 +6.8 +7.0 i Estimates based on incomplete data. * Includes liquid saving, and personal tangible investment less depreciation, and the increase in farm end business debt: not adjusted for seasonal variation and therefore cannot be computed from saving data in appendix table B-9. NOTE.—Detail will not necessarily add to totals because of rounding. Sources: Securities and Exchange Commission, and Department of Commerce. Investment and finance There were wide swings in the movement of business investment during 1951, reflecting in more extreme form the same mixture of strength and weakness which characterized economic events generally. After reaching a peak annual rate of 65.6 billion dollars, or 20 percent of total output in the second quarter of 1951, gross private domestic investment declined 18 percent to 54 billion, or 16 percent of total output, in the fourth quarter. (See chart 19 and appendix table B-5.) Even at this lower level, investment was taking about the same proportion of total output as in such previous peak years as 1948. In spite of the downward trend in the second half, the 59-billion-dollar level of business investment for 1951 as a whole was higher than for any previous year, both in real and money terms and as a proportion of total output. The peaking of total investment in the second quarter of 1951 reflected an extremely high rate of inventory accumulation, and a continued rise in the rate of outlays for producers' equipment and nonresidential construe- 74 CHART 19 BUSINESS INVESTMENT Investment in producers'durable equipment continued to rise rapidly through 1951, but private construction and inventory accumulation both dropped in the second half of the year. BILLIONS OF DOLLARS* BILLIONS OF DOLLARS* 70 70 TOTAL GROSS PRIVATE DOMESTIC INVESTMENT tofc ^ - 30 - 20 - -10 -10 * SEASONALLY ADJUSTED ANNUAL RATES. J/ PRELIMINARY ESTIMATES .BY COUNCIL OF ECONOMIC ADVISERS. SOURCE : DEPARTMENT OF COMMERCE (EXCEPT AS NOTED). 75 977891—52 10 0 tion. Residential construction meanwhile was receding from the record level reached in the latter part of 1950. (See chart 22.) The decline in total business investment during the second half of 1951 was due primarily to two factors. The more important was the extremely sharp drop in the rate of inventory accumulation, as many industries took steps to bring production and inventories in line with the decline in consumer demand which developed early in the spring. The second factor, which was becoming increasingly significant toward the end of the year, was cutbacks in commercial and some other categories of construction, effected primarily by controls over materials. Plant and equipment. During 1951, business investment in plant and equipment rose to record levels, placing a major strain on the supply of scarce materials. (See appendix table B-19.) The expansion in basic areas was stimulated and encouraged by Government action to ensure a productive capacity capable of meeting a growing demand for defense and related output. As the year progressed, it became necessary and possible to shift the emphasis toward the more urgently needed types of expansion, and to reach decisions on specific goals for the expansion of key industries. Through most of 1951, business expenditures for new plant and equipment continued the rapid rise that had begun in the spring of 1950. By the fourth quarter of 1951, private nonfarm plant and equipment outlays were running 18 percent higher than in the same quarter of 1950, and 17 percent above the pre-1951 peak reached in the fourth quarter of 1948. (See appendix table B-19.) In terms of physical volume, the increase from the fourth quarter of 1948 was probably about half that much. This unprecedented surge of investment in new productive facilities reflected in some measure the stimulus of defense buying, and Government inducements such as accelerated tax amortization. The largest increases during 1951 were in the industrial and utility fields, and particularly in the aircraft and primary metals industries. (See charts 20 and 21.) But it is noteworthy that the investment boom of 1950-51 was too broad, and began too early, to be explained wholly or even primarily as the direct result of military procurement or Government aids. The basic factors were the growth in civilian demand until near the end of the first quarter of 1951, the general absence of surplus productive capacity even before Korea, ready availability of funds during most of the period, an outlook for increasing demands and shortages of materials and equipment, and the encouragement given by excess profits tax provisions to the debt financing of new investment. In the latter part of 1951, increasing demands on scarce materials and equipment for military goods and top-priority industrial expansion programs made it impossible to continue other types of business construction and equipment investment at the record rates which had been attained. By the fourth quarter, plant and equipment outlays in the commercial, communications, and miscellaneous field were 13 percent below the level of a year 76 earlier. The decline was 7 percent in the textile industries, and 14 percent in the food and beverage industries. (See chart 21 and appendix table B-19.) The more urgent types of expansion were given the right of way by priorities on the necessary materials and equipment; by various forms of Government financial assistance; by allocations of several critical materials; and in some instances by controlled scheduling of output and distribution of key component items. Financial aids or inducements have been supplied where necessary, in the form of Government loans, loan guarantees, purchase contracts, and certificates of rapid amortization of facilities for tax purposes. The accomplishments of 1951, in terms of expansion of productive capacity, were impressive by any standard. In a private survey made late in 1950, manufacturers reported plans for a 9 percent expansion in total capacity in 1951, and a considerably greater expansion in certain defenserelated lines such as machinery, transport equipment, and chemicals. The actual plant and equipment outlays of 1951 suggest that these anticipations were probably not wide of the mark. The expansion achieved in certain types of basic industrial facilities related to defense is shown in table 5. TABLE 5.—Expansion of capacity or output of selected industries Industry or product Capacity expansion during 1951: Electric utilities Petroleum refining „..„ _ - , , Steel ingots Pig iron . .__ Coke (byproduct ovens) Motor trucks and tractors * 2 Railroad freight cars 28 Railroad locomotives Percentage increase 10 4 4 2 2 6 2 2 Industry or product Capacity expansion during 1951— Con. Cotton duck Output expansion, 1950 to 1951: Aluminum 3 Chlorine Zinc«_ . Newsprint 3 IVToIybdp.rmrn Percentage increase 45 16 18 g 8 34 * Excludes vehicles for military use. * Based on increase in number of units; does not take account of increased average ton-mile capability per8 unit. Domestic primary production. * Domestic primary production plus secondary recovery. Source: Defense Production Administration. Since a large part of the facilities investment of 1951 went into projects not completed within the year, value of work put in place is a better criterion of accomplishment during the year. Table 6 measures in those terms the progress made on the major programs covered by tax amortization. For projects assisted by tax amortization, which will entail in all about 11.5 billion dollars of investment on the basis of the certificates already approved, work was about 35 percent in place at the end of September, and at that time was expected to be about 46 percent in place by the end of 77 CHART 20 NEW PLANT AND EQUIPMENT OUTLAYS IN SELECTED DURABLE MANUFACTURING INDUSTRIES The major durable goods industries invested in plant and equipment at a rising rate through 1950 and 1951. BILLIONS OF DOLLARS RATIO SCALE BILLIONS OF DOLLARS 10.0 ANNUAL RATES, NOT ADJUSTED FOR SEASONAL VARIATION* TRANSPORTATION EQUIPMENT. EXCLUDING AUTOMOBILES^/ * SEASONAL INFLUENCES TEND TO RAISE OUTLAYS IN THE FOURTH QUARTER AND LOWER THEM IN THE FIRST. J/ INCLUDES FABRICATED METALS, STONE,CLAY, AND GLASS, PROFESSIONAL AND SCIENTIFIC INSTRUMENTS-, LUMBER-, FURNlTUREj ORDNANCEv AND MISCELLANEOUS MANUFACTURESjNOT SHOWN ON CHART. jy POINTS FOR FIRST THREE QUARTERS OF I960 ARE AS FOLLOWS'. .048, .072, .084. J/ ANTICIPATED EXPENDITURES REPORTED BY BUSINESS DURING LATE OCTOBER AND NOVEMBER 1951. SOURCES: DEPARTMENT OF COMMERCE AND SECURITIES AND EXCHANGE COMMISSION. 78 CHART 21 NEW PLANT AND EQUIPMENT OUTLAYS IN SELECTED NONDURABLE MANUFACTURING INDUSTRIES The chemicals and petroleum and coal products industries continued to invest in plant and equipment at a rising rate through 1951. In other major nondurable lines, investment declined in the latter part of the year. BILLIONS OF DOLLARS RATIO SCALE BILLIONS OF DOLLARS MISCELLANEOUS . NONDURABLE GOODS17 1952 * SEASONAL INFLUENCES TEND TO RAISE OUTLAYS IN THE FOURTH QUARTER ANO LOWER THEM IN THE FIRST. •^INCLUDES PAPER ANO RUBBER.NOT SHOWN ON CHART. ^INCLUDES TOBACCOi APPAREL-, LEATHER; PRINTING AND PUBLISHING. •^ANTICIPATED EXPENDITURES REPORTED 8V BUSINESS DURING LATE OCTOBER AND NOVEMBER 1951. SOURCES: DEPARTMENT OF COMMERCE AND SECURITIES AND EXCHANGE COMMISSION. 79 the year. The actual year-end figure, however, may have been somewhat lower in view of the severe shortage of structural steel and some other vital construction materials and equipment items in the fourth quarter. Work put in place during the third quarter was, for similar reasons, about 17 percent less than had been anticipated at midyear. In the case of some expansion programs, such as iron and steel and synthetic fibers, the "proposed investment" shown in table 6 comprises the bulk of that now planned over the next 2 years. Other important private investment programs are covered only to a minor extent or not at all by tax amortization. This applies, for example, to oil and gas wells and pipe lines, electric power, agricultural equipment, and mining facilities generally. Moreover, in both electric power and the munitions industries, direct public investment plays an important part in addition to private investment. TABLE 6.—Progress on facilities projects aided by tax amortization Necessity certificates approved through November 30, 1951 Status of projects (percentage of proposed investment in place at date shown).* Industry Tax amortiProposed zation investment 3 (millions Sept. 30, 1951 Dec. 31, 1951 a (millions of dollars) of dollars) - --- MO, 768 6,945 35 46 Iron and steel Railroads _ Chemicals (excluding synthetic fibers) Petroleum refining Aircraft, ordnance^ and accessories Electric light and power _ _ . Aluminum (primary refining) Machinery __ Pulp, paper, and allied products Welded and heavy riveted pipe Synthetic fibers ______ Great Lakes transportation Coke and byproducts _ _ __ All other __ _ 2,430 1,143 1,098 872 750 693 615 568 514 185 130 108 98 1,564 1,700 810 631 575 514 306 421 371 271 113 66 79 76 1,012 28 67 30 32 34 41 16 37 26 21 11 28 26 41 38 83 41 38 49 50 27 52 34 28 19 40 35 54 All industries . i Status reports cover only projects approved through September 30,1951. * Figures are in most cases not directly comparable with those shown in table 14, partly on account of differences in industry classification and partly because (as noted in the text) not all projects are covered by tax8 amortization certificates. Advance estimates reported as of September 30. 4 In addition to this total amount, certificates, for which the amount of tax amortization to be allowed was still undetermined, were issued on projects entailing 715 million dollars of proposed investment, distributed by major industry groups as follows (in millions of dollars): railroads 196, chemicals (including synthetic fibers) 126, primary metals 85, mining 81, machinery 67, pulp, paper, etc., 38, and all other 122. Source: Defense Production Administration. Construction. A record value of total new construction was put in place in 1951—29.9 billion dollars. Although this was 7 percent more than in 1950, the physical volume of construction was about the same in the 2 years. (See chart 22 and appendix table B-18.) Less essential construction, especially recreational, commercial, and private residential, was cut back, while defense, industrial, and public utility construction increased 80 CHART 22 CONSTRUCTION Expenditures for private nonfarm residential construction dropped sharply in 1951, while private industrial and utility rose. Total private construction outlays in 1951 were about the same as in 1950, while public construction increased 27 percent. BILLI DNS OF DOLLARS* BILLIONS OF DOLL.ARS* 30 25 30 — TOTAL PRIVATE CONSTRUCTION ^•^*» r^^ 25 V —l S 20 20 >l 1r 1 15 10 PRIVA rs RESIDENTIAL NONFARM) ' 15 — 10 TOTAL PUBLIC CONSTRUCTION ^^- V^,.*- 5 <•«**"* ^» » """j . ' . ••—\A , 1 0 1 i 2 1 9 1948 1 4 1 5 PRIVATE INDUSTRI AL AND UTILITIES ALL OTHER PR VATE 1 2 1 1 3 4 1 1949 1 2 r 1 3 1950 4 1 i 2 i 3 0 4 1951 •K SEASONALLY ADJUSTED ANNUAL RATES. SOURCE: DEPARTMENT OF COMMERCE. sharply during the year. Beginning in September, the value of total new construction on a seasonally adjusted basis has been less than in corresponding months of 1950. The shift to military, industrial, and defense-related construction in general continued during 1951. Construction projects of these types received priority in the allotment of controlled materials under the Controlled Materials Plan. From December 1950 to December 1951, military and naval construction increased by more than six times on a seasonally adjusted basis, while private industrial construction increased 12 percent. For 1951 as a whole, however, private industrial construction was about 85 percent above 1950. The largest and most consistently sustained decreases in construction expenditures, on a seasonally adjusted basis, were for new private residential, commercial, and recreational building. Partly as a result of credit controls, private nonfarm residential construction fell after September 1950, with only two significant interruptions. From a 1951 high in February of 13.0 81 billion dollars (seasonally adjusted annual rate), residential construction had declined almost one-quarter by December, to 9.9 billion. The number of new nonfarm housing units started in 1951, including about 71,000 public housing units, amounted to about 1.1 million, a drop of about 22 percent from the all-time high of close to 1.4 million in 1950. Although seasonal declines followed a temporary upturn in September, a relatively high level of starts was maintained through the last quarter, caused partly by the easing of credit regulations. Sustained demand, and a generally adequate supply of materials, were also factors of importance. Significant decreases were effected in less essential construction categories such as warehouses, office and loft buildings, stores, restaurants, and garages, and other nonresidential buildings. This reduction was achieved by a variety of specific limitation orders and by credit restraints, and, beginning in the fourth quarter of 1951, by drastic cutbacks in allotments of controlled materials. Total public construction, seasonally adjusted, though higher for each month in 1951 compared with the corresponding month of 1950, showed a slight upward trend during most of the year, with increases in military and naval, residential, and industrial construction more than offsetting decreases, principally in highways and conservation and development projects. (See discussion under Government Fiscal Operations.) In November, the volume of public construction turned up significantly, lifting the year's total to about 27 percent above 1950. Nonfarm inventories. The year 1951 was a period of unprecedented inventory accumulation. (See appendix tables B-3 and B-5.) But even more noteworthy were the tremendous fluctuations within the year, with an unusually high rate of accumulation being reached in the first half of 1951. By the end of the year, the rate of inventory accumulation had dropped drastically. On the other hand, the needs of the expanding security program led to a continuous build-up of inventories in the industries primarily concerned with defense activity. During 1951, the accumulation of nonfarm inventories was about 8 billion dollars, the highest rate on record. This compares with 3.6 billion in 1950 and 6.3 billion in 1946, the previous record. The rate of inventory accumulation, on a seasonally adjusted annual basis, was 9 billion dollars in the first quarter of 1951, then soared to the unprecedented level of 14.8 billion in the second quarter, dropped to around 5 billion in the third quarter, and declined further to 3 billion in the fourth quarter. The rapid rise of total inventories in the first half of 1951, and the even more rapid fall in the rate of accumulation in the second half, represented basically the over-anticipation by manufacturers and sellers of the level of consumer demand and the subsequent steps taken to adjust to actual sales levels. There was, after midyear, a major divergence in trend between retail inventories and those in manufacturing. (See appendix tables B-20 and 82 B-21.) Retail inventories, after rising in the first half of 1951, began to turn down, and by the end of the year were at about the same level as at the beginning. The problem of "excess" inventories was particularly acute in the case of retailers' stocks of durable goods and apparel, where very heavy ordering by retailers had taken place to avoid anticipated shortages which did not materialize. Manufacturers' inventories, on the other hand, continued to rise during the second half of the year, but at a much slower rate than during the first half. The increase in manufacturers' inventories occurred primarily in the expanding defense industries. Inventories of nondurable goods remained stable during the second half of the year, while inventories of durable goods continued to expand. CHART 23 SOURCES AND USES OF CORPORATE FUNDS From 1950 to I95l,there was a large increase in corporate outlays for plant and equipment and inventories. External financing was more important in the past year than in i960. 0 SOURCES RETAINED EARNINGS 5 BILLIONS OF DOLLARS 10 15 I I I 20 25 I 1950. DEPRECIATION RESERVES OTHER SOURCES (EXTERNAL) USES PLANT AND EQUIPMENT OUTLAYS 1950 CHANGE IN INVENTORIES OTHER USES J/ PROFITS ESTIMATES FOR THIRD AND FOURTH QUARTERS 1951 BY COUNCIL OF ECONOMIC ADVISERS. NOTE: EXCLUDES FINANCIAL CORPORATIONS. SOURCE: DEPARTMENT OF COMMERCE ESTIMATES BASED ON SECURITIES AND EXCHANGE COMMISSION AND OTHER FINANCIAL DATA (EXCEPT AS NOTED). At the end of 1951, the inventory-sales ratio was at about the levels prevailing during 1949, the previous postwar high, but it was below prewar levels. In manufacturing, the ratio expanded through the first three quarters and then declined slightly. In retailing, the rise was concentrated in the first half of the year. The ratio declined in the second half, as retailers were successful in reducing their inventories. Corporate finance. The financing of business expansion did not give rise to major problems during 1951. As already noted, Government inducements through tax amortization, loans, and aids such as loan guarantees, helped to expedite some more urgently needed projects, but covered in all only a minor fraction of capital investment requirements. Despite a large decline in their earnings after taxes, nonfinancial corporations' total use of funds in 1951 for fixed and working capital was about 40 billion dollars, as large as during 1950, and 10 billion dollars larger than in any other postwar year. (See chart 23 and appendix table B-37.) Corporate outlays for plant and equipment were about 6 billion dollars greater than in 1950. There were sharp declines in the rate of increase in customer accounts and acquisitions of liquid assets. For the year as a whole, the book value of corporate inventories showed a slightly greater increase than during 1950, but by the end of the year inventory accumulation had become very small. About 40 percent of total uses of funds was internally financed, a smaller proportion than in any of the other postwar years. As a result of high corporate taxes and large dividend disbursements, retained corporate earnings declined to about two-thirds of the level of 1950. Approximately 60 percent of total corporate profits was accounted for by tax liabilities, and about 50 percent of profits after taxes was paid out in dividends. Corporate depreciation allowances expanded about 1.2 billion dollars above 1950, increased somewhat by rapid amortization as an inducement to certain types of expansion. A record total of 24 billion dollars was obtained from external sources of funds, including the corporations' own reserves of about 8.5 billion for Federal income taxes. Increases in bank loans and mortgage loans were moderately larger than during 1950; net new issues of stocks and bonds exceeded the 1950 total by 60 percent. The huge increase in bond issues, which occurred despite significant increases in interest rates, was mainly for the financing of capacity expansion in the utilities, and in the iron and steel, nonferrous metals, machinery, and chemical industries. International transactions In 1951, the expansion of defense and private demand in other countries of the free world, supported by increased military aid from the United States, brought about an expansion of United States exports of goods and CHART 24 EXPORTS AND IMPORTS OF GOODS AND SERVICES Since early 1951, rising 1 exports and slackening imports have increased the United States export surplus. BILLIONS OF DOLLARS* BILLIONS OF DOLLARS* 25 25 20 20 EXPORTS OF GOODS AND SERVICES1' 15 15 10 10 ^IMPORTS OF GOODS AND SERVICES-1' I I I 2 I I 3 1947 I I 2 I 3 1948 J 1 I 2 3 1949 2 3 I960 2 3 1951 *ANNUAL RATES. •^INCLUDES INCOME ON INVESTMENTS. ^PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC AOVISERSs SOURCE: DEPARTMENT OF COMMERCE (EXCEPT AS NOTED). services to a peacetime record of more than 20 billion dollars. Imports of goods and services reached a new high during the year, despite a large decline in the quantity of commodity imports during the second and third quarters which accompanied the lull in private demand. The rise in exports of goods and services during the year exceeded that in imports, and the United States export surplus, which had fallen to an annual rate of 1.5 billion dollars in the second half of 1950 under the impact of the sharp post-Korean rise of merchandise imports, increased to one of approximately 6.5 billion dollars in the second half of 1951. (See chart 24 and table 7.) United States exports. Total exports of goods and services in 1951 were about 40 percent above the 1950 level, with commodity and service items both running higher. (See appendix tables B-38 and B-39.) The large volume of commodity exports in 1951 reflected the high demand for goods in virtually all foreign countries resulting from the rearmament programs abroad, the high incomes of the raw-material-producing countries, and TABLE 7. United States exports and imports of goods and services [Billions of dollars] Exports of goods and services * Period 1950 1951 » Annual rates: 1950— First half Second half 1951— First quarter Second quarter Third quarter a Fourth quarter _. _ . . Imports of goods and services 1 Surplus of exports 14.4 20.2 12.1 15.2 2.3 5.0 13 6 15.3 10 5 13.8 3.1 1.5 17.5 21.1 20 3 21.9 15.7 15.8 14.3 14.9 1.8 6.4 6.0 7.0 i Includes income on foreign investments. * 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). accelerated programs of economic expansion in underdeveloped areas. Recorded commodity exports reached a peak value of 14.9 billion dollars, compared with 10.3 billion dollars in 1950, as a result mainly of increased quantities of goods shipped and, to a lesser extent, higher prices for exports. (See appendix tables B-41 and B-42.) Exports financed under the Mutual Defense Assistance Program in 1951 nearly tripled their 1950 level of 500 million dollars, and exports excluding MDAP shipments rose from 9.7 billion dollars to approximately 13.8 billion dollars. All economic classes of exports increased above their 1950 levels in dollar value, with exports of coal and wheat, for example, doubling not only in value, but in quantity as well. Exports of semi-manufactured goods and finished manufactures were more than 50 percent above their 1950 dollar values, judging from data for the first 10 months of 1951. Approximately three-fourths of the increase in the value of exports of finished manufactures represented larger quantities; the remainder represented higher prices. Despite domestic scarcities, exports of machinery in 1951 were more than 30 percent greater in dollar value than in the previous year. The value of agricultural machinery exports was 29 percent above the 1950 level, construction machinery 40 percent higher, and mining equipment exports were up by more than 38 percent. United States imports. Purchases of both goods and services abroad increased above their 1950 levels, despite a large decline in commodity imports in the second and third quarters of 1951. (See appendix tables B-38, B-43, and B-44.) These imports in the year as a whole were 11.2 billion dollars, compared with 8.9 billion in 1950. There was also an increase in Government purchases of goods and services abroad in connection with the defense program and the war in Korea, with Government expenditures for services abroad rising rapidly. The impact of the Korean outbreak on United States commodity imports began to weaken after the first quarter of 1951. Total commodity im- 86 ports, after rising to an all-time high in March, declined steeply from April through September, and increased somewhat in the final quarter. The decline was almost entirely due to smaller quantities of goods entering the country. Average unit values of imports continued to rise through June, and have since declined only slightly. Although spot prices of worldtraded materials had begun to slip after the first quarter, the decline was not reflected in unit values until the third quarter because of the lag between the placing of orders and deliveries. In addition to seasonal movements, the fall in imports reflected in part the leveling off of general consumer and business buying which characterized the United States economy, and in part the availability of ample inventories of imported commodities which had been accumulated during the second half of 1950 and the first quarter of 1951 in a wave of anticipatory buying. Although the decline in imports occurred in all commodity categories and from all areas, it was largest both in dollars and in percentage terms in crude foodstuffs, imports of which dropped 48 percent. Imports of crude materials declined 24 percent during the same period. This substantial 6-month decline in total imports illustrates, among other things, the extreme short-run sensitivity of our imports to domestic business activity and to the level of inventories of imported commodities. Imports in 1951 of certain scarce basic materials, including tin, lead, and zinc, were considerably below their 1950 levels, as table 8 shows. In the cases of lead and zinc, the decline was due mainly to foreign prices being higher than the domestic ceilings. The decline in tin imports began in late 1950, but its continuation in 1951 reflected the decision of the Government early in March, when prices were about $1.80 a pound, to suspend tin purchases until prices were more reasonable. After the United States withdrew from the market, tin prices fell; but since July, when they were as low as $1.00 on the London market, they have gradually risen. Despite the decline of imports during 1951, tin consumption in the United States was maintained at about its 1950 level. As a result, industrial stocks were reduced, and by the end of the year they were at very low levels. TABLE 8.—United States imports of selected metals [Thousands of short tons, annual rates] Period 1949 Copper -. 1950— First half Second half 1951— First half Second half * _ . _ . _ Lead Tin Zinc 569 409 110 285 701 510 429 677 342 470 532 582 215 215 113 129 77 59 368 314 i Estimates based on data available through October. Source: Department of Commerce. Imports of copper in 1951, although at a lower level than during the first half of 1950, were fairly well maintained in the face of tremendous world demand. 87 Foreign aid and other financing of export surplus. In 1950, the United States export surplus of goods and services was smaller than foreign aid expenditures, and foreign countries were able to accumulate gold and dollar reserves. In 1951, aggregate foreign aid rose only slightly above 1950 levels and, at approximately 4.6 billion dollars, was less than the export surplus. (See appendix table B-40.) Foreign countries as a whole accumulated gold and dollar assets in the first part of the year, but in the second half, losses by the United Kingdom, France, and a few other countries outweighed continued accumulation elsewhere. Although private capital exports declined below their level in 1950, when they had been inflated by a speculative movement in the third quarter, reinvestment of undistributed earnings from direct investments abroad, which are not counted as part of capital outflow, probably increased in 1951. Direct investment of United States capital abroad, which had declined in 1950, dropped further in 1951. Much of the decline in direct investment is accounted for by reduced investment in foreign petroleum properties, resulting from the fact that facilities necessary to meet the estimated requirements of the near future have been completed. Despite the measures to encourage foreign investment noted in Part III of this Review, there has been little reduction of the basic obstacles to United States investment abroad. Government fiscal operations There was a marked shift in the budgetary position of the Federal Government during calendar 1951. Early in the year, at the time of the heavy income tax payments, a large surplus was accumulated in the conventional budget accounts. Thereafter, the seasonal decline in receipts and the steadily rising trend of expenditures for national security programs caused a sizable budget deficit. For the year as a whole, Federal expenditures aggregated 56.8 billion dollars, and net budget receipts 53.5 billion. Both totals represented substantial increases above the preceding year. Only in the wartime years 1942-1945 were expenditures higher than in 1951, while last year's budget receipts were by far the highest in the Nation's history. The budget deficit of 3.4 billion dollars in calendar 1951 compares with the deficit of 400 million dollars in 1950. The increase in the public debt was from 256.7 billion dollars at the end of 1950 to 259.4 billion at the close of 1951. A reconciliation of these changes with trust accounts and other transactions, and with changes in the General Fund balance is shown in table 9. The trend of the total Federal debt is illustrated in chart 25. The rise in budget receipts permitted some debt retirement in late 1950 and early 1951. In fact, not until October 1951 did the total public debt rise significantly above the amount outstanding at the end of June 1950. Exclusive of the amounts held by U. S. Government agencies and trust funds, 88 TABLE 9.—Summary of Federal fiscal operations [Billions of dollars] Calendar year 1951 Calendar year 1950 Item Budget accounts:1 Net receipts E xpenditures ._ _ Surplus, or deficit (— ) Trust accounts, clearing account, and other transactions, excess of receipts, or expenditures ( — ) Investments of Government agencies and trust accounts in public debt securities (net), excess of investments (—) Total First half Second half 37.8 38.3 53.5 56.8 29.7 25.6 23.8 31.3 — 4 -3.4 4.1 .4 4.1 2.5 2 (_ ) Total Net increase, or decrease (— ) in public debt Net increase (— ) or decrease in General Fund balance -2.6 -.4 .4 _ Total.. Public debt 8 General Fund balance 3 -3.4 256.7 4.2 27?" -.1 -2.0 4.6 -1.5 -3.1 -7.5 1.6 -1.4 -7.3 4.2 3.1 2.6 -4.6 7.3 259.4 4.3 255.2 7.4 259.4 4.3 i Gross receipts less appropriations to Federal Old-Age and Survivors Insurance Trust Fund and refunds of 8receipts. Less than 50 million dollars. »End of period. Note:—Public debt excludes guaranteed obligations, which total less than 50 million dollars. Source: Treasury Department. the debt was lower at the end of 1951 than at.mid-1950. (See appendix tables B-29 and B-30.) Public debt operations. In addition to a moderate amount of new borrowing during 1951, the Treasury engaged in a substantial volume of refinancing, the greater part of both operations falling within the second half of the calendar year. All new marketable issues were short-term, as were the marketable issues offered in exchange for maturing or called marketable obligations. New money was obtained from the public by increasing the volume of 3-month Treasury bills, by floating two issues of a new type of Treasury bill, the tax anticipation series, and by issuing a new series of nonmarketable Treasury savings notes, made more attractive by interest rates in line with those on other short-term issues. Public debt transactions of special significance in furthering the policy of keeping the debt outside the banking system were the offer in March of long-term nonmarketable convertible bonds in exchange for two series of long-term marketable bonds, and the optional extension of maturing Series E savings bonds. Of the 19.7 billion dollars long-term bonds to which the exchange offer applied, 13.6 billion were turned in for the new nonmarketables. Under legislation approved in March, holders of maturing Series E bonds were given the privilege of holding the bonds another 10 years, during which they would earn an over-all rate of return equal to that of the first period of ownership, or of exchanging them for Series G CHART 25 THE PUBLIC DEBT At the end of 1951, Government debt held outside Government investment occounts was unchanged from a year ago. The increase in the holdings of these accounts equaled the rise in the total debt. BILLIO NS OF DOLLARS 275 BILLIONS OF 00 LLARS 275 END OF QUARTER #s 250 - 250 TOTAL PUBLIC DEE - 225 TOTAL EXCLUDING ^ DEBT HELD BY ^ U.S. GOVERNMENT INVESTMENT ACCOUNTS 200 — I 0 1 I 2 —~ !r- 200 i I 3 4 225 1 i 2 i 3 0 4 1951 I960 CALENDA R YEARS i/ OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT SOURCE: TREASURY DEPARTMENT bonds. These options were made available in order to minimize the volume of cash redemptions. Most new Treasury borrowing during 1951 was at rising rates of interest. For example, the average yield on new issues of 3-month Treasury bills, which had been 1.22 percent for 1950 as a whole, was 1.40 percent in the first quarter of 1951 and climbed to 1.65 percent by the fourth quarter. The approximate yield to maturity on the new Treasury savings notes was raised to 1.88 percent, compared with 1.40 percent on the previous series. (See appendix table B-31.) Consolidated cash accounts. On a consolidated cash basis, there was a surplus of 1.2 billion dollars in the calendar year 1951. As shown in chart 26, which is in terms of seasonally adjusted annual rates, the large excess of cash receipts over cash payments in the first half of the year was replaced by a cash deficit in the second half. The difference between the surplus in the consolidated cash accounts summarized in table 10, and the calendar year deficit in the conventional budget accounts given in table 9, is largely accounted for by net cash receipts in the Federal Old-Age and Survivors Insurance and TABLE 10.—Government cash receipts from and payments to the public [Billions of dollars, seasonally adjusted annual rates] Federal Government: Cash receipts Cash payments. Calendar year 1951 Calendar year 1950 Receipt or payment _ ._.! . . Total i First half Second hain 42.4 42.0 59.3 58.0 58.6 51.4 60.0 64.7 .4 1.2 7.2 -4.7 State'and local governments: Cash receipts . ._.__-_.. Cash payments. _ . . State and local cash surplus, or deficit (— ) 18.4 19.3 20.0 20.4 19.7 20.2 -.9 -.4 -.5 20.2 20.6 -.4 Total government: Cash receipts _. Cash payments 60.8 61.3 79.3 78.4 78.3 71.6 80.2 85.3 -.5 .8 6.7 -5.1 Federal cash surplus, or deficit (— ) ._ Total cash surplus, or deficit (— ) .. i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See appendix table A-5. other trust funds. Most of the payroll taxes, for example, are appropriated directly to the OASI Trust Fund and are excluded from net budget receipts. All of the important sources of receipts shared in the rise from 1950 to 1951. Not only has the tax base grown, as a result of the marked business expansion and the price rise, but substantially higher tax rates have become effective. Three major revenue bills, estimated to yield a combined total of about 15 billion dollars in a full year of operation, were enacted between September 1950 and October 1951. In addition, the tax base for OASI was broadened as of January 1, 1951. TABLE 11.—Federal cash payments to the public by function [Billions of dollars, seasonally adjusted annual rates] Function Total cash payments 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 retirementClearing account for outstanding checks and telegraphic reports Calendar year 1950 Total i First half Second half* 42.0 58.0 51.4 64.7 13.5 4.0 8.9 3.3 1.3 4.3 7.1 -.4 30.6 4.8 6.0 4.4 .9 4.2 7.4 -.4 25.4 5.0 5.9 4.3 .7 4.1 6.3 -.4 sTi -.1 .1 -.1 .3 i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See appendix table A-7. 977891—52- Calendar year 1951 4.6 6.1 4.5 1.0 4.3 8.5 -.4 A functional breakdown of Federal cash payments is presented in table 11, in terms of seasonally adjusted annual rates. Apart from the increases for the military services and the international programs, which are discussed below, the major changes in expenditures from 1950 to 1951 were the reductions of about one-third in payments for veterans' services and benefits and of more than one-third in agricultural programs, and the increase of about one-third in social security and related programs. The latter increase was associated in large part with the liberalization of benefits provided by the 1950 amendments to the Social Security Act. The "other" category in the table includes such programs as atomic energy and Defense Production Act activities, which expanded in 1951. In the special classification of Federal cash payments by type of recipient and transaction, presented in table 12, the major change from 1950 to 1951 TABLE 12.—Federal cash payments to the public by type of recipient and transaction [Billions of dollars, seasonally adjusted annual rates] Classification of payment Direct cash payments for goods and services, excluding military services: To individuals for services rendered _ To business and foreign countries 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 __ Clearing account for outstanding checks and telegraphioreports. Total Federal cash payments to the public Calendar year 1951 Calendar year 1950 Total » 3.5 3.3 13.5 3.7 3.4 11.3 3.5 2.8 10.7 3.9 4.0 11.9 4.8 4.6 4.3 4.9 3.8 13.2 -.1 4.6 30.3 .1 4.8 25.2 -.1 4.3 35.4 .3 42.0 58.0 51.4 64.7 First half Second half* i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See appendix table A-8. is shown to be in payments for goods and services for the military. Loans and transfer payments to individuals declined, largely because of lower dividend payments to veterans holding National Service Life Insurance, while loans and transfers to foreign countries and international institutions increased. Further tabulations of Government financial transactions will be found in appendix A, in connection with the supporting tables for the Nation's Economic Budget. Major national security programs. Cash expenditures for the military services advanced from 13.5 billion dollars in 1950 to 30.6 billion dollars in 1951. This increase was larger than the rise in total cash payments in this period. In the second half of 1951, payments for the military services were about 40 percent larger than in the first half. Outlays for the international programs increased to 4.8 billion dollars in 1951, but they were somewhat lower in the second half of the year than in the first half. CHART 26 FEDERAL CASH RECEIPTS FROM AND PAYMENTS TO THE PUBLIC Steadily rising cash payments in 1951 turned the surplus in the f i r s t half of the y e a r into a deficit in the second half. BILLIONS OF DOLLARS* BILLIONS OF DOLLARS* 75 50 75 I CASH RECEIPTS «CASH PAYMENTS 50 25 25 1st HALF 2nd HALF 1950 I st HALF CALENDAR YEARS End HALF 1951 •* SEASONALLY ADJUSTED ANNUAL RATES. SOURCES'- TREASURY DEPARTMENT AND BUREAU OF THE BUDGET. The category of "major security programs" includes, in addition to the programs mentioned above, these other programs which are not shown separately in table 11; atomic energy, maritime, civil defense, economic stabilization, and Defense Production Act activities. In the aggregate, these programs came to 1.9 billion dollars in 1951, bringing the total for all of the major security programs to 37.3 billion dollars. These expenditure data are somewhat different from the estimates in the national income and product accounts of the value of current production being absorbed by the security programs. (See appendix table B-l.) The difference is explainable partly by the lag of Federal payments behind deliveries of goods and services, and partly by the fact that Federal expenditures are not always for currently produced goods and services but sometimes instead represent transfer payments or purchases of land or of existing facilities or equipment. Major nonmilitary construction programs. Movements in total seasonally adjusted expenditures for public construction (excluding military and naval construction, but including State and local as well as other Federal con- 93 struction) showed mixed tendencies during 1951; in contrast, total private construction expenditures fell continuously after the first quarter. This contrast partly reflected greater inherent difficulties in reversing the trend of many large-scale public projects, and partly the important role which some of these public programs must play in sustaining the economy's strength in the "long pull" defense period. Table 13, which shows specified types of new public construction expenditures in 1951 prices for selected years since 1939, sets the 1951 record in better perspective. During the past 2 years, public construction of the developmental type has increased, but by less than would have occurred had there been no mobilization program. The increases from 1950 to 1951 were for school construction and for housing, much of it in defense areas. Both were TABLE 13.—New public construction expenditures for major development programs [Millions of dollars, 1951 prices] Program 1939 Total Education . __ . .. Health _._ Development of natural resources Transportation _ Housing ._ __ _ _ - -_ _ _ . 1943 1948 1950 1951 i 5, 637 2,752 3,773 5,728 5,771 i 1, 184 335 1 1 093 * 2, 871 154 130 90 530 584 1,418 653 240 743 1,964 173 1,205 504 960 2,688 371 1,486 496 884 2,305 600 i Includes Works Progress Administration projects, adjusted for probable lower productivity. NOTE.—Construction expenditures by Federal, State, and local governments are included. Source: Department of Labor. almost entirely State and local programs. Decreases took place in transportation (principally highways) and in natural resources development, It is significant that for neither of these did the postwar peak of expenditures in 1950 reach the 1939 level in real terms. State and local finance. Receipts of State and local governments increased by about 1.6 billion dollars, or 9 percent, from 1950 to 1951. Most of the major sources of revenue shared in the increase which, while reflecting in some degree recent adoptions of new taxes or higher rates, was attributable for the most part to the prevailing high level of economic activity. The increase in the total spending of these governmental units from 1950 to 1951 was less than the growth in receipts. The combined State-local deficit was reduced from 900 million dollars to 400 million in 1951. (See table 10.) Despite record revenues, increases in tax rates were more general than reductions among State and local governments in 1951. Caution was also shown in undertaking programs which would involve new expenditures, although the increase of population, creation of new suburban areas, population shifts associated with defense activities, and other factors placed State and local authorities under strong pressure to extend and improve governmental services. To some extent, of course, the higher level of expenditures in 1951 merely reflects increases in prices and wage rates. 94 III. Central Problems for 1952 ADVANCING THE SECURITY BUILD-UP A <J" over-all measure of progress in the security program is the virtual doubling, from the end of 1950 to the end of 1951, of total security expenditures for goods and services, which reached an annual rate of 45 billion dollars in the fourth quarter of 1951. Military expenditures during the past 6 months have increased by the amount contemplated in the fiscal 1952 budget. We are still a long way, however, from achieving our basic security objectives of building up the military and economic strength of the free world as a whole. Major difficulties have been encountered, for example, in getting our military production program under way. These difficulties involve chiefly the machine tool and other bottle-necks, and design, engineering and production problems associated with the decision to produce exceedingly complex equipment of the most advanced design, rather than to concentrate on large-scale production of types already in use. The proposed build-up The security program now being submitted by the President calls for a further increase in total security expenditures for goods and services from the present annual rate of 45 billion dollars to a rate of almost 65 billion dollars by the end of 1952. Under present plans, the maximum rate of expenditures under this program would be slightly higher, and would probably be reached late in 1953. Besides a large further increase in expenditures for the military production programs which will supply United States forces and meet our North Atlantic Treaty commitments, an increase is planned in the atomic energy and civil defense programs. Economic assistance to other free nations—needed to help some of them carry out their mobilization programs and to help them strengthen their economies—is expected to be continued at approximately the present reduced levels of expenditure. More than 85 percent of total security expenditures in 1952 will be spent on the military establishment of this country and on military goods for our Allies. Although the 20-billion-dollar increase in the annual rate of security expenditures expected during the next 12 months is about equal to the increase achieved from the fourth quarter of 1950 to the fourth quarter of 1951, its character will be substantially different. (See chart 27.) Nearly all of the projected increase is represented by expenditures on military hard goods and military construction, while about three-fifths 95 CHART 27 THE SECURITY PROGRAM EXPENDITURES FOR GOODS AND SERVICES IN 1951 PRICES During 1952, the annual rate of security expenditures is expected to increase to a level about 20 billion dollars above the fourth quarter of 1951. Most of the increase will be for military goods and construction. BILLIONS OF DOLLARS* BILLIONS OF DOLLARS* 75 75 50 50 TOTAL SECURITY^ EXPENDITURES 25 25 OTHER SECURITY PROGRAMS -^ MILITARY GOODS AND. CONSTRUCTION !/ 4th Qtr. I960 4th Q1r. 4th Qtr. 2nd Qtr. I95I I952 I953 * SEASONALLY ADJUSTED ANNUAL RATES. U INCLUDES MILITARY PERSONNEL COSTS AND OTHER SALARY EXPENDITURES OF THE DEPARTMENT OF DEFENSE, ATOMIC ENERGY PROGRAM, STOCKPILING, AND FOREIGN ECONOMIC I NONMILITARY) AID. ^IHARO AND SOFT GOODS AND CONSTRUCTION FOR U.S. AND NATO FORCES. SOURCES: DEPARTMENT OF DEFENSE, BUREAU OF THE BUDGET, AND COUNCIL OF ECONOMIC ADVISERS. of the increase during the past 12 months occurred in these categories. The military production program calls for a doubling of hard goods deliveries and military construction within a year, with an increasing portion represented by aircraft and other relatively hard-to-produce types of military equipment. Equipping the military forces as now planned will require some further increase in deliveries of military equipment in 1953, and maintenance of a high rate of deliveries for a year or more. Deliveries of some items will begin to decline fairly soon, as requirements are met, while deliveries of other items will continue to increase through the period. Achievement of this expansion would increase the proportion of the total national output taken for security purposes from nearly 14 percent in the fourth quarter of 1951 to more than 18 percent in the corresponding period of this year. For the year 1952 as a whole, between 17 and 18 percent of total output would be devoted to security. Indicative of the concen- trated impact of the program, more than half of the national security output of goods and services will come from the metalworking and construction industries, though they account for only a little more than a quarter of the national output as a whole. Plans for the security program in the longer run are necessarily flexible. The size and composition of forces, the extent of the build-up of war reserves, and the rates of replacement of materiel all affect the longerrun cost of the program. As a rough guide, however, it has been assumed that the total maintenance cost of forces now planned, plus the atomic energy program, would be in the general range of 40 to 50 billion dollars annually, until a firmer outlook for peace is established. In the perspective of the probable size of the economy of the middle 1950's, a program of this general magnitude would not place us under an intolerable economic strain. Such a program would take roughly one-eighth of the total national output we could expect to have, with reasonably full use of our resources. With success in meeting current objectives for capacity expansion, most of the now serious materials problems would become relatively unimportant. The expected steel capacity of over 120 million tons, and an aluminum supply of over 2 million tons, would take care of sustained defense requirements and reasonably satisfy other needs associated with a maximum employment economy. In the case of copper and some alloy metals, our needs would have to be met in part by further development of substitutes. Speed of the build-up The question has frequently been raised whether economic policy decisions have interfered with the defense program, by providing too much civilian production at the expense of munitions and military equipment. Some confusion has been introduced into this question by the failure to distinguish between (a) the intended size of the defense program and (b) the difficulties which arise in trying to carry out a program of given size on schedule. On the score of intended size, the Council does not believe that the current defense program has been or should be determined primarily by consideration of how much is left over for civilian uses, though the effect of the program on our ability to become economically stronger deserves important consideration. As we have many times said, a security program even larger than that now under way—if found to be necessary on other grounds—would be well within the economic capacity of the country, even though it would raise economic problems of substantial import. It does not appear that the security program thus far undertaken has been slowed down by insufficient cutbacks in civilian use. It seems clear that, for the most part, materials and manpower have been available for military production when needed. It also appears that there have been certain bottlenecks and shortages which could not have been appreciably alleviated by earlier or more drastic civilian cutbacks. The mobiliza- 97 tion officials have been wise in avoiding unnecessary dislocations by not reducing civilian utilization of productive resources before the defense program was ready to take up the slack. Moreover, it may have been entirely wise not to have carried the military program forward substantially faster by sacrificing the opportunity of constantly improving the quality of fighting equipment. The Council does not attempt to evaluate such issues of military strategy. We can only point out that, if a faster military build-up becomes necessary on security grounds, its accomplishment would be impossible without more extensive civilian cutbacks closely synchronized with the defense program. In any event, strenuous efforts will be required to achieve the objectives now set for 1952. Hard work is now under way to overcome the shortage of machine tools, which will affect the aircraft production program for some time to come, and to relieve the shortage of ferro-alloys, in part through the development of substitutes. There is urgent need for firming up military production schedules and translating over-all requirements into bills of particulars for materials, manpower, and tools. ALLOCATING SCARCE MATERIALS The availability of metals To carry out the security program as now planned, while achieving present objectives for expansion of basic capacity, and maintaining other activities on a basis consistent with an extended mobilization effort, will require some major shifts in the utilization of resources. These shifts are imposed by the shortage of metals, and involve mainly the durable goods sector of the economy, which accounts for about one-quarter of total national output. In the nondurable goods and services sector, the mobilization program will not require major resource adjustments. The impact on that sector is discussed at a later point in this Review, mainly in terms of labor availability and inflationary pressures. Military requirements for the major metals will increase through most of 1952, and at their peak will absorb roughly one-fifth of the steel supply, one-third of the copper supply, and about half the supply of aluminum. It is probable, however, that with large increases in supplies, these proportions will fall substantially in 1953. Thus the main materials impact, and the main economic impact, of the military production program probably will come during the next 12 months. The upper panel of chart 28 indicates historical and prospective changes in the supplies of copper, steel, and aluminum available, after deducting military and stockpile requirements, for the output of investment goods, consumer durable goods, public and private construction, and other nonmilitary uses. Comparison of 1952 with 1951 indicates a moderate reduction in the availability of steel and copper, and very sharp reductions in the availability of aluminum, owing to rapidly rising military requirements. CHART 28 METALS SUPPLY AND REQUIREMENTS FOR CIVILIAN USE In 1952, there will be moderately less steel and substantially less aluminum and copper available for civilian use. This1 will impose curtailments in nonmilitary construction, producers durable equipment, and metal-using consumer goods. INDEX, 1949 = 100 175 INDEX, I949s|00 175 150 - - 150 125 - - 125 100 100 1949 1952 1951 I960 BILLIONS OF DOLLARS 80 NONMILITARY METALS REQUIREMENTS BILLIONS OF DOLLARS 80 PROJECTED 60 60 40 40 CONSUMER DURABLE GOODS (METAL-USING) { i \ 20 20 PRODUCERS* DURABLE EQUIPMENT | 1949 1950 1951 SOURCES: DEFENSE PRODUCTION ADMINISTRATION AND COUNCIL OF ECONOMIC ADVISERS. 99 1952 These reductions would leave the steel supply available for nonmilitary uses some 15 percent above the 1949 level, and not much under the level of the last 2 years. However, military requirements will impinge much more severely on particular types of steel, notably high-alloy steels. Comparing 1952 with 1951, supplies of copper available for civilian users will be reduced by about 5 to 10 percent, and of aluminum about 25 percent; the exact reductions depending in part on whether it is decided that stockpiling can be resumed and, if so, at what rate. Available supplies of copper will be reduced nearly to the 1949 level, while aluminum supplies for civilian use will decline about one-third below the 1949 level. Part of these reductions, however, had already occurred by the fourth quarter of 1951. It must be emphasized that, although these figures are based on the best current estimates of total supplies and military requirements, any of a number of factors could alter them appreciably. Beginning in 1953, continuing large increases in supplies are expected to result in a moderate increase in the availability of steel for nonmilitary uses, and a substantial increase in aluminum. Some improvement in the copper position also appears possible. A major factor in determining how rapidly consumer durable goods and other types of restricted output can rise will be the extent to which steel and aluminum are substituted for copper. For the near term, the very tight aluminum supply will limit the latter type of substitution. Major required adjustments There is no one formula for apportioning limited material supplies. Even after military production objectives have been determined, there is wide range for judgment in determining a rational pattern of metals use. If the maintenance of short-term economic stability were to be given overriding priority, materials allocations policy would attempt to maximize the availability of metals for consumer output at the expense of their use for investment. This policy would probably prolong the period of metals shortages and comprehensive direct controls. On the other hand, the attempt to overcome basic shortages of materials, power and transport at the earliest possible date would require drastic reductions in the use of metals for consumer output and for the construction of schools, hospitals, and other types of investment of high utility. Although it is not possible to present in detail the adjustments which the reduced availability of materials will impose, their general nature and implications may be indicated. The lower panel of chart 28 indicates the changes that have occurred since 1949 and the change in prospect for 1952 in the dollar volume (measured in terms of constant prices) of the major nonmilitary metal-using activities. Chart 29 compares the estimated distribution of steel uses in 1952 with the actual distribution in 1950 and 1951. The projected estimates in these charts are consistent with the 100 CHART 29 USES OF STEEL Less steel will be available for nonmilitary use in 1952. The reduction will mainly a f f e c t automobiles, household appliances, and some types of construction, MILLIONS OF TONS' MILLIONS OF TONS 90 90 PROJECTED 80 80 TOTAL USES OF STEEL S 70 70 MISCELLANEOUS- 60 — ADDITIONS TO INVENTORY " 60 EXPORT MILITARY 50 50 CONSTRUCTION-*- 40 40 PRODUCERS* DURABLE EQUIPMENT, — EXCLUDING AUTOMOBILES 30 30 20 10 - CONSUMER DURABLE GOODS, INCLUDING ALL_, AUTOMOBILES "" 10 I960 SOURCE: 1951 DEFENSE PRODUCTION ADMINISTRATION. 101 1952 materials supply picture, as described above, and witK present allocation policies. These charts indicate that between 1950—the peak year of nonmilitary uses in metals—and 1951, there was only a moderate reduction in nonmilitary uses of metals, concentrated mainly in consumer durable goods and in residential construction. The decline in residential construction has saved copper, but not an important amount of steel. Steel used in consumer durable goods, including automobiles, declined about 15 percent, while other major uses were maintained or expanded.. Steel used in producers' durable equipment increased by about a third. This expanded use and the maintenance of total construction, despite cuts in particular types of construction, were in part associated with increasing investment in the major industrial expansion programs. The much larger decline in the availability of metals in prospect for 1952 will force curtailments in all these metal-using activities. A reduction of more than 20 percent in total output of consumer supplies—housing, automobiles, and appliances—from the 1951 level is indicated by the materials allocations for the first quarter of 1952. Some further reduction in these metal allocations is planned for the second quarter. This makes allowance for considerable conservation and change in types of goods bought, since the percentage reduction in the permitted use of copper and aluminum is greater than the projected cut in consumer outlays. In view of the expected increase in programmed investment, discussed in the next section, the maximum reduction in expenditures on producers' durable equipment may be not more than 10 to 15 percent. In addition, it will be necessary to reduce total private and public nondefense construction (other than residential) about 15 percent below the 1951 level, and some types by much more, even if copper is used sparingly. Steel used in nonmilitary construction will not decline by as much as the over-all dollar volume of such construction, because of the shift toward industrial construction which uses relatively more steel. Sufficient steel supplies should be available to permit an increase in steel used for maintenance and repair. The much more restricted availability of copper and aluminum might even operate to prevent a full utilization of steel capacity in 1952. Major problems in materials allocation The allocation process moved ahead on schedule in the second half of 1951, to the stage of comprehensive quarterly allocation of steel, copper, and aluminum under the Controlled Materials Plan; and additional materials, components, and equipment items were subjected to other forms of allocation or use restriction. The use of this machinery for the achievement of a highly selective pattern of materials use raises some problems. The Controlled Materials Plan, as originally instituted, provided no way to insure that the producers of common-use products and components, having gotten their allotments of materials^ would supply defense con- 102 tractors and subcontractors in preference to less essential users. Throughout the latter part of 1951, there was increasing difficulty in getting essential components and equipment for military production and high priority investment projects, despite the fact that components and equipment manufacturers were producing at record rates. The National Production Authority is now attacking this problem, primarily by spot expediting actions to move urgently needed component and equipment orders to the front of the producers' production and delivery schedules. For some types of equipment, where necessary and feasible, this approach will eventually involve complete control over producers' schedules. This line of action can usefully supplement the basic operation of advance planning for production of equipment and components to meet the needs of scheduled military and industrial expansion programs, so that allotments of materials can be geared to the future rather than the past. Effective control of inventory accumulation is another problem. There is evidence that many producers' inventories of scarce materials are substantially in excess of operating needs. The necessary control techniques for dealing with this problem are available, and the problem is one of enforcement. The production agencies are taking action to locate and redistribute excess inventories. Continual screening of military requirements also is necessary to insure that inventories are kept to a minimum. INCREASING PRODUCTION Production and inflation It is often taken for granted that increasing production is the natural economic remedy for the inflationary pressure which the defense program produces. The relation between production and inflation is, however, not a simple one. The central task in halting inflation is to bring supply and demand into balance at the prevailing price level. Whether an increase of output actually will tend to bring demand and supply into balance at the current price level depends on a number of factors. An increase of production in the form of highly specialized munitions and military equipment may widen the gap between the demand and supply of other goods. The reason for this possible result is that workers and businesses receive increases in income, as a result of expanded munitions production. These increases in income normally result in a rise in consumer and business demand for civilian goods, the supply of which has not been increased. A very different case is one in which the increase reflects increased efficiency in the production of widely used civilian goods, for example agricultural products, which could result in a decline in the price per unit of output. In this case, the increased production may tend to narrow the gap between demand and supply, because the supply is increased while private money incomes may not rise correspondingly. 103 Another case is one in which the increase in the production of goods (other than specialized military goods) is achieved by increased employment. This has the result of increasing both the market supply of goods available for civilian purchase, and the incomes of consumers and businesses. If not all of the added income is reflected in increased spending, such an increase in production may be expected to have a net effect of narrowing the gap between demand and supply, although by only a fraction of the amount by which production is increased. If, however, the additional production is achieved only by a substantial increase in unit cost, for example through the payment of premium compensation to workers for overtime, the income added in connection with the production might have a net inflationary effect. One of the chief methods of increasing future production is investment in new productive facilities, and in the modernization of existing facilities. If such investment is made in those industries where plant capacity and efficiency limit the increase of production and of productivity, the effect after the new facilities come into use is to increase supply and narrow the gap between demand and supply. During the period when the investment is being made, however, materials and other resources are diverted from producing consumer goods into the production of capital goods, which of course cannot be consumed, while income payments continue to be made to workers and other producers. An expansion of production that takes the form of increased investment thus would increase inflationary pressure during the period before the new facilities were brought into productive use. The fact that some kinds of increases in production create inflationary pressures should not be interpreted as indicating that such increases must therefore be postponed or abandoned. Certain types of output must be expanded despite the fact that they add to inflationary pressures. Thus, military production is undertaken for imperative reasons which do not permit its abandonment for the sake of lessening inflationary pressures. Similarly, the expansion of the industrial mobilization base may be so important that any immediate inflationary pressures which might be produced may have to be accepted. The inflationary impact of such programs, nonetheless, is a reason for subjecting them to controls which will guide the expansion of production into the most essential lines, and for adopting other stabilization measures to limit demand. An expanding supply of consumer goods is likely to improve consumer acceptance of such restrictions as are needed. Clearly, an expansion of total production, if it is well balanced, makes a major contribution toward the expansion of our economic strength. Factors limiting increase of total production Given adequate demand for goods, the problem of increasing production is essentially one of overcoming certain physical limiting factors. With respect to most nondurable goods and services, actual output during the 104 coming year undoubtedly will depend mainly on the intensity of demand. In several of the soft goods industries, the available labor force, plant capacity, and materials would permit increases of production. With respect to many consumer and producer durable goods, however, the availability of raw materials—especially metals—is the limiting factor determining possible increases in output. Expanding metals output is largely a problem of productive capacity, including electric generating capacity. Limitations on the supply of manpower, with a few special exceptions, have not interfered with the growth of production, and the prospect is that the supply of labor can be increased to meet the expanding need, at least over the next 12 months. Increasing the supply of raw materials The most immediate restraint on production, both in the United States and throughout the free world, continues to be the limited supply of certain raw materials. Comparing 1951 with 1950, the free world output of many important raw materials showed large gains. (See appendix table B-17.) Increasing the free world supply of certain raw materials, however, continues to be a major problem. Encouragement of private investment in raw materials production abroad requires reasonable protection of such investment and of fair profits realizable in dollars. Conversely, countries that engage in needed expansion want assurance that neither shortages nor price inflation in the United States will undercut their own efforts to expand production. In some instances, investments are needed in such ancillary facilities as a transportation system. For example, the effective exploitation of Labrador and Quebec iron ore will depend largely on the early completion of the St. Lawrence seaway project. Pricing and related devices for encouraging production of essential metals and minerals deserve continued judicious use. First, guaranteed floor prices in long-term procurement contracts are now being used, and can be extended where necessary. Floor price guarantees help to increase domestic and foreign supplies of raw materials, by eliminating the risk of a postemergency price decline to levels which would make additional production and investment unprofitable. Second, where the costs of domestic or foreign marginal mines producing essential scarce minerals exceed United States price ceilings, the use of premium prices or their equivalent would be desirable in cases where protection from abuses cart be assured. Premiums should be limited in time and amount, and should apply only to the high-cost portion of output. The same policy is appropriate to encourage new development projects. Third, a program to increase supplies of certain minerals and metals by adjusting price ceilings is appropriate where other methods less likely to impair price stabilization objectives are not effective. Recent ceiling price changes for lead and zinc represented an increase to domestic producers, and should tend to increase domestic sup- 105 plies. These price changes, however, have not yet resulted in significant improvements in imports. Fourth, removal of the existing United States tariff on lead, zinc, and certain other metals would be desirable, where this action would encourage imports or would ease the pressure on domestic prices. Technological research and related efforts to conserve materials in short supply by simplifying designs, using more plentiful substitutes, or salvaging and re-using materials, can help in increasing total production, and in easing allocation and production problems. Specific suggestions have already been worked out in the construction industry for effecting substantial savings in the use of structural steel, through the substitution of reinforced concrete and masonry or wood construction. Substantial savings of copper are planned in the electrical, automotive, and other industries by the substitution of aluminum as it becomes more plentiful. Longer-range requirements for raw materials, and the best methods of meeting them from sources in the United States and the free world generally, have been under intensive study by the President's Materials Policy Commission for the past year. The report of this Commission will soon be completed. Enlarging the labor supply Availability of raw materials is the limiting factor in determining the possible increase of output in the durable goods sector of the economy. The manpower needs for this sector, involving the defense program, constitute a priority which should be met. Defense and defense-related production will require about 2l/$ million more workers in the fourth quarter of 1952 than in the fourth quarter of 1951. Some of these essential workers will be provided by cutbacks in the output of civilian durable goods and nondefense construction. Allowing also for some lengthening of working hours, and a modest increase in productivity, it seems that an increase in total civilian employment of about 15/3 million would be required to service the primary defense effort, and to provide an adequate labor force for such increases in production in other sectors of the economy as might be expected in the light of probable increases in incomes and demand. The small possible addition of workers through further reducing unemployment is about counterbalanced by the probable withdrawal of manpower to enlarge the armed forces. Judging from previous experience, a net increase of about 1J/3 million in total civilian employment during 1952 is well within our capabilities. An annual increase in the labor force of about 1 million has been usual since the war, even without such active recruitment as will occur, at least in a few industries, during the coming year. Though there is no general manpower shortage nor any near-term prospect of one, some localized labor shortages do exist. In November 1951, 6 of the 174 major labor market areas in the United States either had, or were 106 expected shortly to have, labor shortages which threatened to impede essential activities. Another 60 areas were listed as having a "balanced" labor supply; in some of these, the labor market will tighten as the pace of defense production is stepped up. In addition to localized manpower shortages, there are some urgent problems arising from scarcities of workers with particular skills, such as those in the fields of engineering, design, and machinery operation, which require considerable training to develop. The Government is stressing the importance of more adequate training programs, and is assisting employers, schools, and labor to improve and expand such programs. When shortages of highly skilled metal workers threatened seriously to hamper machine tool production, the industry was given priority in recruitment of labor through the Employment Service. Special consideration also was given to machine tool workers who were liable to call by Selective Service or as reserves by the Department of Defense. The Department of Labor and the Selective Service System are developing a joint policy which will provide more deferments for apprentices in skilled trades. In addition, every effort should be made to expand the number of "on-the-job" trainees. Full use should also be made of vocational education in public schools, which contributes importantly to the supply of skilled and semi-skilled workers. Preventable illnesses and accidents, on and off the job, can be reduced by strengthening public health, medical care, safety, and "related programs. Strengthening of the existing Federal-State vocational rehabilitation system could, over the years, return to the labor force hundreds of thousands of workers who are already trained and experienced. In addition to specific labor shortages in industry, there are increasing evidences of farm labor shortage. The steps being taken to meet this shortage include more extensive use of persons not normally in the labor force, community participation in emergency situations, fuller exchange of labor between farmers and between States, better housing facilities, and improved informational, health, and welfare services for migrant workers. Part of the solution for manpower problems lies in placing facilities expansions and contracts in areas where there are ample labor supplies, thus reducing the need for migration. To ensure that manpower considerations are given adequate attention in placing defense contracts, the Department of Defense has developed a plan under which no such contract will be placed in a labor shortage area without prior consultation with the Employment Service. But not all defense operations can be carried on in areas of adequate labor supply. The lack of housing and community facilities is the greatest obstacle to recruiting sufficient workers where it is necessary to bring them in from other localities. By mid-January 1952, some 140 local areas had been classified as critical from the point of view of insufficient housing and community facilities and services to accommodate persons migrating to 107 977891—52 8 military installations and defense plants. The number of such areas is expected to increase substantially during 1952. Special assistance provided by the Defense Housing and Community Facilities and Services Act has been extended to some 65,000 private housing units in these areas. Although the bulk of future need will continue to be met by private construction, larger appropriations for publicly financed defense housing will be required for those types of housing and in those places where private enterprise cannot be expected to meet the need. Additional aid to critical areas for essential community facilities and services should also be provided. Guiding investment The necessary shifts in resource use outlined above will involve some further major changes in the pattern of private and public investment. To meet war preparedness objectives, and to work toward the substantial elimination of basic shortages by 1954—when, so far as can now be judged, military production will have passed its peak and be on the way toward a substantially lower maintenance level—investment in Government-aided industrial expansion programs will have to increase further. As tentatively planned, these programs will expand from a level of around 14 billion dollars in 1951 to about 15 l /z billion a year over the next 2 years. (See table 14.) In addition, essential developmental investment, including that for schools, hospitals, highways, and natural resources, will probably amount to roughly 5 billion dollars in each of the next 2 years. Reduced availability of materials is expected to force a reduction, comparing 1952 with 1951, of at least one-quarter in all other types of public and private investment. Though part of this decline in the rate of outlays had occurred by the end of 1951, full adjustment to such a pattern cannot be accomplished all at once, because of the necessity of completing a substantial volume of construction now under way. Programmed expansion of productive capacity. The basic expansion programs are an important part of an economic strategy for a long period of partial mobilization. They contemplate, in addition to meeting the top priority needs of the military, the provision of an enlarged base of additional capacity—not only as a reservoir of quick strength in the event of war, but also as the long-range solution to the problem of adequate supply in all major sectors of the economy while maintaining a large security program. The bulk of the investment in such programs is private, though publiclyowned facilities constitute a major share of the program for expansion of munitions facilities, and a quarter to a third of the electric power program. The Federal Government has supported the private programs, however, with various forms of financial assistance, in addition to giving them preference over other investment in the allocation of scarce materials. The full industrial build-up program necessary for meeting mobilization objectives extends well beyond 1952. The progress made during 1951, the availability of materials and equipment, and such advance scheduling 108 of the programs as has been done, indicate for 1952 and 1953 a continuance of very high rates of investment in these priority expansion programs as a group. The projected rates of outlay, as shown for some major programs in table 14, reflect further work on projects now under way, and work on new projects for which in most instances fairly firm commitments have already been made. The actual rate of progress will depend in part on the availability of structural steel and other bottleneck items for construction and equipment. These major expansion programs accounted for one-quarter of total private and public nonmilitary investment in 1951; in 1952 they may account for nearly one-third of the total. They will require in 1952 nearly half the copper and steel used in all nonmilitary investment. TABLE 14.—Estimated plant and equipment expenditures in selected areas of programmed or Government-aided expansion [Billions of dollars, 1951 prices] Program 1 1949 Total Electric power 3 Petroleum Farm machinery 4 _ Metalworking machinery 44 _ Trucks and truck trailers Natural gas ._ _ ._ ._ _ __ __ *Iron and steel (including byproduct coke ovens and iron ore mining facilities) Railroad equipment * Aluminum _ Synthetic fibers *Taconite (iron ore) concentrates *Nitrogen 1950 1951 1952-53 2 10.8 11.1 14.0 15.4 2.6 2.4 2.3 1.6 .4 2.0 1.2 2.9 2.4 1.6 1.2 2.0 1.3 38 .6 .2 .1 1 1.4 .6 .2 .2 1.2 .7 .3 .2 .2 .1 2 2 1.7 .4 1.6 1.1 .6 5 (5) 1 (5) (5) (4) (5) (5) (•) 2.6 1.7 1.7 1.7 1.2 *Indicates programs for which the Defense Production Administrator has announced objectives. Objectives have also been set recently for a number of other programs, not shown in the table and involving for the most part relatively small investment. These include columbite and tantalite, tungsten ore, chromite, cobalt, molybdenum, nickel, sulfur, lead, magnesium, chlorine, hydrofluoric acid, newsprint, lubricating oil, phenol, phthalic anhydride, metallurgical manganese ore, zinc, aniline, high-purity oxygen, and naphthalene. 1 Most of these "programs" are still only tentative proposals. Figures are in most cases not directly comparable with those in the first column of table 6, partly on account of differences in industry classification and partly because not all projects are covered by tax amortization certificates. 2 Estimated average annual rate. 34 Includes both private and public power facilities. Figures refer to value of proposed output of the type of equipment indicated, and not to expansion of facilities for producing such equipment. « Less than 50 million dollars. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Defense Production Administration. Public investment. Many lines* of public investment outside the direct military area play an essential role in the defense build-up. These include, among others, the public electric power program, minerals development, highways, and land, water, and forest conservation. Others are considered in the next section. In view of the increased pressure on scarce materials in 1952, stemming from the build-up of the security program and defense-related industrial expansion, many lines of public investment need to be curtailed still further. But this curtailment will have to be highly selective. This can be achieved 109 by a combination of materials allocation and careful Federal, State, and local budgeting. Some cut should be feasible in nonmilitary public construction as a whole. The electric utilities, private and public, are planning to increase capacity by about 30 million kilowatts, or nearly 40 percent, during the next 3 years. Even with this program, power availability is likely to remain a critical problem in certain regions where large load increases will occur, such as the aluminum-producing Pacific Northwest and the areas where large new atomic energy plant requirements must be met. Looking farther ahead, the increasing emphasis on the chemical, electrometallurgical, and other large power-using industries indicates a continuing rapid growth of power requirements. Power development by public agencies needs to play an important part in meeting them, particularly where Federal multi-purpose river developments can provide large additions to power capacity along with other desirable results. Hydroelectric projects already begun should be completed rapidly. New projects serving defense and other essential requirements which should be undertaken are the St. Lawrence seaway and power project and the Niagara River redevelopment, to furnish 1/2 to 2 million kilowatts of capacity to users in the northeastern part of the country; and also several projects in the Pacific Northwest. Basic resource survey, research, and experimental programs, as well as some actual land, water, forest, range, and mineral conservation and development projects, need to be strengthened, since these provide the underpinning for long-range production increases. For the immediate period ahead, those activities less essential for defense will have to be postponed, but such postponement cannot long be continued without sacrifice to longer term security and production objectives. Although the atomic energy program is now directed primarily toward the production of weapons, the possibilities for future peacetime use of atomic energy and isotopes have not been forgotten. Several private utilities and other companies, with the cooperation of the United States Atomic Energy Commission, are investigating the technical and cost characteristics of the joint production of materials for weapons and electric power for general use. Fortunately, almost all of the fissionable material being produced, as well as a portion of the investment now being undertaken by the Atomic Energy Commission, will be useful for peaceful purposes when the world situation no longer requires that they be kept available for defense. The rate of maintenance of the highway system has for the past decade averaged far less than would be required to keep it in even reasonably adequate condition in the face of the phenomenally rapid growth of traffic. Although some reduction in highway expenditures has to be made in the immediate future, higher levels of construction and maintenance activity should be resumed as quickly as possible. The Federal highway aid program should be extended promptly, to avoid any lapse when the present program expires. no Restrictions on nonessential investment. The impact of materials restrictions on business investment has only recently been felt. But late in 1951, as the supply of metals and equipment tightened and as direct controls over construction were made effective, the rate of investment in some less essential types of construction and equipment began a sharp decline. (See charts 21 and 22.) In 1952, with the national security programs sure to absorb resources at a greatly increased rate, and the likelihood that the high priority industrial expansion programs will take at least as much as in 1951, it is evident that other types of investment must be brought well below 1951 levels. Private housing construction, for example, will have to be cut, probably by at least 20 percent. In the commercial and nondefense-related industrial categories, very few new construction starts are currently being approved, and most of the current construction activity of those types represents merely the completion of projects already well under way. A continuance of this rigid restriction on new starts through 1952 would bring the •volume of commercial construction by the end of the year down to perhaps half its current level, which is in turn well below that of a year ago. Such a rigorous policy, however, is not contemplated. As projects under way are completed in 1952, it will be feasible and desirable to permit new start? where most needed (e. g., in areas of rapidly increasing employment), while at the same time keeping the level of construction activity and the use of scarce materials below present levels in commercial, nonpriority industrial, and miscellaneous construction. Business investment in machinery and other producers' durable equipment is currently accounting for a much larger dollar outlay than all private construction combined, and also absorbs larger amounts of scarce metals. (See charts 19 and 28.) The rate of output of equipment is controlled by allotments of controlled materials to equipment producers; but effective control to assure the direction of equipment to uses of greatest urgency requires further development. Dispersal. One important problem related to achievement of security objectives is industrial dispersal. In previous Reviews, the Council has recommended two general types of dispersal: first, avoidance of overconcentration of industrial facilities within particular industrial and labor market areas, and, second, within the framework of the whole economy, a regional decentralization of industry which looks toward further development of cores of economic strength in the less developed large regions of the country. The President has already directed that applications for aid for industrial expansion as well as the allocation of critical materials for construction purposes be reviewed with an eye to dispersing essential defense activities within given labor market areas. More work needs to be done toward specifying precise standards for governing this kind of dispersal, and seeing that it is balanced with an adequate dispersal of housing and III community facilities and services. Under this policy, the principal instrument of dispersal must remain the location of new facilities. But over the course of a decade, assuming a high level of investment in new plants, possibly one-third of the present total value of industrial plant could be located according to dispersal standards. Less headway has been made toward building up diversified and interrelated centers of industrial strength in various larger regions of the country, such as the Far West and the Southeast. Here again, the need is to establish workable standards to guide private firms and Government agencies in the selection of sites for new essential industrial operations. Increasing agricultural production Increased agricultural production, up to the limit of available acreage, and with special increases in feed crops, is contemplated in the Department of Agriculture's goal for 1952. The recent high level of farm output, about 40 percent above the 1935-39 average, has been a major restraint on inflation. Further gains are necessary to meet domestic consumption, exports, and storable reserves. Price support programs again will be used for this purpose. The existing farm price support legislation for basic commodities, including wheat, corn, and cotton, was written during 1948 and 1949. It was intended to cushion producers against abnormal drops in prices which might result from production in excess of market demand. It was feared that large carry-overs would hang over the market and depress prices; also, that they would lead to excessive losses from price support operations and alienate public support for the farm program as a whole. Therefore, the 1949 legislation provided for a reduction in price support levels when stocks were large, in order to stimulate consumption and to hold down production. The present situation is quite different from that envisaged in 1948 and 1949. The Secretary of Agriculture has asked farmers for maximum production of several of the basic commodities. Our reserves of wheat, corn, and cotton are all at lower levels than can be considered safe or desirable. Yet under existing legislation, if farmers succeed in increasing production sufficiently to build up reserves to safe or desirable levels, they could be penalized by having their support prices reduced from 90 percent to as low as 75 percent of the effective parity. This possibility may act as a deterrent to maximum production of basic commodities by raising concern in the minds of many farmers lest the Government, after enlisting them in an all-out production drive, might leave them worse off as a result of their patriotism and hard work. Support prices for corn, wheat, cotton, and dairy products at 90 percent of parity have already been announced. In addition, wider and more effective use of fertilizer is necessary. Expansion programs for nitrogen and other fertilizers should be expedited, and adequate quantities of farm machinery provided. Newly irrigated 112 land coming into production this year will contribute to the 1952 increase in output. Over-all production objective for 1952 In 1952, the primary production objective is to boost the annual rate of output for defense by about 20 billion dollars—most of it in military hard goods items and military construction. About half of this should represent additional production; about half would be diverted from civilian durable goods production and construction. (See chart 30.) CHART 30 GROSS NATIONAL PRODUCT EXPENDITURES IN 1951 PRICES The increase in security expenditures during 1952 is expected to be larger than the hoped-for growth in total output. BILLIONS OF DOLLARS* 400 BILLIONS OF DOLLARS* 400 OBJECTIVE TOTAL 300 300 PERSONAL —*• CONSUMPTION EXPENDITURES 300 100 "~ GOVERNMENT PURCHASES GOODS AND SERVICES 200 100 GROSS PRIVATE > DOMESTIC ^ INVESTMENT foTHER —* J } NATIONAL . . INSECURITY """* 4th Qtr. I960 * SEASONALLY ADJUSTED ANNUAL RATES. FOREIGN INVESTMENT RELATIVELY VERY SMALL. 4th Qtr. 1951 4th Qtr. 1952 NOT SHOWN ON CHART SINCE AMOUNTS ARE SOURCE: COUNCIL OF ECONOMIC ADVISERS. By the methods discussed above, it should be feasible within the year to lift the annual rate of total output, for defense and civilian purposes combined, by at least 5 percent, or about 15 to 20 billion dollars. About twothirds of this increase, or at least 10 billion dollars, should be a net gain in the area of durable goods, including construction. These 1952 production figures, it should be emphasized, are not a forecast. They only set forth desirable and feasible objectives. Enlargement of defense production and total production in 1952 depends primarily on the vigor and initiative of producers and workers. It depends upon the effectiveness and cohesion of the whole economic mobilization effort. It depends also on the success of the policies designed to remove roadblocks. MINIMIZING BUSINESS DISLOCATION Minimizing local unemployment and geographical dislocations Although the national total of unemployment remained at a low level throughout 1951, a number of areas have serious unemployment problems. Many of these areas concentrate on one or two major types of industrial activity; for example, textiles in Lawrence, Massachusetts, and coal mining in Scranton and Wilkes-Barre, Pennsylvania. The defense production program has not had much impact on such areas. Without a substantial increase in demand for the products of these areas, a continuance of the problems confronting them is likely. While in some instances war contracts can be let in these areas, little surplus labor can be absorbed by this method. A number of new plants are being located in isolated communities where a labor force is practically nonexistent, so that we can expect, before very long, some migration of the unemployed from areas of labor surplus to these new locations. Steps are now being taken to compile a directory of existing unused facilities which could be used for defense production. In addition, long-range estimates of manpower requirements and resources are in process of being developed. With such information at hand, we can expect greater success in placing contracts in areas where the labor supply is available, thus reducing unemployment, and at the same time helping to avoid the geographic dislocation problems discussed above. A special type of defense unemployment, which has become acute in some metal-using centers, has resulted from a discrepancy between expanding defense and contracting civilian work. Certain industrial areas, such as Detroit, have been hard hit by this development. Despite the efforts which the Government is making, the unemployment problem in some of these areas will unfortunately continue in 1952. To alleviate this problem, the Director of Defense Mobilization is appointing an interdepartmental committee of production, procurement, and manpower agencies to assist in dovetailing civilian industry cutbacks with defense expansion on an area and industry basis. In line with approved military requirements, the Department of Defense has been trying to place more defense contracts in Detroit, with some success in terms of the number of contracts, but the dollar value of such contracts has shown some decline. Every effort should be made by the industries in this area to do as much of their own work as possible in Detroit. For example, some 114 of the automobile production now being carried on in tight labor areas might be drawn back into plants in labor surplus areas. New defense plants, procurement contracts, and military installations are affecting larger regions of the country, and should be related to the broader regional economic potentialities and problems if major geographic dislocations are to be avoided. Several Federal agencies are making good headway in the programming of natural resources development, which is basic to economic growth, in a number of larger river basins and other regions. The Council hopes that it is contributing to this end by sponsoring a series of regional economic studies which, while not conceived originally as defense projects nor primarily focused on defense needs, have given a good deal of attention to them since Korea. With the cooperation of the Joint Committee on the Economic Report, studies relating to the South and New England have been completed. Another is now under way in the Southwest. Prepared independently by highly qualified economists and others who live in those regions, these studies indicate specific ways in which the present defense program may affect underlying economic problems of the regions, and look beyond the immediate program to the problems which will arise during and after the transition to the later maintenance phase of the defense effort. Utilization of small business In view of the large growth in defense output during 1951, some dislocation of business, and particularly of small concerns, might have been expected. Actually, business viewed as a whole showed little evidence of distress; and not all of the distress that appeared resulted from the mobilization effort. In lines of business where the limiting factor was materials supply, the mildness of the over-all impact of the defense program in 1951 was due to a combination of factors. Stocks of needed materials and components were high at the beginning of the year. Many producers showed remarkable ingenuity in stretching their reduced allotments of critical materials by redesigning their products. Finally, so long as it was feasible, it was Government policy to allot sufficient materials to each industry, even to those producing clearly nonessential goods, to keep it going until defense orders began to take up the slack. Provision was made for exceptional allotments to individual producers in hardship cases. But a mobilization effort necessarily creates serious problems for small business as a class. Small business firms are more vulnerable to material shortages than larger firms, because their profitability is generally more severely affected by reductions in their operations, their output more narrowly specialized, and their financial position weaker. The industries in which a mobilization effort calls for major increases in output and capacity are, in large part, those in which small-scale production is the exception rather than the rule; and in general, the facilities of small firms are less easily adapted to defense production. The increased stringency of materials supply in 1952 will intensify the need for many firms, particularly smaller ones, either to get into defense production or to redesign their products in such a way as to make much less use of scarce materials. It will no longer be possible on so extensive a scale to allot such materials to nonessential production in cases where the only justification is that it permits a firm to continue operations. Quite aside from the need to alleviate distressed conditions caused by material cutbacks, it is obviously in the national interest that there be a greater diffusion of defense production in our industrial structure. It is advantageous to spread arms production experience. Small plants have a production potential which should be preserved against the day when it would be needed to support total mobilization. Production bottlenecks may be eliminated by a more effective utilization of small manufacturing facilities. Moreover, the mobilization program should not be permitted to impair competition. Government assistance to small business, particularly through the services of the Department of Commerce, is an activity of long standing which is now being intensified. In addition, a number of measures have more recently been taken by the Defense Department and the mobilization agencies to increase the participation of small business firms in the defense program, and to lessen the impact of material shortages. Information is circulated on prime and subcontract opportunities. An industry distress program has been set up on a regional basis, to identify those firms hardest hit by allocations, assemble information on their capabilities for producing defense goods, and bring them together with procurement officials and prime contractors. Users of controlled materials in very small quantities are permitted self-certification. The Small Defense Plants Administration was recently created as an independent agency, to aid in developing ways of using small business concerns most effectively in national defense and essential civilian production. It has statutory authority to enter into prime contracts with Government procurement agencies, and to arrange for the performance of such contracts by letting subcontracts to small business concerns. It should be noted, however, that no funds have been appropriated to finance this contracting function. SDPA also has the power to recommend to the Reconstruction Finance Corporation loans to enable small concerns to engage in defense and essential civilian production. A working arrangement has already been agreed upon to implement this operation. Perhaps the most important responsibility of this new agency is that of determining, jointly with the procurement agencies, that it is in the interest of the national defense program to let a specific contract to a small business concern. Once this joint determination is made, the contract must be 116 placed with a small concern. If effective procedures are devised by SDPA and the procurement agencies, this should be a concrete way of effectuating the frequently expressed policy of Congress that a fair proportion oi Gov* ernment procurement be placed with small business concerns. SUPPLYING CONSUMER NEEDS Outlook for consumer goods With the security program now scheduled, and reasonable increases in total production, consumer supplies will be adequate to meet essential needs in 1952. Since there will be cutbacks in the output of metal-using durable goods, any increased demand arising from a higher income total will be manifested mainly in increased production of nondurable goods and services. The output of textiles, food, and many other products can be expanded without interfering with the defense program. Judging from peak rates of output in 1950 and 1951, production of textiles, apparel, shoes, and furniture could be raised by over 25 percent from recent levels, and production of carpets could be doubled. The food outlook also is relatively good and CHART 31 OUTPUT OF SELECTED CONSUMER DURABLE GOODS Metals allocations for the first quarter of 1952 indicate that production of passenger cars will be reduced 25 to 30 percent below the 1951 rate. INDEX, 1947-49 = 100* 300 INDEX, 1947-49 = 100* 300 — 200 - 100 100 *ADJUSTED FOR SEASONAL VARIATION. -^ LOWER ESTIMATE OF PASSENGER AUTOMOBILE OUTPUT BASED ON ALLOCATIONS FOR 930,000 UNITS; UPPER ESTIMATE ON PERMITTED PRODUCTION OF 1,000,000 UNITS. SOURCES: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, DEFENSE PRODUCTION ADMINISTRATION, NATIONAL PRODUCTION AUTHORITY, AND COUNCIL OF ECONOMIC ADVISERS. 200 117 should permit some rise in food consumption, with the largest increases in the more expensive items such as meats and frozen fruits. The capacity for synthetic fibers is being increased, which will further supplement the supply of cotton and wool in 1952 and 1953. In major metal-using consumer durables, the outlook is quite different. Production of passenger cars in the first quarter of 1952 will be between 900,000 and 1 million units, or a little more than half the average quarterly rate in 1950. Allocations for steel and other metals for use in major household appliances, such as ranges, washers, and refrigerators, and for radio and television sets, are also being reduced to 50 percent or less of the rate in the base period, which in most instances is the first half of 1950. However, absorption of stocks of materials and substitutions will temporarily permit somewhat higher rates of production. (See charts 4 and 31.) The projected production levels for appliances and automobiles are not so low in relation to recent demand as the size of the cuts from 1950 suggests. Sales of passenger cars and major appliances declined from 1950 to the second half of 1951 by between 20 and 25 percent, as shown in chart 18. Nevertheless, the supply of passenger cars is likely to be below the level of demand in 1952, while other durable goods will become more scarce as the present ample stocks are worked off. It is not likely that output of automobiles can be increased much in the second and third quarters. It now appears likely that less than 4 million cars will be produced in 1952, compared with 5.3 million in 1951, and 6.6 million in 1950. While this is below the number which would be desirable in order to retire over-age vehicles rapidly, the continuance of even this rate for the next few years would maintain or somewhat increase the number of cars in use. The cutbacks in production of metal-using consumer goods raises problems of maintaining adequate supplies of lower priced lines of merchandise. Manufacturers at present are free to shift to higher priced lines, so long as they stay within their metals allocations. As materials become scarcer, a tendency may develop to concentrate on the high-profit margin items— whjch in general are also the more costly. A shift in production toward a higher proportion of expensive goods not only adds to living costs, but in most cases makes for a less efficient use of materials. Consequently, the production and stabilization agencies are considering measures to be applied in the event that low priced goods tend to disappear from the market. Housing Although 6 million new houses have been produced since the end of World War II, demand remains at a high level because of backlog requirements, high living standards, and a high rate of family formation. Credit restrictions introduced in 1950, which were relaxed by Congressional action in September 1951, plus a stringency of funds for Government-insured mortgages in the latter part of 1951, helped to reduce the number of starts 118 CHART 32 NEW HOUSING STARTS Housing starts in 1951 were about 15 percent below 1950, but higher than in any other year on record. A cut of about 20 percent is expected for 1952. MILLIONS OF UNITS .5 1.0 1.5 1948 1949 I960 I95I17 1952^ u REQUIREMENT TO MAINTAIN PRESENT HOUSING STANDARD ESTIMATED. SOURCES: DEPARTMENT OF LABOR AND HOUSING AND HOME FINANCE AGENCY. of nonfarm housing from 1.4 million in 1950 to about 1.1 million units last year. (See chart 32.) In 1952, a large net migration will be needed to meet the labor requirements of areas containing defense establishments or military installations. New housing accommodations will be required for a large proportion of these workers, and a Federal program for aiding private construction of about 200,000 units is in operation. In addition, sufficient defense housing can be provided only if the Government assists in financing necessary community facilities and actually builds houses in some areas. Besides the unusual strains on housing capacity arising from movements of defense workers, there is a need for new housing to take care of the 600,000 to 700,000 new families which will be formed next year. Although part of these families can be housed in units vacated by families moving to defense areas, it is estimated that, for the economy as a whole, 800,000 to 850,000 new nonfarm dwellings would be needed in 1952 merely to maintain present housing standards. It is hoped that this number of units can be produced in 1952. The outlook for materials supplies indicates that substantial further economies in the use of scarce materials in housing construction will be required if this goal is to be reached. Housing construction in 1952 must of necessity fall considerably short of the annual rate which would meet long-term needs. To replace structures which are below standards of health and decency, and to house the growing population, an average of nearly 11/2 million new nonfarm units a year would be required throughout the 1950's. A large number of these should be publicly-financed low-rent housing for low income families. In 1952, even with prospective cuts in total housing, at least 75,000 of these units should be built. This would be about the same as in 1951, and much less than the average annual rate contemplated by the authorizing legislation. An inadequate supply of new housing is part of the price we must pay for national defense. But the economic and social costs of the housing deficit can be aggravated or mitigated, depending upon the policies adopted. Since addition to the housing supply during the next two years at least must be held down to between one-half and two-thirds of the actual need, it is essential that the bulk of the supply be channeled into areas where it is needed most, and that within these areas and elsewhere there be concentration upon reasonably priced housing coupled with severe limitation of luxury housing. In all housing construction, there should be strenuous efforts to limit the utilization of critical materials, such as copper, in view of the fact that adequate housing can be provided with available substitutes. The proportion of low-cost housing to the total new housing supply should be appreciably raised above recent performance. This is an obviously desirable requirement for a mobile and contented labor supply in a defense emergency. The World War II experience, with appropriate adaptations, provides such well tested techniques for bringing about these necessary adjustments that they should be speedily effectuated in the year ahead. Essential public services Education. To meet the needs of the very large number of children who will be added to the school population in the next 6 years, some 200,000 additional classrooms with adjunct facilities should be constructed. In areas where school needs are due to increased Federal activities, Congress has authorized aid to school construction. It is necessary to continue and extend the present program to cover all critical defense areas. No less urgent is the need for a large increase in the number of teachers trained for elementary and secondary schools. In some States, it would be difficult to improve teaching and operating standards of education without adequate general Federal aid. At least a start in this direction should now be made. To promote needed higher education, and to correct the inequality of opportunity in the present draft procedure, an appropriate Federal scholarship program appears even more urgent now than when it was previously recommended. Health. By 1954, the Nation will need an estimated addition of 22,000 120 physicians, 9,000 dentists, and 49,000 nurses beyond those now in sight. A program of Federal aid to medical education, including nursing, is urgently required if the increase in health personnel is to keep pace with the growth in population, instead of continuing to fall behind it. Federal aid is required to help organize local public health services in those communities which do not have them. Shortages of scarce building materials have forced a slow-down in the rate of hospital construction despite vigorous conservation measures, but hospital construction should be stepped up again, as soon as extreme pressures of defense construction programs begin to subside. Social security and welfare. The integrity and economic purposes of social security and welfare programs should not be cut away by inflationary rises in the cost of living. Even with an effective anti-inflation program, some adjustments of social security benefits are necessary to preserve the intended effects of the programs. Looking further ahead, other improvements are needed to provide protection to meet costs of medical care and loss of earnings due to illness; these and other health problems will be studied by the President's Commission on the Health Needs of the Nation. HELPING TO STRENGTHEN OTHER FREE NATIONS It is our purpose, in the interest of security, to strengthen the individual and collective defenses of the nations of the free world, to encourage production and the development of their resources, and to facilitate their effective participation in the United Nations system for collective security. Although considerable progress was made toward some of these objectives in 1951, the economic situation has not improved in all areas of the free world, and in some it has deteriorated. Under the Mutual Security Act of 1951, Congress appropriated for the fiscal year 1952 a total of 7.3 billion dollars of new funds, and reappropriated more than 800 million dollars of unobligated funds remaining from the fiscal year 1951, for aid to foreign countries. As table 15 shows, over 5.9 billion TABLE 15.—-Foreign aid appropriated under Mutual Security Act of 1951 [Millions of dollars] Total foreign aid Area Total Europe Near East and Africa Asia and Pacific American Republics . . ... _ _ _ _ 1 _ 8 Military aid* Economic aid a 7, 329 5,789 1,440 » 5, 941 4,819 396 535 38 1,022 160 237 21 556 772 59 For purchase of finished military equipment, technical military training, and some items consumed directly by military forces. > For purchases of tools, raw materials, equipment, foodstuffs, etc. »Includes 100 million dollars for Spain not allocated between "military" and "economic" aid. NOTE.—Excludes reappropriated funds. Detail will not necessairly add to totals because of rounding. Source: Public Law 249, 82nd Congress. 121 dollars of the newly appropriated funds were provided for Europe, nearly 5 billion dollars for military aid, and slightly over 1 billion dollars for economic aid. The Mutual Security Act provides for limited transfers of funds between military and economic aid for Europe, as well as for limited transfers of funds between areas. It requires that a minimum of 10 percent of the economic aid to all areas administered under the terms of the Economic Cooperation Act take the form of loans. The purposes of the aid provided to Europe, as stated in the Act, are to help carry out the plans for defense of the North Atlantic area, while at the same time maintaining the economic stability of the area. Despite many difficulties, there is reason to believe that progress toward both objectives will be achieved. As a result of the re-examination of military goals for the defense of Europe, and the screening of military requirements which has just been completed, considerable progress has been made in reconciling defense requirements and economic and political capabilities. Beyond this, attainment of th© objectives in Europe requires the most efficient use of its production and foreign exchange resources. Western European developments and their appraisal In Western Europe, the economic expansion stimulated by the outbreak of war in Korea continued. Industrial production averaged 10 percent higher in 1951 than in 1950, according to preliminary estimates, as chart 33 indicates. The increase in output varied considerably among countries, ranging from 20 percent in Germany and 18 percent in Belgium to 4 percent in the United Kingdom. Agricultural production in the current crop year appears to be averaging about the same as in the preceding crop year. The limiting effects of raw material scarcities on industrial output were not as restrictive as had been anticipated at the beginning of the year, but all of Western Europe suffered from a shortage of coal, nonferrous metals, and steel-making materials. Western Europe's coal production is running about 2 percent less than before the war, while its industrial production is over 40 percent higher than its prewar level, thus creating an unusually high demand for coal. The Western European economy as a whole was operating near its currently practical capacity in 1951. In some instances where plant appeared available, raw materials or labor were not; and where labor seemed available, there was a shortage of plant or materials. Strong efforts were being made to increase output and capacity further. Germany and Italy were the only countries with substantial pools of unemployed. High consumer and business purchasing, higher incomes, and high prices of imported raw materials raised wholesale prices sharply after the Korean outbreak until the spring of 1951. These prices then fell somewhat as raw material prices receded, but began to rise again in some countries in the fourth quarter. (See chart 34.) The cost of living in most countries followed a similar pattern. 122 CHART 33 INDUSTRIAL PRODUCTION IN WESTERN EUROPE Production in 1951 surpassed I960 levels, but by a diminishing margin in recent months. INDEX, 1938 = 100 INDEX, 1938 = 100 150 150 140 140 130 130 120 120 I 10 110 100 100 -^DA-TA FOR 1951 PRELIMINARY. NOTE: INCLUDES AUSTRIA, BELGIUM, DENMARK, FRANCE, FEDERAL REPUBLIC OF GERMANY, GREECE, IRELAND, ITALY, NETHERLANDS, NORWAY, SWEDEN, TURKEY, AND UNITED KINGDOM. SOURCE: ECONOMIC COOPERATION ADMINISTRATION. The expansion of demand and production, and the rise in prices of raw materials imported from non-European sources, caused a serious deterioration in the Western European foreign trade position. Despite the improvement in the position of Belgium and Germany by an annual rate of approximately 1 billion dollars, the trade deficit of Western Europe as a whole rose by an annual rate of approximately 3 billion dollars from the second half of 1950 to the first half of 1951. In the second half of 1951, it fell slightly, but the trade position of the United Kingdom and France continued to worsen, as shown in table 16. From 1947 to the year ending June 30, 1951, Western Europe's total production of goods and services rose by an estimated 28 percent. Although this rise brought production to a level 19 percent above 1938, it did not permit a significant rise in per capita consumption above the 1938 level. The reason is apparent from table 17, which shows rough estimates of the changes in output and other sources of supply, and the use made of them. A large part of the rise in production since 1938 has been offset by the loss of income from foreign investments which had to be liquidated during World War II, and by the higher prices of imports in relation to exports. The 123 977881—52 9 TABLE 16.—Foreign trade of Western Europe with rest of world [Billions of dollars, annual rates] 1950 Trade and country 1949 Imports 2. . Exports First half 1951 Second half First half Second half -22.3 18.8 -20.8 17.7 —22.8 21.8 —29.7 25.7 -30.9 Trade balance * —3.5 —3.1 —1.0 —3.9 -3.5 Trade balance by country: Belgium-Luxembourg France Western Germany United Kingdom Other countries .2 -.2 -.9 -.8 -1.8 .2 —.1 -.5 —.5 -2.3 -.2 .7 —.5 .2 .3 .1 -2.0 —2.5 .6 — .1 .4 -3.0 -1.5 (3) -1.1 27.4 i8 Estimates based on incomplete data. Imports and trade balances based on f. o. b. imports, estimated by deducting 10 percent from c. i. f. imports. * Less than 50 million dollars. NOTE.—Minus sign indicates imports or import surplus. Detail will not necessarily add to totals because of rounding. Source: Organization for European Economic Cooperation. remaining increase since 1938 in the goods and services available for domestic use has been devoted to a considerable increase of investment, and to a rise of consumption approximately proportional to the rise in population. TABLE 17.—Available resources in Western Europe [1949 prices and average 1949 exchange rates] Calendar year 1938 Item Calendar year 1947 Year ended June 30, 1951 i Billions of dollars Total resources: Available for home use: Gross national product Net imports of goods and services financed by: Income from overseas investments Grants, borrowing, or liquidation of reserves _. Adjustment for terms of trade Total resources available . . _ _ Uses: Gross private domestic and public investment ._ Government consumption, including defense Private consumption _. Total uses of resources 143 133 170 3 1 +2 8 1 -3 149 141 168 26 24 99 27 22 92 33 25 110 149 141 168 Dollars Per capita uses of resources: Gross private domestic and public investment Government consumption, including defense Private consumption _ Total p e r capita uses . _ ._ _. ._.«. 105 97 400 103 84 350 121 92 404 603 536 618 i Estimates based on incomplete data. NOTE.-—Detail will not necessarily add to totals because of rounding. Source: Organization for European Economic Cooperation and U. S. Economic Cooperation Administration. 124 Some of the new burdens which are causing external financial difficulties in Europe—particularly in Britain and France—must necessarily accompany the pursuit of the basic objectives of the free nations. The past year saw substantial progress in one of these objectives, the strengthening of military defenses. In the expansion of Western Europe's own military production, and in our shipments of finished military equipment, however, the progress made has been less than was hoped for earlier this year, and the objective of maintaining economic stability has not been achieved. To some extent, the present economic difficulties of the Western European countries are temporary. First, they resulted partly from replenishment and accumulation of inventories, which is not a continuing process. Second, the decrease of imports by the United States, which contributed to a reduction of the sterling area's earnings, will probably not continue much longer and now shows signs of being reversed. Third, the terms of trade of the United Kingdom and several of the other large trading countries have recently begun to improve. Finally, the speculative outflow of capital from the United Kingdom, which has contributed to a 1.5-billion-dollar drain of British gold and dollar reserves during the past 6 months, may stop and perhaps be reversed, as other temporary adverse factors disappear and as remedial measures become effective. Fundamental problems nevertheless do exist. The most important are the substantial increases in Western European defense expenditures which lie immediately ahead, the great difficulty some of these countries are having in restraining the inflationary pressures which are aggravating their balance of payments as well as their price problems, and the difficulty in expanding coal production to adequate levels. Military versus economic aid. To provide aid in a way which contributes most to attaining its purposes, it should be recognized that the distinction between "military" and "economic" aid bears no close relationship to the distinction between the military and economic objectives of aid. A rigid distinction between "military" and "economic" aid according to what the aid funds are spent on or what goods are shipped from the United States may, in fact, impede the attainment of the objectives. To the extent that aid must be spent to provide military equipment, and may not be spent on civilian goods, it limits the choice as to where particular goods may be produced, and thus may decrease efficiency in the use of total aid. The expenditure of aid funds on military goods produced in the United States may serve an economic purpose, if it relieves the receiving country of some of the need for increasing its own military production and for curtailing production for civilian use. Conversely, so-called "economic" aid, which is spent on nonmilitary goods, may serve defense purposes by making possible fuller use of the receiving country's productive capacity, or a greater diversion of its production from civilian goods and exports to military goods than would 125 otherwise occur. Whether the result of the aid is to carry out military or economic objectives depends on the policies followed by the receiving country in the use of its total resources, which should be based on advance agreement between ourselves and the receiving country as to specific goals and methods for achieving them. United States import barriers. Under the mandatory amendments in Section 104 of the Defense Production Act passed last summer, imports of certain specified commodities have been prohibited. Although potential imports of these commodities are relatively unimportant from the point of view of the United States market, they are an important potential source of dollars for many other countries. These restrictions deprive the producing countries of opportunities for more rapid progress toward selfsupport, and the precedent discourages efforts to develop American markets for other products. At the same time, they run counter to the very principles of liberalizing world trade which we have taken the leadership in pressing. The economically underdeveloped countries In contrast to the more advanced countries of Western Europe, expansion of military strength is a major problem in only a few of the economically underdeveloped countries. Our major concern in most of these countries is to help them overcome chronic poverty by supporting their economic development, which must start from low levels and, in some cases, must reverse a process of deterioration. In some of them, for example, per capita food consumption has not regained even the low prewar levels. The United States has long been interested in the material progress of the peoples of these areas, both because that progress is an end in itself, and because it is one of the most essential elements in the development of stability and democracy. In the present state of world tension, this interest has become an urgent concern. The major problems differ greatly from country to country, owing to differences in their geographical positions and political conditions, which affect their vulnerability to aggression or subversion, and to differences in their internal institutions and their basic economic potential. Our security objectives are served not only by the actual economic progress they make, which is necessarily small year by year, but also by a sense of current progress and hope for the future, which our aid, even in its early stages, can help to generate and fulfill. Although our military program, including assistance to countries sharing in the common defense, necessarily entails a heavy burden upon the productive and financial resources of our people, the United States has supported sound programs for the economic development of underdeveloped countries, and has made significant financial contributions for that purpose. 126 The net new funds made available to underdeveloped countries by the United States Government and by the International Bank, which the United States actively supports, have increased from the fiscal years 1949 to 1951, as table 18 shows. The Congress, in the Mutual Security Act, increased the economic assistance available for these countries, from appropriated funds, to 418 million dollars for the fiscal year 1952. United States assistance to underdeveloped countries in the form of grants helps bridge the gap which frequently exists between such a country's borrowing capacity and the total investment assistance consistent with carrying out our policy objectives. TABLE 18.—Net new funds made available to underdeveloped areas for economic assistance by United States Government and International Bank [Fiscal years; millions of dollars] Item 1949 Total United States grants _. __ United States credits International Bank credits _ _ _ _ _ _ _ _._ .__ 1950 1951 446 654 809 291 47 109 184 336 134 142 548 119 NOTE.—Includes underdeveloped countries in the Near East and Africa (except Turkey), Asia and the Far East, and Latin America. Also includes United States contribution to multilateral technical assistance programs and United Nations Belief and Works Agency for Palestine Refugees. Excludes Philippine War Damage Claims of 151 million, 136 million, and 87 million dollars in the fiscal years 1949, 1950, and 1951, respectively. Figures in table are net of cancellations. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce and International Bank for Reconstruction and Development. The Government has also encouraged the investment of private capital abroad, by negotiating treaties relating to double taxation and other provisions affecting foreign investments. Credits for taxes paid abroad have been liberalized, and the area of the authority to guarantee certain risks peculiar to foreign investment has been extended geographically. Provision also has been made to assist the export of capital goods needed in essential projects. In contrast to widely held expectations, actual exports of many capital goods to the underdeveloped countries have increased since acceleration of the defense program. (See appendix table B-45.) Although the economic situation in several underdeveloped countries, particularly in the Near and Middle East, became worse in 1951, many such countries increased the production of a number of primary products, which will help t'hem to finance further development, and also increased the production of a number of industrial products and of electricity, as table 19 shows. Many countries, moreover, made significant progress during the year in getting economic development plans under way. Substantial progress was made in both domestic and regional coordination of development plans by nations of Latin America and South and Southeast Asia. These nations also showed recognition of what they must do themselves, and took a realistic view of the pace at which improvement could be expected. 127 TABLE 19.—Output of selected commodities in certain underdeveloped areas Commodity and area Cement: Far East: 4 countries 2 Latin America: 9 countries Coal: Far East* 5 countries Latin America: 3 countriesCotton fabrics, woven: India * Latin America: 3 countries Electricity: Far East* 6 countries Latin America: 10 countries. Rice *: Asia: total Rubber: Far East* 8 countries Steel, crude: India Latin America: 3 countries Sugar, raw 8: Far East: 9 countries Tin (metal content) : Far East* 3 countries Bolivia Africa* 2 countries Unit 1938 19511 1950 1946 1,954 1 730 2,180 3 172 3,260 5 389 3,754 5,836 33 060 4 040 31 358 4 855 34 992 36, 804 Million metric tons do 3 940 3 670 3 300 3,720 73 Million kwh do 2 842 Thousand metric tons. do do do 53 4,655 Million metric tons 143 Thousand metric tons 893 do 985 165 do 7,367 .... do _ ..._ .do .... do _ do _. 89 26 19 92 4 398 8,025 3,852 77 5,957 11, 599 4,948 6,880 11,916 139 142 812 1,784 1,854 1,320 1,464 1,063 1,511 1,351 5,887 6,349 78 32 23 192 36 20 (4) 616 (4) 16 38 25 1 Estimates based on incomplete data. 2 Includes in 1938 and 1946 the area that now is Pakistan; excludes it in 1950 and 1951. « Crop years. Data from FAO "State of Food and Agriculture, 1951." * Not available. NOTE.—The output shown for each commodity represents the total of the region from all countries shown in the source. Source: United Nations Monthly Bulletin of Statistics, December 1951 (except as noted). Sharing of scarce commodities Besides extending financial aid to other free nations, the United States is helping to secure equitable distribution of scarce commodities, both by active participation in international arrangements and by its own domestic controls. In early 1951, the United States, the United Kingdom, and France took the lead in setting up an International Materials Conference to promote increased production and the conservation of scarce materials, and to assure equitable distribution of free world supplies. Beginning with the third quarter, this Conference recommended allocations for sulfur, tungsten, and molybdenum. The record for the third quarter indicates that United States exports of sulfur and molybdenum were approximately equal to the Conference's recommendations. In the case of tungsten, our actual imports considerably exceeded our recommended share, but the excess will be taken into account in future allocations. Beginning with the fourth quarter, allocations were also recommended for nickel, cobalt, copper, and zinc. The Conference has also arranged for emergency allocations of newsprint; a small amount of Canadian output originally scheduled for United States consumption was diverted to a number of countries faced with critical shortages. Five of the six remaining commodities covered by IMC were found to be in sufficiently ample supply to make allocations unnecessary, and in the case of wool it was not possible to reach agreement between producers and consumers. 128 CHART 34 WHOLESALE PRICES IN SELECTED COUNTRIES Wholesale prices have risen more in most foreign countries than in the United S t a t e s since June 1950, and in many a 1951 lull has ended. I N D E X , J U N E 1950 « 100 INDEX, J U N E I960 * 100 160 160 140- - 140 120 - UNITED STATES I 100 i I I I I i I I 160 140 - 120 - — 120 100 100 160 160 140 - - 140 120 - — 120 100 100 J J A S O N D J F M I960 M J J 1951 SOURCE: INTERNATIONAL MONETARY FUND, A 129 A S O N D This country has also taken unilateral action to facilitate essential exports of capital goods. In May of 1951, the Director of Defense Mobilization announced a policy of providing adequate exports of scarce supplies by priorities or by directives to producers whenever necessary, and stated the types of foreign needs which would be given positive export assistance. Since then, there has been an acceleration of priority assistance and a diversification of the methods used to help foreign countries meet their essential needs. Since shortages of raw materials and capital goods are likely to continue through 1952 and, for most commodities, for several years, our allocation devices should be maintained and in some cases extended and strengthened. The United States should continue the provision of priority assistance for exports of capital goods to friendly countries. World aspects of inflation and stabilization The period of price stability which began early in 1951 in the United States was followed by a slackening of price increases in most other countries, and stability or actual declines of prices in some. Although the situation differs greatly from country to country, there is in general a greater tendency toward inflation in most other countries than in the United States. (See appendix table B-25.) While wholesale prices in the United States rose to a post-Korean peak of 17 percent above June 1950, a rise of 30 percent or more was experienced in 10 of the European and 10 of the non-European countries for which statistics are available. Generally speaking, the abatement of pressures since the post-Korean peak in these countries has been far less than in the United States. In contrast to the United States, where wholesale prices have risen hardly at all since their April-to-September decline, wholesale prices in many other countries started to move up again after an earlier lull, or have risen almost continuously since June 1950, as chart 34 illustrates. Prices in some of the Western European countries have already risen at a pace that endangers support for necessary defense expansion. In November 1951, the wholesale price level in France, for example, was 46 percent above June 1950. The world's post-Korean price inflation is additional to a large price rise experienced from the end of the war to the Korean outbreak. The major burden of restraining inflationary pressures in other countries must rest upon these countries themselves, but the United States can do much to help. The most important contribution we can make to a solution of this serious problem, apart from the alleviating effect of our aid, is to control our own domestic inflationary pressures effectively. In the context of the world inflationary problem, it is especially important for us to refrain from action which will have an inflationary effect on prices of internationally traded commodities—those we export as well as those we import—for it is chiefly through these commodities that inflationary pressures in the United States are communicated to other countries. In the case of some of the major raw materials, we are contributing to a multi- ISO lateral solution of this problem through international allocations. The role of the Government in purchasing for the stockpile is also important. Although the effect of actual stockpiling operations in the post-Korean rise of raw material prices was much less than was widely believed, it is an important potential factor in the markets for the stockpiled commodities. When it is necessary to accelerate purchases, this should be done carefully to avoid violent alternations of heavy purchasing and complete withdrawal from the market. FINANCING THE GOVERNMENT PROGRAM Savings through budget economies Intensive efforts have been made by the Congress and the Executive Branch to effect budget economies, both inside and outside the national security program. Following the President's directive of July 21, 1950, all departments and agencies conducted a detailed review of Government programs "for the purpose of modifying them wherever practicable to lessen the demand upon services, commodities, raw materials, manpower, and facilities which are in competition with those needed for national defense." Such programs as highway assistance and Federal aids for housing and community development outside critical defense areas have been restricted to expenditure levels substantially below those authorized in the basic legislation. General flood control projects and rural electrification and telephone loan authorizations have been similarly curtailed. Regular procurement of operating supplies and equipment has been held to minimum amounts, and inventories in excess of the lowest practical working levels have been made available to the General Services Administration for appropriate disposition. Intensive efforts should continue in this direction. However, the nondefense areas do not contain the "fat" often attributed to them. Federal expenditures for all programs except national security, veterans' benefits, and interest on the national debt will be about 65 percent higher in the current fiscal year than in the fiscal year 1940. In comparison, the index of wholesale commodity prices is nearly 130 percent higher, and the consumers' price index almost 90 percent higher. Despite a rapidly expanding population and a great increase in the total product of the economy, Government programs which are directed toward servicing the general needs of the people and building up our natural resources have been held down. Tax legislation of 1950 and 1951 Three major tax bills have been enacted since the Korean outbreak. The first was initiated almost immediately after the initial involvement in Korea, with the agreement by the Administration and the Congress to convert the pending tax revision bill into a substantial revenue-raising measure. Legislative action was completed in sufficient time for higher income tax with- holding rates to become effective October 1, 1950. The second revenue measure, which was the Excess Profits Tax Act of 1950, was passed in the final week of the Eighty-first Congress, and affected approximately half of 1950 profits. The latest measure was the Revenue Act of 1951, which became law in October. This Act adopted only about half the aggregate tax increase recommended by the President in January 1951 for individual income, corporate profits, and excise taxes. In a full year of operation, the post-Korean tax measures will yield an estimated additional 15 billion dollars at 1951 income levels. This represents an increase of almost one-third in the revenue productiveness of the Federal tax system, and is certainly a notable legislative achievement in view of the high tax rates already in effect in 1950, and the short time during which these successive measures were adopted. On the other hand, they provided substantially less revenue than had been requested, and substantially less than is needed to keep pace with expenditures. The revenue legislation of 1950 and 1951 was a major part of the stabilization program, operating to bring consumer and business demand into closer balance with available supplies of goods and services. Largely as a result of the higher tax rates, the proportion of total personal income absorbed by Federal individual income taxes rose from 8 percent (seasonally adjusted) in the second quarter of 1950 to about 11 percent at the end of 1951. The proportion of total corporate profits absorbed by Federal-corporate income and profits taxes advanced from 45 percent to almost 60 percent during the same period. Nature of the financing problem ahead Partly as a consequence of the higher tax rates, and partly as a result of the inflation of prices and growth of incomes following the adoption of the expanded security program, the fiscal year which ended June 30, 1951, produced a surplus of 3.5 billion dollars in the conventional budget accounts. The surplus was more than twice this amount on a consolidated cash basis, due to the excess of cash receipts over payments in the various trust accounts. For the current fiscal year, which began July 1, 1951, budget expenditures are expected to total approximately 71 billion dollars. The increase over last year's total is virtually equal to the expansion in the major national security programs. (See chart 35.) Net budget receipts are estimated at almost 63 billion dollars. The indicated excess of expenditures over budget receipt is about 8 billion dollars. A considerable portion of this deficit can be financed by the excess of cash receipts over expenditures in the trust funds. On a consolidated cash basis, the estimated fiscal year deficit is about 4 billion dollars. As a result of the expected further increase in national security expenditures, the annual rate of total Federal expenditures will rise to between 85 and 90 billion dollars by June 30, 1953. For the fiscal year 1953, under existing revenue legislation, a budget deficit approaching twice the size of the 132 CHART 35 FEDERAL BUDGET EXPENDITURES The expansion of expenditures for the major security programs has approximated the increase in total budget expenditures since 1950. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 40 40 '' 30 _ TOTAL BUDGET EXPENDITURES 30 N 20 20 •< M AJ 0 * SEC I R I T Y PROGRAM 5 10 10 . OT HE R 1 PROGRAMS! 1 0 n • PERCENT PERCENT 80 80 MAJOR SECURITY EXPENDITURES AS PERCENT OF TOTAL BUDGET EXPENDITURES 60 // - *^ 40 mmm s* 60 ' ^ _ 1 2 nd HALF 1st HALF I960 I 1st HALF *X 2nd HALF 1951 CALENDAR YEARS J/ ESTIMATES BASED ON ANTICIPATED BUDGET EXPENDITURES. SOURCES . TREASURY DEPARTMENT AND BUREAU OF THE BUDGET. 133 40 1st HALF 1952^ current year's budget deficit is indicated. To pay for the projected volume of expenditures without reliance upon new borrowing from the public would thus require large additional revenue legislation, and a heavier total tax load than has ever before been imposed in the United States. A large element of uncertainty exists regarding the future development of expenditures under the defense program. Our present planning is based on a program which would build up strength to the required level, and continue the maintenance and modernization of our defensive equipment at that level. This may require expenditures in the fiscal year 1954 at least as high as those proposed for fiscal 1953. Thereafter, it is anticipated that expenditures will gradually decline to a substantially lower "maintenance" level. Throughout the defense period, the Council has emphasized that it is sound economic and fiscal policy to pay for the national security program through taxation. But in view of the decision of the Congress in 1951 not to take all of the tax action requested of it by the President, it is virtually impossible through tax increases to prevent substantial deficits in the calendar year 1952, and in the fiscal year 1953. Thus, the action of last year in effect constituted an abandonment of the pay-as-we-go policy, at least for the time being. Lost ground cannot be made up overnight. Consequently, we must now look ahead to the fiscal year 1954 and following years, as well as to 1953, in considering appropriate tax legislation for the calendar year 1952. A considerable time span usually is required to accomplish necessary changes in the tax structure and to collect the taxes under them. Consideration must be given to the effect of the tax bite upon consumers and small and large business enterprises, and upon general popular support. The speed of tax increases must allow for these factors, without relinquishing the objective of restoring a balanced budget as rapidly as ^feasible. Each year the question of legislation must be reappraised with a view to determining what specific course of action, in the light of current and prospective conditions, would be most nearly in accord with the longerrun basic policy position. The chief tax policy questions which must be answered are whether additional taxes should be adopted in 1952 and, if so, whether the amount should be sufficiently large to achieve a balanced budget in the fiscal years 1953 and 1954. The Council continues to attach great importance to the principle of the balanced budget during periods of heavy expenditure and inflationary pressure such as characterize defense mobilization. The Council does not believe, however, that the principle of paying the cost of defense expenditures out of taxes during the mobilization period requires that sufficient taxes be proposed or adopted to balance the budget in the peak years 1953 and 1954. We believe that it is not imperative to do so, in view of the longerrun budget outlook, and that it would be unwise to attempt to do so, in view of the size and speed of the tax increases that would now be required— a result in part of the inadequacy of tax legislation last year. Considering all factors involved, the Council recommends that the immediate tax legislation be the completion of the program proposed by the President a year ago, including such technical changes as would improve the equitableness and yield of the Federal revenue system. The yield of the Revenue Act of 1951 is estimated at 5.4 billion dollars, at calendar year 1951 levels of income, or only about half the amount specifically proposed by the President. In the case of the individual income and corporate taxes, the increases approximated two-thirds of the amount proposed. A considerably smaller proportion of the amount proposed for excises was enacted. There are, furthermore, various revenue-losing features in the Act. As stated by the President on signing the bill, "this legislation does little to close the loopholes in present tax laws, and in some respects provides additional means by which wealthy individuals can escape paying their proper share of the national tax load through such devices as excessively liberal 'capital gains' provisions, family partnerships, and excessive depletion allowances on oil and gas and certain mineral properties." Misconception arises when there is a failure to distinguish between the real economic burden of the program, which is measured by the diversion of resources and supplies from civilian uses, and the financial burden of the program as indicated by the level of taxes. The method of financing the security program does not necessarily decrease or increase the real economic burden, and consequently does not directly determine the size of the program that can be afforded. At any particular time, however, there are limits beyond which it would be unwise to raise the rates of a specific tax or of taxes in general. The limit beyond which tax increases become harmful cannot be determined by any figure or ratio which would be applicable to all situations. The limit depends not only on the ratio of taxes to incomes at any one period of time, but also on how rapidly taxes have been increasing in the recent past. It depends also on whether incomes in general are rising, are remaining the same, or are declining. Finally, it depends to no small extent on the recognition by the taxpayer that the money is needed for imperative national purposes, and that the burden is being distributed in a fair manner. The Council recognizes that tax rates have risen rapidly during a short period of time, and are so high that their effect on incentives must be carefully watched. Nevertheless, we do not believe that the economic limit of taxation has been reached. As we indicated at midyear 1951, we feel that the tax objectives stated by the President earlier in the year are well within the ability of the taxpayer and the economy to support. The alternative to relying upon the conventional tax sources for the additional revenue requirements would be to introduce a new, broad-base tax. One new type of taxation, which could raise substantial amounts of revenue, is a general sales tax. Whether imposed in frank manner upon 135 retail sales or disguised as a general manufacturers' excise tax, resort to it would be a portentous departure from national tax policy which should not be considered at this time. Provided the national security programs follow the pattern now indicated, rate increases in existing tax sources and the proposed improvement in the tax structure would be adequate at high levels of employment to yield a surplus in budgets designed to support the ordinary Government functions, plus the cost of the expanded military establishment when it reaches maintenance levels. With the additional revenue which might be obtained from carrying through the above suggestions, the margin of excess of budget expenditures over receipts would be reduced to about 10 billion dollars a year during the period of 1 to 2 years when budget expenditures will be at the peak level now contemplated. A considerable portion of this deficit, however, would not result in an addition to the debt held by the public, but would be absorbed by the excess of some 4 to 5 billion dollars of cash receipts over disbursements in a number of trust accounts. The effect of a Government deficit on inflationary pressures is dependent in large degree on the extent to which spending is restrained by methods other than taxation. Indirect and direct controls help to limit the rise of incomes. By giving some assurance of price stability, these controls also increase the willingness of consumers to hold their spending to levels of current need. The tendency of business and consumers not to spend is strengthened also by cutting down the availability of consumers' and producers' durable goods, through direct controls imposed on the use of scarce materials and on the operating rates of industries that consume such materials. In these various ways, spending may be restrained, savings increased, and sources of funds developed as outlets for the Government securities which are issued to finance the deficit. Under conditions expected to prevail over the next year or two, when consumer and business spending will be restrained by various controls, the situation should be favorable for minimizing the inflationary impact of deficits of moderate size and duration. State and local government fiscal policies The present defense economy finds State and local governments with important responsibilities, not only for direct participation in defense activities but also for supporting the Federal programs and policies made necessary by the defense effort. These governments, for instance, have primary responsibility for civil defense and the many financial and operational problems which it entails. They must also provide special services, or expand their normal governmental services, in areas where there is a large population influx because of defense activities. The Federal Government, under the terms of existing or proposed legislation, will help to relieve the more serious instances of defense-imposed burdens. 136 It is of equal importance that State and local finances be conducted in such a manner that positive support will be given national policies and objectives. In the interest of reducing inflationary pressures, any surpluses should, be used to retire debt, or build up reserves to ease future financial problems. Continued restraint in borrowing is, of course, essential. In connection with the Voluntary Credit Restraint Program, in which the State and local governments are cooperating, criteria have been developed for appraising the essentiality of State and local bond issues. Cooperation along these general lines was of great value during World War II. There are many indications that State and local officials are no less aware of their responsibilities today. MAINTAINING ECONOMIC STABILITY Outlook for inflationary pressures The relative price stability during the last 9 months of 1951 reflected three conditions: first, a series of direct and indirect controls which limited prices, wages, credit, and the expansion of incomes; second, a voluntary disposition on the part of consumers to buy more cautiously and to save more; and third, a reduction in inventory buying by business and inventory liquidation in some lines of civilian goods. These three conditions interacted upon one another. The controls would not have been as effective in holding the price line, in the face of rising incomes, without the trend toward increased voluntary saving; the increased saving would probably not have been so pronounced if the imposition of controls had not put a brake upon the inflationary spiral which succeeded the Chinese intervention and which induced speculative buying; and the controls would not have been so effective, nor consumer and business buying so cautious, if it had not been for the large inventories accumulated in the previous period. The impact of rising security expenditures on economic stability in 1952 turns upon these three interacting conditions. Within this year, national security expenditures are again scheduled to rise by an annual rate of about 20 billion dollars. More people will be drawn into the labor force, some will shift to higher paying defense jobs, and some will work longer hours at premium pay. In addition, some wage adjustments will occur. While increased taxes can take a large bite out of these increases in income, a substantial proportion—perhaps two-thirds— will be added to spendable funds. If the increase in total output during the year is at the rate of at least 5 percent, it is estimated that disposable income within the year would rise by about 15 billion dollars. The first issue to be considered is how much of this additional income will be saved and how much spent. If the recent high rate of consumer saving should continue, the amount of additional buying would only moderately exceed the amount of additional civilian supplies that can be made available without hurting defense production. But if consumers or business should 137 again intensify their buying, and if the rate of saving should decline and the use of credit expand, serious inflationary pressures would result. The shift in the saving rate, from an average of 5 percent or less to around 10 percent during the last three quarters of 1951, reflected some temporary factors. These included a reaction to previous buying sprees, to higher prices, and to credit tightening. But it is not unlikely that many American families, who during World War II had their first opportunity to build up some reserves, have become more "saving conscious." Having satisfied urgent demands for many consumer durables by 1951, they may now be ready to replenish their liquid asset reserves, and to attain a higher level of family and personal security. As shown in chart 36, the increase in the volume of cash, deposits, and Government bonds has been less than the rise CHART 36 CHANGES IN PERSONAL ASSETS AND PRICES individual holdings of liquid assets have increased substantially since the end of World War II but their purchasing power has decreased because of the large rise in consumers' prices.. I N D E X , END OF 1945 = 100 160 J N D E X , E N D OF 1 9 4 5 « 1 0 0 160 END OF YEAR 150 - vx-i O PRIVATE INSURANCE EQUITIES 140 / 150 — CONSUMERS' PRICES / ..« 140 130 130 120 120 110 110 100 100 1946 1947 1948 1949 1950 J/ INCLUDES CURRENCY AND DEPOSITS, SAVINGS AND LOAN SHARES, AND U.S. GOVERNMENT SECURITIES OTHER THAN TERMINAL LEAVE BONDS. _2/ PRELIMINARY ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS. , SOURCE: SECURITIES AND EXCHANGE COMMISSION (EXCEPT AS NOTED). 138 in prices since the end of World War II, while the private insurance equities have little more than kept pace with prices. Further, the increase in personal debt has been greater than the increase in financial assets, such as bonds, stocks, and deposits, during the past several years. A reversal of this trend at some time was inevitable, and it came last year with a significant increase in more liquid forms of savings and a less rapid rise in debt. Nevertheless, while there are grounds for anticipating a continued high saving rate, it would be unwarranted to base economic policy on the expectancy that so high a rate as the recent rate or an even higher rate can be maintained. Even with the continuance and further improvement of the anti-inflationary measures which affected income and saving last year, and with shortages of major durables, there may be some tendency on the part of consumers to revert to a more normal rate of buying. Also, business buying may become more active as a lower ratio of inventories to sales is established. Consumers and businesses are going to have ample funds for a rapid increase in buying. The rate of business investment in plant and equipment is also an important factor bearing on the outlook for inflationary pressures. Such investment was carried on at an unprecedentedly high rate during 1951, and the plans of businessmen indicate further expansion, at least in the early part of 1952. It seems probable that the major factor limiting the size of business investment will not be the desire of business concerns to expand, but the availability of scarce materials and machine tools. Material shortages may force business investment in plant and equipment to contract somewhat by the latter part of 1952. Commercial and residential construction also is being reduced. The outlook now is that there will be some increase in inflationary pressures, but that it may be held to a moderate magnitude, even with rapidly rising defense spending, if the brakes upon inflation which were applied in 1951 are not relaxed. But any relaxation would increase the possibility of another inflationary upsurge, which could be even more serious than that of mid-1950 or of a year ago because it would start from tighter conditions of supply in many sectors of the economy. The reasonable success during 1951 in maintaining stability cannot be attributed to any one cause. Tax increases, credit measures, price and wage controls, and the various allocation policies interacted upon one another. Each link in the chain was essential. An outstanding feature of 1951 was that stability was maintained despite the shift during the course of the year from a Government surplus to a large deficit. This does not mean that the inflationary pressures would not have been much greater if the deficit had not been reduced by the large taxi increases which took effect. But it does mean that, in addition to the tax measures discussed in the preceding section, a variety of other measures must be relied upon to continue their contribution toward over-all stability. 977891—52 10 139 Relationship among stabilization measures However inflation may be defined, there is no dissent from the view that the ultimate consequence which gives concern is the increase in prices, and especially the increase in prices paid by consumers. Economic policy to forestall price increases must include, first of all, measures to restrain forces which cause higher prices. These measures, which include tax and general credit measures, are sometimes referred to as dealing with the fundamental causes of inflation rather than its symptoms. But as a practical matter, the economic situation at times does not permit pushing such measures far enough to do the whole job alone. In fact, if such measures are pushed too far, they may operate to frustrate their purpose. Tax policy and general credit policy, as measures to stabilize prices, illustrate this. Each is aimed at limiting some of the causes of price increases, rather than at holding the line on prices when other conditions are pushing the market upward. But each has some partially offsetting effect in adding to the upward pressure. Higher taxes reduce the buying power of consumers and business. In this way they are deflationary. But they also may heighten the demand for higher wages and for larger gross business profits, which is an inflationary aspect. General credit policy, as distinguished from selective credit controls, is designed to dampen business investment generally, and thereby to stabilize prices. But the increase in interest rates, which is either the principal tool of general credit policy or is its normal consequence, is an increase in the cost of capital, and this involves an increase in costs of production and may tend to press prices upward. Moreover, both tax and credit measures, if pushed too far, may so impede production as to be self-defeating. Consequently, in the current situation, it is necessary to turn also to controls which will directly prevent the inflationary forces from producing their normal effect upon market prices. It is incorrect to say that these controls treat only the symptoms, and not the fundamental causes, of inflation. In practical effect, they restrain the growth of inflationary forces, besides helping to hold the price line against such forces. It is seriously misleading to think in terms of two distinct categories, one of policies which will restrain forces leading to price increases, and the other of policies which will hold down price increases despite the upward trend of the market. Wage control is a good example of a policy which combines these objectives. Wage advances mean higher costs of production, and higher costs of production are a powerful force in raising prices. Wage increases also expand consumer buying power, which is equally potent in its effect upon market prices. But wage control, while directed to restraining these forces which directly influence prices, is also designed to break an inflationary spiral already under way, by holding the line on wages which would normally rise in response to conditions of a tight labor market and a rising cost of living. 140 Price control policy, although usually thought of as a measure to prevent price increases which would otherwise be caused by other forces, also has the purpose of restraining the inflationary spiral itself. The interaction of prices is obvious. A rise in one price affects many others, and the stabilization of any one price limits some of the force which is pressing upward the price of other goods. Price control also has the purpose of limiting the increase in incomes,, which is the normal result of advancing price levels. Credit policy During the first quarter of 1951, several measures to limit the inflationary expansion of private credit were added to those which had been undertaken in the second half of 1950. These included increases in the reserves required of member banks; further steps to check the transfer of Government securities to Federal Reserve banks, and thus to curtail a large source of new lending power for banks and other financial institutions; the inauguration of the Voluntary Credit Restraint Program; and the tightening of selective credit controls requirements. During the last 9 months of the year, no new measures were initiated to tighten credit. In fact, as a result of congressional action, down payments were decreased and maximum maturity periods lengthened in connection with loans for consumer durables and for housing. In addition, beginning at the end of September, the Federal Reserve System added about 900 million dollars to its holdings of Government obligations, to relieve an acute tightness of credit while the Treasury was engaged in a considerable volume of new financing and refinancing. During October and November, the Federal Reserve reduced its portfolio of Government securities to about the level which it held early in September. It seems reasonable to conclude that credit policies, both of a general and selective character, contributed to the relative stability of the last 9 months. However, credit policy should now be adjusted to differences between the situation in 1951 and that likely for the period ahead. Private credit expansion is likely to become a less important inflationary factor, and the rising gap between money income and civilian goods a more important one. Business demand for loans to finance construction and inventory accumulation will probably be more greatly curbed by the allocation of materials than earlier in the defense period. It would be unwise, however, to rely unduly on this development and to relax present credit restraints. Credit for some nonbusiness purposes, such as instalment and mortgage credit on houses, may expand to compound the problem presented by rising incomes. The supply of private funds for mortgage loans may also increase, as financing institutions which invest heavily in mortgages accumulate funds from higher personal saving and from repayments of existing loans. In this situation, there may have to be greater reliance on selective credit controls. In addition, the situation with regard to Treasury financing will change. The deficit in the fiscal year 1953 will be substantial. It will be sound policy 141 for the Treasury to borrow new funds insofar as possible from nonbank sources, to minimize the inflationary potential of the deficit. Greater limitations on the opportunities to make private loans because of allocations of materials, restraints on the demand for credit, and high levels of personal liquid saving may help to provide investors with funds for investment in Government securities, to a considerable extent in long-term issues. It will be an important goal of economic policy to develop and maintain market conditions favorable to the flotation of the largest feasible quantity of longterm obligations. Concern for debt management objectives does not require that general credit policy be withdrawn from the struggle against inflation. The tactics that are used to curtail the supply of lendable funds may merely have to be modified to suit new situations; for example, the instrument of reserve requirements may have to be relied upon more heavily than in the past. In order that credit policy may function more effectively during the next phase of mobilization, the Council recommends that there should be restored to administrative authority a more flexible discretion in the formulation of selective credit regulations. It is also suggested that the Board of Governors of the Federal Reserve System be given additional authority over reserve requirements. In the opinion of the Council, higher rese'rve requirements may be a suitable means of curbing bank lending in certain specific situations. Increased reserve requirements can be used to offset bank lending power arising from Federal Reserve purchases of Government securities or from gold imports. One plan for increased authority over reserve requirements, which has been previously recommended by the Council, would permit certain Government securities to be carried as reserves. If banks were permitted to carry Government obligations in reserves, there would be some inducement to hold these securities rather than to offer them on the market, with the possible consequence of the creation of new lending power through Federal Reserve bank purchases. Separate note by Mr. Clark upon monetary and credit policy No economic theory relating to the stabilization of the economy is more important than that of general monetary policy, which many believe can of itself accomplish the stabilization purposes of the Employment Act of 1946, but the usefulness whereof in a strong inflationary movement has been challenged in former reports of the Council of Economic Advisers. Early in 1950, the Douglas committee regretfully commented that "Our monetary history gives little indication as to how effectively we can expect appropriate and vigorous monetary policies to promote stability, for we have never really tried them." This is not quite accurate. Monetary policy was used vigorously in 1920, and the resulting "stabilization" was a disaster the farmers have not yet forgotten. It was used again in 1928-29, and of that episode the British expert, Hawtrey, has said, "The dear money policy ac- 142 complished its purpose in the end. It stopped speculation by stopping prosperity." We are now able to study efforts to establish the stabilization value of monetary policy in our greater economy in which the institution of banking has been revolutionized by a great national debt which has multiplied the liquid assets in bank portfolios. The Council of Economic Advisers, which, unlike other Government agencies, has the responsibility of considering all national economic policies and their effect upon each other, must give attention to the collateral consequences when it studies our recent experience. In the light of the problems of a defense program which must be integrated, the following anomalies created by monetary policy stand out. It has enabled the banks to increase their earnings more than enough to match the heavy increase in their taxes in 1951. Nearly every other business and industry found net profits reduced as result of Government policies under the defense program. An increase of one-third in the basic commercial interest rate of larger banks, leading to general increases in other bank interest rates, was hailed as a valuable contribution to economic stability. All other business men are criticized when they exploit a situation by raising their prices by a much smaller percentage. When restraint must be imposed elsewhere upon the freedom of decision, the Nation imposes positive control, as in forcing young men into military service, in limiting the production of General Motors, and in fixing prices. To limit the expanding activity of banks, we are offering them larger profits upon the existing level of loans. The cost of new private capital has been increased and an effort has been made to tighten credit for industry. Vital defense-related industries must expand and the Government will have to finance their expansion to the extent that private capital is inadequate. The Government is spending large sums to assemble and distribute business information in order that businessmen may reduce to the minimum their uncertainties about the trend of the economy and may plan more confidently. Monetary policy is being based upon the principle that the financial world must be kept in great uncertainty about future interest rates and the availability of credit. There is general agreement that every effort should be made to place the Government debt in long-term bonds in nonbank Tiands. The Treasury now finds no market for long-terms and its heavy financing has to be in the form of short-term securities eligible for bank portfolios. When the size of Government expenditures is giving us deep concern, the interest charge on the Government debt is increasing. If these miscarriages were the unavoidable results of a monetary policy which is a successful instrument to stabilize the economy, they might be accepted. I do not believe that monetary policy can be successfully used 143 for that purpose in the kind of economy and institutions which we now have. In recent action, that policy has had utterly perverse consequences. The advance in short-term interest rates in August 1950 was followed by the greatest expansion of business loans in our history. The increase in long-term rates in March 1951, coming after the price freeze in January had taken the steam out of boiling markets and when a seasonal contraction of business borrowing was due, had no effect upon new business investment. The more rigorous the use of monetary policy, the more rapid was the increase in new investment in plant and equipment, the very channel through which monetary policy, if effective, operates on its way to the final objective of dampening inflationary forces. And to complete the topsy-turvy picture, the more rapid the growth in money supply, creating "more dollars chasing goods," the quieter became the consumers' markets. (Conclusion of separate note by Mr. Clark.) Price control In the first stages of price control policy after the general freeze in January 1951, which all recognized could be only temporary, it was necessary to concentrate upon a large variety of broad-gauged "interim" adjustments to remedy inequities and to bring the price structure into balance. This was because the great upward movement of prices before the freeze had not been uniform, and had resulted in many advance runners and many laggards. But this process was only to be the prelude to more enduring, more enforceable "tailored" regulations, i. e., regulations geared to the problems of individual industries and commodities. This work was delayed considerably and complicated by the amendments to the Defense Production Act. The amendments weakened the powers of price control by preventing certain necessary actions and by requiring a number of adjustments, all of which could only have the effect of raising ceiling prices. After the adjustments required under the law had been carried out, the Office of Price Stabilization was able to push ahead in the autumn with tailored regulations, hinged upon adjustments necessary to develop a sound and reasonable price structure. The general policy now should be to hold the price line, while work proceeds vigorously with the issuance of tailored regulations. However, since the new amendments seriously interfere with the effective carrying out of this policy, these amendments should be reviewed and the obstacles to sound price control eliminated. In addition, the furtherance of this policy involves the following tasks. Narrowing the gap between ceiling and market prices. After the general freeze halted the runaway spiral in prices, price controls and the lull in many markets resulted in sharp drops in the prices of cotton, wool, fats and oils, hides, and other commodities. When prices fall below ceilings, there are three alternatives: (1) exempt commodities on a stand-by basis; (2) con- 144 tinue current ceiling prices; or (3) make the ceilings more realistic by lowering them toward the market levels. In general, it is in the most volatile markets that a substantial gap exists between ceiling and market prices. At the time of the general freeze, these commodities had advanced excessively, spurred on by a high degree of speculation. To maintain these ceiling prices would be to permit the return of excessively high prices if speculative markets develop. Under these circumstances, and because dangers of general inflation are still present, it would appear desirable to bring ceilings down to levels much closer to existing market prices, insofar as this is feasible while keeping ceiling prices "generally fair and equitable" as required by law. An effective barrier to any major advance in these wholesale areas would prevent undue pressure against retail prices, when markets now weak begin to firm up again. OPS has already taken action of this sort in the cases of glycerin, hides, wool, tallow, soap, detergents, and carpets. Further action is under study with respect to other commodities. Stabilization of .consumers3 prices. This is the most difficult task confronting the OPS. These prices directly affect the public, and are closely connected with the effectiveness of wage stabilization. While part of the recent rise in the consumers' price index reflects seasonal factors, a major part results from the lack of adequate control over many items making up the cost of living. Of the items entering into the consumers' price index, about 17 percent are exempt from price controls by law. These are primarily services. In the case of rents, representing another 11 percent, only partial controls exist. Only slightly over one-half of the items in the consumers' price index are completely under the control of the OPS. With respect to food prices, the program for controlling beef prices has been weakened by the abolition of slaughtering quotas. Progress has been made in developing dollars-and-cents ceilings for a number of food items. Thus, in addition to the beef ceilings, there are dollars-and-cents wholesale ceilings for pork products, lamb, and veal. In the further development of simple, enforceable regulations, the OPS is now experimenting in three cities with community dollars-and-cents ceilings covering a wide variety of grocery items. However, under existing legislation, action to stabilize retail food prices cannot be completely successful. Development of pricing standards. With the completion of the "interim" pricing program, the need for standards to guide price control operations becomes more acute. The kind of standards chosen determines the degree to which price control permits escalation of cost increases or requires absorption. The main formula used to straighten out the distortions and inequities caused by the general freeze was pre-Korea prices plus specified cost increases up to specified cut-off dates. For the future, to use a cost-plus standard would mean continuous escalation of higher costs, and permit a constantly rising price level. 145 In April, the Director of Economic Stabilization took the first major step toward the development of permanent standards. He directed the OPS, once the "interim" program was completed, to grant general price increases to any industry only if its current earnings before taxes fell below 85 percent of its return on net worth in the 3 best years of the period 1946-49. The purpose of this directive was to prevent unnecessary price increases by requiring a reasonable amount of cost absorption and, at the same time, to assure industry of an adequate earnings base. If an increase became necessary under this standard, it was not to exceed the amount necessary to assure this minimum rate of earnings. As this standard applies only when industries seek price relief, two factors have reduced the need for its application. First, the generally high level of profits finds most industries earning well above the standard. Second, the "interim" program provided adjustments for industries which might otherwise have sought relief under this standard. However, a few industries have applied for price relief and their cases are being considered under this standard. The outcome of the current steel case will be a major factor in determining the future of effective price control. It cannot be stated too strongly that, while effective price control depends upon effective wage stabilization, it also depends upon cost absorption where feasible, instead of automatic escalation of cost increases into price increases. The problem of standards is not confined to this issue alone. There has already been issued a relief standard to provide protection for exceptionally high-cost sellers. There is need for the development of a product standard to govern cases where relief may be in order for an individual product of an industry, contrasted with all its products. Considerable preliminary work has been done in developing this standard. Price control must also be concerned with preventing price ceilings from becoming an impediment to production in areas vital to defense or essential civilian production. In such situations, what is needed is a coordination of production and price controls. Frequently, the problem is not one of price, but of materials, or manpower, or proper use of production controls. But in some cases, price is also a consideration. Price adjustments to encourage production have already been made in the cases of machine tools and lead and zinc. Price control over the longer run. A firm price policy does not mean that price control should continue indefinitely in every sector of the economy and for every item. If the international situation does not worsen, a rising production trend should make it feasible at a later date to reduce substantially and progressively the area of coverage of price control. The Council has never been impressed with the argument, which seems to prove too much, that no prices can be controlled unless all prices are controlled. After we get over the production hump, for the long period ahead we must be 146 prepared and ready to use selective price controls geared to strategic areas. In that situation, we should rely for general stabilization upon other antiinflation weapons. Except in an emergency period, such as the present, the benefits of general price controls are outweighed by their drawbacks. Wage stabilization Wage policy is even more difficult than price policy, because it involves the very livelihood of millions of families, who have come to regard periodic wage increases as an index of their progress in an economic society which they believe to be strong enough to grant them that progress. Nonetheless, price stabilization cannot be maintained without wage stabilization. The sound public appreciation that prices and wages must both be stabilized if either is to be stabilized has been blurred by the incorrect impression that prices and wages are exactly alike and should be treated exactly the same. Thus, it is sometimes said that any wage increase must necessitate a price increase; and that where the price line is held absolutely, the wage line must be held absolutely. This is a superficial view. Under conditions of expanding markets and rising productivity, which has been the long-range trend in the American economy, a constant relationship between prices and wages would cause business profits to rise out of line with wage incomes, and would not provide consumer purchasing power sufficient to support expanding markets. In a normal peacetime economy, wages should rise relative to prices—by lower prices or higher money wages—when the general productivity of the economy enlarges. This is fully recognized by business. This principle, however, is not entirely pertinent to a defense emergency, when a large part of the expanding output is absorbed by the defense program, and is consequently not available for purchase by consumers. If wage incomes rise as fast or faster than the total of expanding output, while a large and growing part of this output is bought by the Government, there will clearly be an inflationary redundancy of consumer buying power, unless compensated for by sufficiently higher taxation and a higher rate of saving. Yet entirely to deny productivity increases to wage earners would involve the greater difficulty of a growing disparity between wages and other forms of income, which are likely in the long run to reflect the productivity and production trends of the economy as a whole—and in the long run to move generally upward in a defense period. In addition, the flat denial of productivity increases would remove an important or potentially valuable incentive factor. Consequently, the Council has maintained the position since the commencement of the defense emergency that productivity allowances should be included within the framework of a well-rounded wage stabilization program. However, we have urged that these increases should be held to the likely productivity increases for the economy as a whole—that is, in the neighborhood of 2 to 3 percent—instead of being allowed to reflect in 147 particular cases a higher rate of productivity increase in particular industries. For the latter course would tend to create a pattern of wage increases under wage stabilization which would necessitate price increases, except among those industries or firms where the actual rate of productivity increase is highest. Since even the moderate policy of productivity increases here portrayed would tend to augment the income stream more rapidly than the increase in civilian supplies, such a policy should be accompanied by certain safeguards. One of these safeguards might be that consideration be given to regard these productivity increases as incentive payments, and to tie them in with efforts on the part both of employers and workers to maximize actual productivity increases. Another safeguard would result if, in accord with suggestions which the Council has made before, more systematized efforts were made to divert necessary wage increases into forms of saving rather than into immediate payments for immediate spending purposes. This we believe to be one of the most neglected areas in the program thus far. For practical reasons, the Council has favored cost-of-living adjustments. These can be consistent with the stabilization program if sufficient efforts are made to hold the price line. The difficult necessity of a sufficiently flexible wage program to maintain equity, incentives, and industrial peace points up the urgency of a sufficiently strong tax, credit, and voluntary savings program to curtail excessive spending. The Council views with approval the very substantial progress already made by the Wage Stabilization Board toward firming up elements in its wage stabilization program, and urges speed in the work now under way to close the remaining gaps in wage policy. We have repeatedly stressed that wage stabilization requires a fairly stable and established wage policy, enunciated generally and adhered to firmly. General policies must of course be administered, and in applying them to particular cases the Board must properly be concerned with avoiding hardship and inequities. Yet we have never believed that a purely pragmatic adjustment of the wage policy to suit the exigencies of each hard case as it arises could result in effective wage stabilization. A bad wage policy is not better than no wage policy; but a moderately good and firm wage policy is better in the long run than a highly uncertain wage policy would be even if the latter achieved more perfect results in a few specific cases. This is certainly true from the viewpoint of general public understanding and support, an overwhelmingly important consideration under current conditions. The problem of longer-range stability Increasing interest is being manifested in the outlook for the economy, if and when international difficulties subside and the defense program is correspondingly reduced. Even when the defense program levels off at a relatively constant figure, the great build-up now under way in productive 148 facilities will leave us year by year with increasing resources seeking nondefense utilization. While the urgency of dealing with our immediate defense problems is so great as to demand concentrated attention, it would be a lack of foresight not to give serious thought and study to more distant problems also. In some respects, immediate policies can take account of these more distant problems without sacrificing immediate objectives. In any event, concern about the more distant future, implanted in the minds of the producing community, has an important bearing upon the vigor of their commitment toward the defense effort itself. It is therefore desirable to discuss certain aspects of this issue now. In the first place, it should be recognized that we are likely to be confronted with a new set of problems before the defense period is over. For example, unless the international situation worsens, there should be within a year or two an ample supply of steel and some other materials now in short supply. This will permit the modification of some of the materials controls. But at that time, with purchasing power so ample and a new backlog of demand for durables built up, there may well develop a new phase of inflationary pressures from private and public spending which will require some containment. This is one of the reasons why there should be continuously available an ample and flexible assortment of economic tools to be adjusted quickly to changing situations. Particularly, as we look forward to the progressive relaxation of the direct controls, the tax structure and credit devices should be brought to a better state of readiness for dealing with new conditions. As restrictions upon materials are released, some credit controls may be more needed a year hence than they are now. We should also be prepared for another contingency. If at the time defense spending declines, business investment and consumer spending were also to decline, the result would be a period of slackness, which although perhaps temporary, might require changes in policies regarding taxation, controls, and long-range public programs. While it is now desirable to be better prepared to meet changing economic problems both within and beyond the defense period, the precise unfolding of economic events cannot be forecast with enough precision to justify now the making of those blueprints for which some are calling. Instead, we may draw assurance from the knowledge that the general techniques to be used when conditions change are fairly well-known and accepted. There is always a need for continuing and intense study of the specific ways in which private and public policies can be Applied to cope with changing economic conditions. Another point of interest is the convex n of some parts of the business community that those programs of rapid expansion, which are now needed to support the defense effort, will result in considerable excess capacity when the defense effort levels off on a maintenance basis. Those voicing this concern should be mindful that, if we should falter in the current effort, 149 we could lose all. Adjustments, of course, will have to be made. We cannot expect all economic activities to continue at all times on an equally high level. However, recent experience illustrates the capacity of our economic system for flexible adjustment to a decline in defense outlays. Although World War II was unfortunately succeeded by the cold war, the annual level of public outlays was reduced by more than 60 billion dollars between 1944 and 1947, and sustained at this lower level until well into 1950. With only minor faltering, these years evidenced new high levels of peacetime production and employment. A rising standard of living absorbed quite fully our expanded productive facilities in factory and field. It is sometimes said that this new postwar experience of avoiding major dislocation for so long a time was due to the great backlog of demand built up during World War II. Undoubtedly, this was an important factor. But much of the rise in the standard of living, contrasted with the years before the war, was, for instance, in many services, where obviously there was no such thing as a backlog. And it is highly probable, although insufficient economic analysis has been devoted to this problem, that the high demand for durables from 1946 until now has been due not mainly to backlogs, but rather to the fact that people always have a wide range of unfilled desires—if not pressing needs—which they will try to satisfy as soon as the incomes and productive capacity of the Nation rise sufficiently. In addition, a variety of Government programs and private action, as well have contributed greater stability to incomes, so that it may be easier to maintain relatively full employment. The current defense effort will be building up new backlogs for housing, for other durables, and for some types of industrial expansion, which are now being deferred to make way for the expansion of the industrial mobilization base. There is no reason to accept the gloomy hypothesis that we would do a worse job of adjustment when defense spending declines than we did after World War II, particularly since the reduction of defense outlays in the future would be far smaller in proportion to the Nation's economy than the reductions which took place between 1944 and 1947. This generally favorable outlook does not mean that long-range problems are being ignored. As a matter of fact, the current defense build-up represents a blending of factors which include consideration of the longerrange future. The size of the military program itself represents some calculated risks, which weigh the desirability of maximum military strength against the desirability of avoiding excessive dislocations in the general economy. None of the basic expansion programs has gone beyond the capacity of a reasonably full employment economy to absorb output a few years hence, even in the event of a much reduced defense program. This consideration, as well as current shortages of materials, has entered into the determination of how large these expansion programs should be. 150 One further point should be added. The better the current job is done, the more assurance the economic community will have about the future. Insofar as industrial dislocation is held to a minimum under the current program, industry and labor will share the confidence that greater dislocations can be avoided in later years by the same application of prudent, consistent, and timely policies as the need arises. 151 Appendix A Statistical Tables Relating to the Nation's Economic Budget CONTENTS A-l. A-2. A-3. A-4. A—5. The Nation's Economic Budget, calendar years 1950 and 1951 Consumer account, calendar years 1950 and 1951 Business account, calendar years 1950 and 1951 International account, calendar years 1950 and 1951 Government account (Federal, State, and local), calendar years 1950 and 1951. . A-6. Federal cash receipts from the public other than borrowing, calendar years 1950 and 1951 A-7. Federal cash payments to the public by function, calendar years 1950 and 1951 A-8. Federal cash payments to the public by type of recipient and transaction, calendar years 1950 and 1951 153 Page 157 158 158 159 160 161 161 162 The Nation's Economic Budget The Nation's Economic Budget provides a comprehensive view of national economic activity by major economic groups: consumers, business, government, and "international." The receipts and expenditures of these groups and the net addition to or absorption of saving for the calendar year 1950 and the first and second halves of 1951 are shown in table A-l. Column 1 indicates the major flow of receipts or income. Receipts are divided into two categories: income from current production and receipts of transfers and interest. The total of incomes from current production (shown in roman type and adjusted for the statistical discrepancy between total receipts and expenditures) equals current output, or the gross national product. Expenditures for current output and government transfer payments are shown in column 2. The gross national product comprises only the expenditures for current output. Government expenditures for goods and services (i. e., expenditures for current output) plus government transfer payments equal government cash payments. Government cash transfers, on the expenditures side in column 2, are shown as receipts by consumers and by foreign countries and international institutions in column 1. The sum of these transfer receipts is approximately equal to government transfer payments in the accompanying table. Some discrepancy 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 of consumers 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 ( - f ) or expenditures ( — ) for the various accounts: 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 in some accounts must equal the total excess of expenditures in others, since national income and product are conceptually equal. Personal net saving, for example, which represents an excess of receipts, must be matched by an excess of investment by business or by a government deficit, or both. (Also, the adjustments made in column 1 must be carried over into column 3 in order to complete the balance between the positive and negative items.) X 977891—52 11 55 While the summary table on the Nation's Economic Budget gives a comprehensive view of recent economic changes, additional detail on receipts and expenditures is needed for analytical purposes, as is shown in the tables that follow. More complete statistics for recent years on national income and product and their components can be found in the National Income Supplement to the Survey of Current Business, July 1951. Data relating to the cash budget of the Federal Government are from the Budget of the United States. 156 TABLE A—1.—The Nation's Economic Budget, calendar years 1950 and 1951 [Billions of dollars, seasonally adjusted annual rates] 1950 1951, first half 1951, second half 1 Excess Excess Excess of reof reof receipts ceipts ceipts ExExEx- (+) Re- pendi(+) or Re- pendi(+) or Re- pendior ceipts tures ex- ceipts tures ex- ceipts tures expendipendipenditures tures tures Economic group CONSUMERS 1. Disposable income arising from current production 8. Government transfers and net interest payments .. 3 Disposable personal income 4! Personal consumption expenditures ---5 Personal saving (-J-) 185.2 202.8 19.0 16.4 16 6 804.3 819 S 886 4 193.6 209. 6 205.0 ~+'ib~7~ 203.8 ~+~U~s~ "+88'.~6 BUSINESS 6. Retained receipts from current production 7. Gross private domestic investment 8 Excess of investment ( — ) 29 7 27 6 48.9 33 2 62.8 JQ 2 54.8 -35.8 -81.6 INTERNATIONAL 9 Cash loans abroad 10. Net foreign investment_. 11. Excess of receipts (+) or investment (— ) _ -.1 .5 -2.3 .8 -1.4 +88 1.6 +1 7 -1.4 GOVERNMENT (FEDERAL, STATE, AND LOCAL) 12 Tax payments or liabilities IS. Adjustment to cash basis 69 8 14. Cash receipts from the public... . 15. Purchases of goods and services. _ 16 Government transfer payments. 17. Cash payments to the public 18. Excess of receipts (+) payments (— ) 90 5 —18.8 -9.0 or 60.8 ....... 78.3 42.5 18 8 61.3 87 4 —7.8 80.8 56.9 14.7 70.1 15 8 85.3 71.6 -6.1 +6.7 — 5 ADJUSTMENTS 19. For receipts relating to gross national product 2 _^ 80. Other adjustments 3 -2.1 +8.9 21. 282.6 Gross national product —2 1 +2.4 +10.1 +2 4 +8.9 +10.1 282.6 323.4 323.4 +5.5 +5.6 330.3 330.3 i Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. « These adjustments bring the estimates on the receipts side into agreement with those on the expenditures 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. 3 "Other adjustments" are net and are the amount necessary for balancing the excess of receipts (+) with the 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. NOTE.—Items relating to current production of goods and services are shown in roman type. Transfer payments and receipts and other items not included in the gross national product are shown in italics. 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 estimated by the Bureau of the Budget and the Treasury Department. See also footnote 1. TABLE A-2.—Consumer account, calendar years 1950 and 1951 [Billions of dollars, seasonally adjusted annual rates] 1951 1950 Receipts or expenditures Personal income arising from current production of goods and services: Wage and salary receipts and other labor income Farm proprietors' income ._ B usiness and professional income 2 _. _. __ Dividends Private interest and rental income Business transfer payments _ . 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 Equals: Disposable personal income -. Less* Personal consumption expenditures 3 __ Equals* Personal net saving (+) Total i First half 146.4 13.7 22.3 9.2 13.4 .8 169.8 17.0 23.6 9.5 14.1 .8 166.5 16.4 23.8 9.2 13.8 .8 173 0 17 6 23 4 98 14 2 g 205, 7 234.8 230.5 238 8 4.7 2.7 11.6 4.8 .5 11.2 4.8 .3 11.3 48 .8 11 0 224.7 20.5 251.3 28.4 247.0 27.7 255 6 29 2 204.3 193.6 222.8 204.4 219.3 205.0 226 4 203 8 +10.7 +18.5 +14.3 +22 6 205.7 20.5 234.8 28.4 230.5 27.7 238 8 29 2 185. 2 206.4 202.8 209 6 Second half' ADDENDUM Personal income arising from current production Less: Personal tax and nontax payments _„ _ . Equals* Disposable income arising from current production - 1 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. 2 Includes adjustment for inventory valuation.3 For detail, see appendix table B-4. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See table A-l. TABLE A-3.—Business account, calendar years 1950 and 1951 [Billions of dollars, seasonally adjusted annual rates] 1951 1950 Receipts or investment Total » Corporate profits before tax Less* Corporate tax liability 3 Dividend payments Equals* Corporate undistributed profits Plus* Capital consumption allowances 3 Corporate inventory valuation adjustment 4 Equals: Retained business receipts from current production Less: Gross private domestic investment: « New construction Residential (nonfarm) _-_ Other private construction Producers' durable equipment Change in inventories Total Equals* Excess of receipts (+) or investment (— ) . First half Second half i 41.4 18.6 9 2 44 8 26 7 95 48 6 29 o 92 41 0 24 4 98 13 6 21.2 —5.1 86 23 5 —1 7 10 4 22 8 —5 6 68 24 2 22 29.7 30 4 27 g 33 2 22 1 12.6 95 22.5 43 22 10 11 27 9 23 2 11 9 11 3 26 6 13 1 21 2 98 11 4 28 6 50 2 8 4 6 1 48.9 58 8 62 8 54 8 —19 2 —28 4 —35 2 —21 6 1 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers, 2 Federal and State corporate income and excess profits taxes. 3 Includes capital consumption allowances on noncorporate capital, including residences. * 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. * For additional detail, see appendix table B-5. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See table A-l. 158 TABLE A-4.—International account, calendar years 1950 and 1951 [Billions of dollars, annual rates] 1951 1950 Receipts or investment Total » Receipts: U. S. Government cash long-term loans (net)2 _ _ Plus: Cash payments to International Monetary Fund and International Bank _ „ _, Equals: U. S. Government cash transfers on loans (foreign receipts). Investment: Surplus of exports of goods andfi services _. Less: Net unilateral transfers: Government 6 _. . _ _. Private Equals: Net foreign investment . . . _. __ Excess of receipts (+) or investment (— ) .. __ 0.2 8 -.3 -.1 0.3 (<) First half 0.3 Second half 1 0.2 (4) (4) .3 .3 .2 2.3 5.0 3.6 6.5 4.1 5 4.5 4 4.6 4 4.4 .4 -2.3 .1 —1.4 1.6 +2.2 + 2 +1 7 —1.4 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 In 1950, the International Monetary Fund returned 262 million dollars in cash to the U. S. Treasury in4exchange for United States notes. Less than 50 million dollars. 6 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 to6avoid double counting. Unilateral aid included in appendix table A-8 is on a Daily Treasury Statement basis and is gross. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See table A-l. 159 TABLE A-5.—Government account (Federal, State, and local), calendar years 1950 and 1951 J [Billions of dollars, seasonally adjusted annual rates] 1951 Eeceipts or expenditures 1950 Total 2 Receipts: Tax and nontax payments or liabilities: 3 Federal State and local _ Total Adjustment to cash basis * 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 public 8 Loans to foreign governments and subscriptions to International Bank and International Monetary Fund (net)6 All other » Total Cash payments to the public Cash surplus (+) or deficit (— ) Federal: Cash receipts Cash payments .. ... First half Second half 2 50 5 19.3 68 0 21.0 69 6 20.9 66.4 21.0 69.8 -9 0 89.0 —9 7 90.5 — 12 2 87.4 —7.2 60 8 79 3 78 3 80.2 22.8 19 7 41.9 21 6 35.6 21 2 48.2 21.9 42.5 63.5 56.9 70.1 14 3 4.6 11 7 4.5 11 6 4 4 11.8 4.6 —.1 .3 —1.5 .3 -1.6 .2 -1.4 18.8 14.9 14.7 15.2 61.3 78.4 71.6 85.3 -.5 +.8 4-6 7 -5.1 42.4 42 0 59.3 58 0 58.6 51 4 60.0 64.7 +.4 +1.2 +7.2 -4.7 18.4 19.3 20 0 20.4 19 7 20.2 20.2 20.6 — 9 — 4 — 5 — 4 ADDENDUM Surplus (+) or deficit (— ) _ State and local: Cash receipts Cash payments Surplus (+) or deficit (— ) 1 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 Statelocal governments. All intragovernmental 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 (including excess profits tax liabilities), and contributions for social insurance. 4 Consists of deductions from government employees' salaries for retirement funds, government contributions to retirement funds, National Service Life Insurance and U. S. Government Life Insurance funds, and excess of personal and corporation tax liabilities over receipts. Cash receipts also include some items of miscellaneous receipts not included in tax and nontax payments, such as receipts from sales of surplus property. 5 Does not agree with net interest paid by government (appendix table A-2) which is on a net accrual basis and includes interest paid by government corporations. 6 See appendix table A-4, International account. 7 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 (deliveries in advance of payments being subtracted), 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. Source: See table A-l. 160 TABLE A-6.—-Federal cash receiptsfrom the public other than borrowing, calendar years 1'950 and 1951 [Billions of dollars, seasonally adjusted annual rates] 1951 Source Direct taxes on individuals . __ Direct taxes on corporations Employment taxes _ __ Excises and customs Deposits by States, unemployment insurance Veterans' life insurance premiums Other Less: Refunds of receipts 1950 __ _ __ _ Total Federal cash receipts from the public Total i First half Second half» 19.2 9.9 3.4 8.6 1.2 .5 1.7 -2.2 27.2 16.5 4.3 9.2 1.5 .5 2 2 -2.1 26.6 16.5 4.2 9.2 1.4 .6 21 —2. 1 27.8 16.5 4.4 9.2 1.6 .5 2.2 -2.1 42.4 59.3 58.6 60.0 i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See table A-l. TABLE A—7.—Federal cash payments to the public by function., calendar years 1950 and 1951 [Billions of dollars, seasonally adjusted annual rates] 1951 Function 1950 Total i Military services International security and foreign relations Veterans' services and benefits.. ___ ______ _ Social security, welfare, and health Agriculture and agricultural resources Interest _ Other Deduction from Federal employees' salaries for retirement Clearing account for outstanding checks and telegraphic reports ___ Total Federal cash payments to the public i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See table A-l. 161 First half Second halfi 13.5 4.0 8.9 3.3 1.3 4.3 7.1 -.4 30.6 4 8 6.0 4 4 .9 4.2 7.4 —.4 .1 25.4 5.0 5.9 4 3 .7 4.1 6.3 —.4 —.1 35.8 4.6 6.1 4.5 1.0 4.3 8.5 -.4 .3 42.0 58 0 51.4 64.7 TABLE A~8.—Federal cash payments to the public by type of recipient and transaction, calendar years 1950 and 1951 [Billions of dollars, seasonally adjusted annual rates] 1951 Cash payments 1950 Total * Direct cash payments for goods and services, excluding military services:2 Payments to individuals for services rendered: Civilian wages and salaries (excluding Post Office): Federal 3 Grants- and loans-in-aid for performance of specified services, net * _ _. Total Payments 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 ._ _ _ Total Loans and transfer payments to individuals: Social insurance and public assistance: Federal employees' retirement benefit payments ... Old-age and disability benefit payments Unemployment insurance benefit payments Grants-in-aid for public assistance Readjustment benefits, pensions, and other payments to veterans 7. Loans to8 home owners, net Interest^ _ Other «_ . 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 farmers _. Business: Home mortgage purchases fromfinancialinstitutions . Loans, net Direct subsidy payments Subsidy 8arising from the postal deficit Interest _Total Loans and transfer payments to foreign countries and international institutions: Unilateral transfers: Military aid Economic aid Loans Subscriptions to the International Bank and Monetary Fund (net cash withdrawals) . First Second half halfi 26 28 27 .8 .8 .8 .9 3.5 3.7 3.5 39 17 19 18 21 .6 1.1 .6 .9 .6 .8 .1 .1 33 34 .3 .3 .6 .5 30 .1 (6) 28 40 .3 1.3 .7 1.2 .2 — 2 .3 23 9 1.2 5.3 1 1.3 6 13 5 11 3 10 7 11 9 (6) —.4 .2 .7 — 7 .3 .8 — l1 6 .4 .6 2.9 5 — 1 («) .8 3.0 13 22 22 7.6" — .2 5.2 .1 5.1 .1 1.5 1.1 .1 .7 (6 .4 (6) .9 1.2 .5 (6) (6) .9 1.2 1.2 (6) CO 6 3.0 7 3.0 4.8 4.6 4.3 4.9 .4 1.6 .2 .3 1.3 32 .3 1.9 23 .2 35 28 (6) 4.6 (6) 3.8 4.8 4.3 Military services — cash payments for goods and services ^ 13.2 30.3 25.2 35.4 Clearing account for outstanding checks and telegraphic reports.. -.1 .1 —.1 .3 42.0 58.0 51.4 64.7 Total Total Federal cash payments to the public See footnotes on following page. 162 -.3 (6) 1 2 Estimates based on incomplete data. 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. * Includes all grants-in-aid and loans 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. * 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 1951, the residual is subject to a high margin of error. 6 Less than 50 million dollars. 7 Includes cashing of terminal leave bonds, retired pay of military personnel, 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. 8 Includes a small amount of interest on tax refunds in addition to interest on the public debt. 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 A-2 is net, and is on an accrual rather than a cash basis; it includes interest paid by State and local governments and by government corporations. 9 During the period shown, represents in large part some of the transactions of the Federal Home Loan Banks. 10 Excludes retired pay and redemption of Armed Forces Leave Bonds which are included above as payments to veterans. NOTE.—Detail will not necessarily add to totals because of rounding. Source: See table A-l. 163 Appendix B Statistical Tables Relating to Employment, Production, and Purchasing Power CONTENTS National income or expenditure: Page B-l. Gross national product or expenditure, 1929-51 167 B-2. Gross national product or expenditure in 1939 prices, 1929-51 168 B-3. Gross national product or expenditure in 1951 prices, 1929-51 169 B-4. Personal consumption expenditures, 1929-51 170 B-5. Gross private domestic investment, 1929-51 171 B-6. National income by distributive shares, 1929-51 172 B-7. Personal income, 1929-51 173 B-8. Relation of national income and personal income, 1929-51 174 B-9. Disposition of personal income, 1929-51 175 B-10. Total and per capita disposable personal income in current and 1951 prices, 1929-51 176 Employment and wages: B—11. Labor force, employment, and unemployment, 1929-51 177 B-l 2. Number of wage and salary workers in nonagricultural establishments, 1929-51 178 B-l 3. Average weekly hours in selected industries, 1929-51 179 B-l4. Average hourly earnings in selected industries, 1929-51 180 B-15. Average gross weekly earnings in selected industries, 1929-51 181 Production and business activity: B-l 6. Indexes of industrial and agricultural production, 1929-51 182 B-l7. Production of selected commodities in the free world, 1950-51 183 B-l8. New construction activity, 1929-51 184 B-l 9. Business expenditures for new plant and equipment, 1929-52 185 B-20. Inventories and sales in manufacturing and trade, 1939-51 186 B-21. Sales, stocks, orders, and receipts at 296 department stores, 1939-51. . 187 Prices: B-22. Consumers' price index, 1929-51 188 B-23. Wholesale price index, 1929-51 189 B—24. Indexes of prices received and prices paid by farmers, and parity ratio, 1929-51 190 B-25. Percentage increases in wholesale prices and cost of living in the United States and foreign countries since June 1950 191 Credit, money supply, and Federal finance: B-26. Consumer credit outstanding, 1929-51 192 B-27. Loans and investments of all commercial banks, 1929-51 193 B-28. Deposits and currency, 1929-51 194 B-29. Estimated ownership of Federal obligations, 1939-51 195 B-30. U. S. Government debt—volume and kind of obligations, 1929-51 196 B-31. Bond yields and interest rates, selected years, 1929-51 197 165 Corporate profits and finance: B-32. Profits before and after tax, all private corporations, 1929-51 B-33. Sales and profits of large manufacturing corporations, 1939-51 B—34. Relation of profits before and after taxes to stockholders' equity, private manufacturing corporations, by industry group, 1947—49 average and 1950-51 B—35. Relation of profits before and after taxes to sales, private manufacturing corporations, by industry group, 1947—49 average and 1950—51.... B—36. Relation of profits before and after taxes to stockholders' equity and to sales, all private manufacturing corporations, by size class, 1947—49 average and 1950-51 B—37. Sources and uses of corporate funds, 1947—51 International transactions: B-38. International transactions of the United States, 1948-51 B—39. United States exports and imports of goods and services, by area, 1948-51 B-40. U. S. Government grants, other unilateral transfers, and loans to foreign countries, 1948-51 B-41. United States merchandise exports, including reexports, by area, 1936-38 quarterly average and 1947-51 B—42. Indexes of quantity and unit value of United States domestic merchandise exports, by economic class, 1936—38 quarterly average and 1947-51 B—43. United States general merchandise imports, by area, 1936—38 quarterly average and 1947-51 B-44. Indexes of quantity and unit value of United States merchandise imports for consumption, by economic class, 1936—38 quarterly average and 1947-51 B-45. United States exports of selected capital goods to ERP countries and underdeveloped areas, 1950-51 Summary: B-46. Changes in selected economic series since 1939 and 1950 and during 1951 166 page 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 Statistical Tables Relating to Employment, Production, and Purchasing Power TABLE B-l.—Gross national product or expenditure, 1929—51 [Billions of dollars] Government purchases of goods and services Gross Gross Personal , private Net Federal national consumpdomesforeign exState prod- tion in- invest- Total pendi- tic and Nauct vestment tures 1 ment 2 Total 3 tional 4 Other local security Period 1929..._ 1946 1947 1948 1949 1950 1951 « 103.8 90.9 75.9 58.3 55.8 64.9 72.2 82.5 90.2 84.7 91.3 101.4 126.4 161.6 194.3 213.7 215.2 211.1 233.3 259.0 257.3 282.6 326.8 78.8 70.8 61.2 49.2 46.3 51.9 56.2 62.5 67.1 64.5 67.5 72.1 82.3 91.2 102.2 111.6 123.1 146.9 165. 6 177.9 180.2 193.6 204.4 15.8 10.2 5.4 .9 1.3 2.8 6.1 8.3 11.4 6.3 9.9 13.9 18.3 10.9 5.7 7.7 10.7 28.7 30.2 42.7 33.0 48.9 58.8 1950: First half Second half _ _ _ _ _ _ _ 1951: First half 6 Second half 1950: First quarter Second quarter Third quarter Fourth quarter 1951: First quarter Second quarter Third quarter 6 Fourth quarter ... 269.7 295.6 323.4 330.3 264.4 275.0 287.4 303.7 319.0 327.8 327.6 333.0 186.7 200.4 205.0 203.8 184.7 188.7 202.5 198.4 208.2 201.7 202.5 205.0 44.0 53.8 62.8 54.8 40.1 47.9 47.3 60.2 60.1 65.6 55.7 54.0 1930. 1931 1932 1933 1934 1935 1936 1937. 1938 1939 1940 1941. _ 1942 1943 1944.... 1945._._ _ _. 0.8 .7 .2 .2 .2 .4 -.1 -.1 .1 1.1 .9 1.5 1.1 -.2 -2.2 -2.1 -1.4 4.6 8.9 1.9 .5 -2.3 .1 8.5 9.2 9.2 8.1 8.0 9.8 9.9 11.7 11.6 12.8 13.1 13.9 24.7 59.7 88.6 96.5 82.8 30.9 28.6 36.6 43.6 42.5 63.5 1.3 1.4 1.5 1.5 2.0 3.0 2.9 4.5 4.6 5.3 5.2 6.2 16.9 52.0 81.2 89.0 74.8 20.9 15.8 21.0 25.5 22.8 41.9 (5) 7.2 3) 4.0 3.2 2.7 1.5 1.6 1.0 2.5 3.8 5.6 6.6 3.9 4.1 7.8 7.7 6.6 5.9 6.8 7.0 6.9 7.0 7.5 7.9 7.8 7.8 7.7 7.4 7.5 8.0 10.0 12.8 15.6 18.1 19.7 21.6 4.6 3.3 3.6 4.8 5.3 3.8 3.2 3.4 3.6 3.6 4.6 4.9 19.2 20.2 21.2 21.9 19.3 19.2 19.7 20.4 21.1 21.4 21.6 22.2 (5) (5) (66) (5) () (6) (5) (5a) (5) () 1.2 () (55) () (58) () 3.9 2.2 13.8 49.4 79.7 87.5 73.8 18.5 12.0 15.5 18.9 18.9 37.8 16.9 20.9 32.0 43.4 16.7 17.1 17.9 23.9 28.8 35.3 42.0 44.9 5 8 5) Seasonally adjusted annual rates -1.6 -3.0 -1.4 1.6 -1.7 -1.6 -3.2 -2.7 -2.7 O 1.2 2.0 1 See appendix table B-4 for major components. 2 See appendix table B-5 for major components. 3 Net of Government sales, which have been deducted 4 40.7 44.3 56.9 70.1 41.3 40.1 40.8 47.8 53.4 60.4 68.2 72.0 21.4 24.2 35.6 48.2 22.0 20.9 21.2 27.3 32.4 39.0 46.6 49.8 from the national security expenditures. For 1947-51, "national security" expenditures include the following: military services, international security and foreign relations, development and control of atomic energy, promotion cf merchant marine, promotion of defense production and economic stabilization, and civil defense. (See The Budget of the United States Government for the Fiscal Year Ending June 30, 1953, for items included in each of these classifications.) Prior to 1947, the expenditures are based on items formerly classified as "war" by the Bureau of the Budget and Treasury Department. For all years, the expenditures exclude Government sales and have been adjusted to the concept of purchases of goods and services. 8 Not available. 6 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. 7 Less than 50 million dollars. NOTE.—The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). 167 TABLE B-2.—Gross national product or expenditure in 1939 prices, 1929-51 [Billions of dollars, 1939 prices] Personal consumption expenditures Period Government purchases of goods and services Gross private domestic investment Total gross Pronational New ducprodDur- NonServcon- ers' uct Total able durable ices Total struc- durable goods goods tion equipment Net Gross forprieign Change invate in prodvestState uct 2 busi- ment Total Fedand eral local ness inventories 1929 . 85.9 62.2 8.0 29.1 25.1 14.9 7.4 6.1 1.5 0.8 7.9 1.3 6.6 81.5 1930 1931 1932 1933... . 1934 78.1 58.6 72.3 56.6 61.9 51.8 61.5 51.1 67.9 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 .6 .3 .2 .1 .3 8.7 9.4 8.9 8.7 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 1935. . . 1936 1937 1938. 1939 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 -.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 1940 100.0 1941 115.5 1942 129.7 1943... . 145.7 1944 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 6.0 7.2 4.4 3.6 5.1 2.3 1.2 3.8 .7 1.6 -.4 -.1 -2.1 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 1945 1946 1947 1948 1949 153.4 86.3 138.4 95.7 138.6 98.3 143.5 100.3 143.5 102.9 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 38.0 39.6 8.3 20.3 19.3 22.7 17.8 2.6 6.0 6.9 8.0 7.9 6.7 9.9 11.8 12.6 11.6 -1.0 -1.8 4.4 2.7 .6 4.8 2.1 1.4 -1.7 .6 60.6 19.6 16.1 19.2 22.2 54.6 12.8 8.5 10.9 13.0 6.0 6.8 7.6 8.2 9.2 129.7 125.6 128.8 133.7 133.2 1950 19513 154.3 108.7 166.5 107.5 15.5 13.4 51.7 41.6 51.1 43.0 24.8 28.1 9.4 8.9 13.2 15.0 20.8 28.7 11.0 18.7 9.8 10.0 143.8 153.3 -2.2 2.2 4.2 1 See Survey of Current Business, January 1951, and the National Income Supplement to the Survey of Current Business, 1951, for explanation of conversion of estimates in current prices to those in 1939 prices. 2 Total gross national product less compensation of general government employees. 3 Estimates based on incomplete data; by Council of Economic Advisers. NOTE.—Detail will not necessarily^add to totals because of rounding. Source: Department of Commerce (except as noted). 168 TABLE B-3.—Gross national product or expenditure in 1951 prices, 1929-51l [Billions of dollars, 1951 prices] Personal consumption expenditures Period Total gross national product 3 £ r2 m | §> bo 0) 3o 1 EH ft 1 r2 3 2 1 fc '> 1 Government purchases of goods and services Gross private domestic investment 3 e Si "wft fc o> fc PH >> i P o>-3 £ •l 1 0®B 0< 8 rs ® <u_g T3 0 1-i Federal Net foreign S| ino vestS ment •a r-J'd a i EHo § a O II •P X g. 'd § 3$ 03 1929 167.2 118.1 16.3 62.8 39.0 32.7 18.4 11.1 1930 1931 1932 1933 1934 151.4 111.0 13.0 59.9 38.1 22.1 13.7 139.7 107.1 10.8 59.4 36.9 13.5 9.7 118.4 97.6 8.0 54.4 35.2 2.7 5.4 117.0 96.5 7.7 54.1 34.7 3.5 3.6 130.8 102.4 9.0 58.3 35.1 7.2 4.1 1935 1936 1937 . 1938 1939 142.5 108.8 163.2 120.1 170.8 124.2 163.9 122.3 179.3 129.4 13.4 14.2 11.7 13.5 61.8 68.8 71.1 72.2 76.4 36.0 37.9 38.9 38.4 39.5 14.0 5.5 6.6 1.9 -2.5 22.2 6.7 19.7 7.9 8.8 3.0 -2.7 26.1 10.9 23.9 9.5 10.0 4.4 -2.3 25.0 10.0 13.5 8.3 7.3 -2.1 28.1 11.9 21.6 12.3 8.5 .8 -.5 28.8 11.7 1940 1941 1942 1943 1944 197.3 137.0 229.6 147.6 262.4 145.5 296.6 149.3 320.0 155.3 15.6 18.1 11.5 10.1 9.3 80.3 86.8 89.4 92.1 96.3 41.1 42.7 44.6 47.1 49.7 .2 30.5 13.8 4.9 29.6 13.7 11.0 4.9 36.6 15.4 13.2 8.0 -1.3 46.7 30.9 25.2 19.9 8.3 8.2 3.4 -3.3 100.3 85.8 81.5 11.2 4.7 6.7 -.2 -7.6 143.7 130.5 128.1 13.3 5.0 9.4 -1.1 -8.1 159.5 146.6 144.2 16.7 15.8 14.5 13.2 12.9 1945 . 1946 1947 1948 . . 1949 309.4 165.6 272.9 184.1 271.5 188.6 280.4 191.9 280.1 196.6 10.7 103.5 21.0 108.5 24.9 107.1 25.4 107.6 26.1 109.1 51.4 54.6 56.6 58.9 61.4 16.6 42.6 40.2 47.6 37.4 12.2 -2.1 -8.0 135.2 122.2 120.6 18.1 9.3 2.8 43.4 28.6 25.3 7.2 35.5 19.1 14.5 21.7 1.3 23.2 4.4 -1.5 42.4 24.5 18.1 21.3 -3.6 -3.0 49.1 29.1 21.6 13.0 14.8 16.4 17.9 20.0 1950... 1951* .. 301.2 207.5 31.2 111.7 64.6 52.5 23.7 24.1 326. 8 204.4 27.1 110.6 66.6 58.8 22.2 27.6 n.o 6.5 15.2 17.2 20.0 19.7 3.2 -0.8 17.2 2.9 8.8 -.4 -.9 19.2 6.1 -2.3 -1.4 20.5 3.6 -6.3 -1.3 19.4 3.7 -3.8 -1.8 18.8 4.8 -1.7 -.9 22.1 3.3 3.5 3.8 5.1 6.9 (3) 3 ( ) (3) (3) (3) (3) 14.3 15.9 17.0 15.6 13.7 15.2 15.5 15.2 15.0 ( ) 16.2 ( ) 2.7 17.1 (3) (3) 3 3 4.7 -4.6 45.8 24.6 20.4 21.2 .1 63.5 41.9 37.8 21.6 9.1 Seasonally adjusted annual rates 1950: First half Second half 294.2 204.4 29.0 111.4 64.0 49.2 23.0 22.5 307.9 210.6 33.4 112.0 65.3 55.6 24.4 25.7 1951: First half Second half* 323.8 205.5 28.8 110.4 66.2 63.0 23.2 26.6 13.2 -1.6 56.9 35.4 32.0 21.4 1.8 70.0 48.4 43.6 21.7 329.8 203.2 25.3 110.9 67.0 54.6 21.2 28.6 4.8 1950: First quarter Second quarter. _. Third quarter Fourth quarter. . . 289.8 203.5 298.6 205.2 301.5 214.4 314.3 206.9 28.9 111.3 29.0 111.6 36.4 113.0 30.4 110.9 63.3 64.6 65.0 65.6 45.1 53.2 49.2 61.9 22.7 23.4 24.6 24.1 21.1 1.3 23.9 5.9 25.9 -1.3 25.5 12.3 45.9 44.6 43.1 49.4 24.6 23.5 22.1 28.2 18.7 19.3 18.7 24.7 21.3 21.1 21.0 21.2 1951: First quarter Second quarter. __ Third quarter Fourth quarter*.. 319.5 209.4 328.2 201.6 328.4 203.1 331.1 203.4 31.7 111.7 26.0 109.1 25.5 110.7 25.1 111.1 66.0 66.5 66 9 67.2 60.4 65.7 55.7 53.5 24.0 22.5 21.6 20.8 26.0 10.4 -3.2 52.9 60.9 27.1 16.1 28.2 5.9 ~"I.~4 68.2 2.3 71.9 28.9 3.8 31.7 39.2 46.7 50.0 28.5 35.5 42.1 45.1 21.2 21.7 21.5 21.9 3.6 -4.6 45.2 24.0 19.0 21.2 5.5 -4.6 46.2 25.2 21.7 21.1 -4.7 -4.4 -5.2 -3.9 1 These estimates represent a rough conversion of the Department of Commerce series in 1939 prices. (See appendix table B-2.) This was done by major components, using the implicit price indexes for the year 1951 as a base. Although it would have been preferable to redeflate the series by minor components, this would not substantially change the results except possibly for the period of World War II, and for the series on change in business inventories. 2 See appendix table B-l, footnotes 3 and 4. 3 Not available. * Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Council of Economic Advisers. 169 TABLE B-4.—Personal consumption expenditures 9 1929-51 [Billions of dollars] Durable goods Period Nondurable goods Services Total exAutopendimoHoustures Total biles Other Total Foodi Clothing 2 Other Total ings Other and parts 1929.. 78.8 9.4 3.2 6.1 37.7 19.7 9.2 8.9 31.7 11.4 20.2 1930 1931 1932 1933 1934. 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 34.1 29.0 22.7 22.3 26.7 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 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 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 123.1 146.9 165.6 177.9 180.2 8.5 16.6 21.4 22.9 23.9 1.1 4.2 6.6 7.5 9.4 7.4 12.4 14.8 15.4 14.5 74.9 85.8 95.1 100.9 98.7 43.0 50.3 56.6 59.7 58.6 17.1 18.6 19.1 20.1 18.9 14.8 16.9 19.4 21.1 21.3 39.7 44.5 49.1 54.1 57.6 12.2 13.0 14.6 16.5 18.1 27.5 31.4 34.5 37.7 39.4 1950 1951* 193.6 204.4 29.2 27.1 12.3 10.5 16.9 16.5 102.3 110.6 60.9 67.3 18.8 19.8 22.6 23.6 62.1 66.7 19.9 21.4 42.2 45.2 1935 1936. 1937 1938 1939 1940 1941 1942.. 1943 1944 . _. . Seasonally adjusted annual rates 1950: First half Second half 186.7 200.4 26.5 31.9 10.9 13.6 15.6 18.2 99.4 105.2 59.2 62.7 18.2 19.4 22.0 23.1 60.8 63.4 19.5 20.3 41.4 43.1 1951: First half _ Second half* 205. 0 203.8 28.7 25.4 11.6 9.5 17.1 15.9 110.5 110.7 67.0 67.6 19.9 19.6 23.6 23.6 «5.7 67.6 21.1 21.8 44.7 45.8 1950: First quarter Second quarter.. . Third quarter Fourth quarter . 184.7 188.7 202.5 198.4 26.3 26.6 34.3 29.4 10.4 11.4 14.3 12.9 15.9 15.2 20.0 16.5 98.4 100.4 105.5 104.9 58.7 59.7 62.6 62.7 17.9 18.5 19.6 19.2 21.8 22.2 23.3 23.0 60.1 61.6 62.7 64.0 19.3 19.7 20.1 20.5 40.8 41.9 42.6 43.5 - 208.2 201.7 202.5 205.0 31.5 25.9 25.3 25.5 12.5 10.8 9.6 9.3 19.0 15.2 15.7 16.2 111.5 109.5 110.0 111.5 67.0 66.9 67.3 67.9 20.4 19.5 19.4 19.7 24.1 23.1 23.2 23.9 65.2 66.2 67.2 68.0 20.9 21.3 21.6 22.0 44.3 45.0 45.6 46.0 1951: First quarter. Second quarter Third quarter Fourth quarter * 1 Includes alcoholic beverages. 2 Includes shoes and standard clothing issued to military personnel. 3 Includes imputed rental value of owner-occupied dwellings. * Estimates based on incomplete data; fourth quarter by Council of Economic'Advisers. NOTE.—The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). 170 TABLE B-5.—Gross private domestic investment, 1929-51 [Billions of dollars] Net change in Nonfarm producers' Farm equipment and construction business inventories Total plant and equipment Rasigross dential Other pripriconNonvate struc- vate farm condomestion Conafter Contic Total i Equip-2 struc- Total < Equip- struc- (non- struc- Total revaluFarm investment tion i s ment tion farm)1 5 tions ation ment adjustment Period 1.8 -0.3 -.3 -1.4 -1.7 -2.6 -2.6 -1.3 -1.6 .2 -1.1 -.2 .3 1929 15.8 9.8 5.6 4.2 1.1 0.8 0.3 2.8 0.5 1930 1931 1932 10.2 5.4 .9 1.3 2.8 7.6 4.6 2.5 2.3 3.1 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 .5 .4 .2 .1 .1 6.1 8.3 11.4 6.3 9.9 3.8 5.2 6.6 4.7 5.7 2.9 3.9 4.7 3.4 4.0 .0 .3 .9 .4 .7 .6 .8 1.0 .8 .8 .5 .6 .8 .6 .6 .1 .2 .2 .2 .2 .7 1.1 1.4 1.5 2.7 .1 .9 .1 1.0 .2 2.3 .2 -1.0 .2 .4 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 1.6 1.0 1.3 1.0 .9 1.2 .8 1.0 .7 .6 .9 .2 .3 .3 .3 .3 3.0 3.4 1.8 1.0 .8 .2 .3 .1 10.7 28.7 30.2 42.7 33.0 8.7 15.5 20.3 23.4 22.0 6.3 10.7 14.6 16.7 15.6 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 48.9 58.8 25.6 31.6 18.8 23.2 6.8 8.4 4.8 5.6 3.6 4.3 1.2 1.3 12.6 10.8 — ... 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 _ 1945 1946 1947 1948 1949 1950 1951 8 1.6 5., -1.3 .4 2.1 1.8 -1.1 .3 .5 -1.1 .5 .1 .1 2.3 3.9 2.1 -.9 -.8 2.0 3.4 .8 -.5 -.3 .2 .5 1.3 -.4 -.5 .2 — 7 .6 .7 -'.8 1.0 5.0 1.3 -3.2 -.6 6.3 1.4 3.7 -2.5 -.1 -.2 -2.2 1.3 -.7 .1 1.5 1.7 4.3 9.1 3.6 8.0 .8 1.1 Seasonally adjusted annual rates 1950: 1st half 2dhalf__-._- 44.0 53.8 23.0 28.2 16.8 20.9 6.2 7.2 4.6 5.0 3.4 3.8 1.2 1.2 11.8 13.4 1.5 1.6 3.1 5.6 2.8 4.4 .4 1.2 1951: 1st half. 62.8 54.8 30.3 33.0 21.9 24.5 8.3 8.5 5.8 5.3 4.6 4.0 1.2 1.3 11.9 9.8 1.8 1.6 13.1 5.0 12.0 4.0 1.2 1.0 1950: 1st quarter... 2d quarter.. 3d quarter.. 4th quarter. 40.1 47.9 47.3 60.2 22.0 24.0 27.5 28.9 15.8 17.8 20.5 21.3 6.2 6.2 7.0 7.5 4.3 4.8 5.2 4.8 3.1 3.6 4.0 3.7 1.2 1.2 1.2 1.1 11.2 12.4 13.7 13.1 1.5 1.5 1.5 1.6 1.1 5.2 -.7 11.8 1.1 4.4 -1.8 10.6 1951: 1st quarter... 2d quarter. . 3d quater..4th quarter 8. 60.1 65.6 55.7 54.0 29.5 31.1 32.7 33.3 21.4 22.5 24.0 25.0 8.1 8.6 8.7 8.3 5.7 5.9 5.4 5.3 4.5 4.7 4.1 4.0 1.2 1.2 1.3 1.3 12.9 10.8 9.7 10.0 1.7 1.9 1.8 1.4 10.3 15.9 6.1 4.0 9.1 14.8 5.1 3.0 0 l!2 1.2 1.1 1.0 1.0 1 Items for 1945 and earlier years are not comparable with those for later years, nor with figures shown in appendix table B-18. Items for all years are not comparable with those shown in appendix table B-19, principally because the latter exclude certain equipment and construction outlays charged to current expense. 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. * Farm construction (residential and nonresidential) plus "farm machinery and equipment" and farmers' purchases of "tractors" and "business motor vehicles." (See footnote 2.) 8 Includes construction of hotels, tourist cabins, motor courts, and dormitories since 1946 only. • Includes religious, educational, social and recreational, hospital and institutional, miscellaneous nonresidential, and all other private. 7 Less than 50 million dollars. 8 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. NOTE.—The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement tojfche" Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). 171 977891—52 TABLE B-6.—National income by distributive shares, 1929-51 [Billions of dollars] Period Business and proCorporate profits fessional income and inventory and inventory valuation valuation adjustment adjustment InTotal Comcome RentpenNet of al inna- sation InInInfarm come intional of emof ven- terest come ven- pro- perin- 1 ployCortory 2 tory come ees of prieporate valuunin- valu- tors sons Total profits Total corpoation ation before adrated adtax 3 justenter- justment prises ment 1929 . 87.4 50.8 8.3 8.1 0.1 5.7 5.8 1930 1931 . 1932 1933 1934 75.0 58.9 41.7 39.6 48.6 46.5 39.5 30.8 29 3 sili 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 4.8 6.6 3.6 1.6 2.5 -2.0 2.0 -2.0 2.1 1.1 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 . i 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 S4.9 109.2 121.2 7.7 9.6 12.6 15.0 17.2 7.8 10.2 12.9 15.1 17.2 -.1 -.6 -.2 -.1 4.9 6.9 10.5 11.8 11.8 3.6 4.3 5.4 6.1 6.5 182.7 180.3 198.7 223.5 216.7 123.0 117.1 128.0 140.2 139.9 18.7 20.6 19.8 22.1 20.9 18.8 -.1 22.4 -1.8 21.3 -1.5 22.5 -.4 20.3 .6 12.5 14.8 15.6 17.7 13.0 239.0 276.0 153.3 178.1 22.3 23.6 23.8 -1.6 24.4 -.7 13.7 17.0 .. . 1940 1941. 1942 1943 1944 1945 1946 1947 1948 1949 . 1950.. 1951 • ll .2o A 0..5 6.5 3.3 3.3 -.8 2.4 -3.0 1.0 .2 -2.1 1.7 -.6 6.2 5.9 5.4 5.0 4.8 — 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 7.5 19.2 18.3 24.7 31.7 30.5 19.7 -.6 23.5 -5.2 30.5 -5.8 33.8 -2.1 2.1 28.3 3.0 2.9 3.5 4.3 4.9 8.0 8.4 36.2 43.1 41.4 -5.1 44.8 -1.7 5.4 5.7 10.3 9.8 3.2 5.7 6.2 3.3 6.5 Seasonally adjusted annual rates 1950: First half Second half 225.0 253.0 145.4 161.2 21.5 23.1 22.0 -.6 25.6 -2.5 12.4 15.0 7.8 8.2 32.6 39.8 34.7 -2.0 48.0 -8.2 5.2 5.6 1951: First half Second half « 271.8 280.0 174.8 181.4 23.8 23.4 16.4 17.6 8.2 8.4 43.0 43.2 48.6 -5.6 2.2 41.0 5.6 5.8 1950: First quarter . Second quarter Third quarter . _ Fourth quarter 219.3 230.6 245.8 260.1 142.2 148.6 157.3 165.2 21.1 21.9 23.2 23.0 25.7 -1.8 23.0 .4 2 21.3 22.8 -ilo 26.3 -3.2 24.9 -1.8 12.5 12.2 14.3 15.8 7.8 7.8 8.1 8.4 30.5 34.8 37.4 42.2 31.9 37.5 45.7 50.3 -1.4 -2.7 -8.3 -8.2 5.2 5.3 5.5 5.6 1951: First quarter Second quarter Third quarter • 5 Fourth quarter 269.4 274.3 278.1 282.0 172. 1 177.4 180.4 182.5 24.1 23.6 23.4 23.5 27.2 -3.1 24.2 -.5 22.8 .6 23.3 .2 16.4 16.3 17.3 18.0 8.3 8.2 8.4 8.5 42.9 43.0 42.8 43.7 51.8 -8.9 45.4 -2.3 2.8 40.0 42.0 1.7 5.6 5.7 5.8 5.8 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, and indirect business taxes. 2 Includes wage and salary receipts and other labor income (see appendix table B-7), and employer and employee contributions for social insurance (see appendix table B-8). 3 See appendix table B-32 for corporate tax liability (Federal and State income and excess profits taxes) and corporate profits after tax. 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.—The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). 172 TABLE B-7.—Personal income, 1929-51 [Billions of dollars) Total personal income Period Salaries, wages, and other labor income 1 Proprietors' and rental 2 income Dividends and Transfer personal payments interest3 income Nonagricultural personal4 income Agricultural income 1929 85.1 50.5 19.7 13.3 1.5 76.8 8.3 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 6.2 4.7 3.1 3.6 3.7 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 6.5 5.6 7.5 6.2 6.3 1940 .. 1941 1942 1943 1944 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 6.8 9.2 13.3 15.1 15.4 1945 .. _ 1946 1947 1948 . _ 1949 171.9 177.7 191.0 209.5 205.1 116.9 111.1 122.3 134.9 134.2 37.5 42.0 42.4 47.3 41.4 11.4 13.2 14.5 16.0 17.1 6.2 11.4 11.8 11.3 12.4 155.7 158.8 170.8 187.1 187.6 16.2 18.9 20.2 22.4 17.5 224.7 251.3 146.4 169.8 44.0 49.0 19.3 20.1 15.1 12.5 206.6 229.6 18.1 21.7 1950 _ . ._ 1951 « _ . ... Seasonally adjusted annual rates 1950: First half Second half 216.7 232.8 138.7 154.1 41.6 46.4 18.0 20.5 18.4 11.8 200.0 213.1 16.6 19.8 1951: First half Second half 5 247.0 255.6 166.5 173.0 48.4 49.6 19.6 20.5 12.4 12.6 226.1 233.2 21.0 22.4 1950: First quarter Second quarter Third quarter Fourth quarter. . _ 216.3 217.1 227.3 238.3 135.6 141.8 150.3 157.9 41.4 41.8 45.6 47.2 17.6 18.4 19.6 21.4 21.7 15.0 11.8 11.9 199.5 200.6 208.5 217.7 16.8 16.5 18.8 20.6 1951: First quarter Second quarter. _. Third quarter. _ 1 _ Fourth quarter <L_ 244.1 163.8 169.2 249.9 253.2 171. 4 258. 0 * U 174.6 48.8 48.1 49.1 50.0 19.2 20.1 20.2 20.8 12.3 12.5 12.6 12.6 223.2 229.0 231.2 235.2 20.9 21.0 22.1 22.8 4' 1 Differs from "compensation of employees" in appendix table B-6, in that it excludes employer and employee contributions to social insurance. Includes wage and salary receipts and other labor incomecompensation for injuries, employer contributions to private pension and welfare funds, pay of military reservists not on full-time active duty (pay for full-time active duty included in military wages and salaries), directors' fees, jury and witness fees, compensation of prison inmates, Government payments to enemy prisoners of war, marriage fees to justices of the peace, and merchant marine war-risk life and injury claims. 2 See appendix table B-6 for major components. 3 See appendix table B-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.—The figures beginning with 1948 are based on the revised series of national income and product of the (Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). TABLE B—8.—Relation of national income and personal income, 1929-51 [Billions of dollars] Less: Plus: Corporate National profits Contriincome and in- butions to ventory social valu- insuration ance adjustment Period Excess of wage accruals over disbursements Government transfer payments Net interest paid by government Dividends Busi- Equals: Perness sonal trans- income fer payments 1929 87.4 10.3 0.2 0.9 1.0 5.8 0.6 85.1 1930 1931. 1932 1933 1934 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 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 95.3 122.7 150.3 165.9 182.7 180.3 198.7 223. 5 216.7 19.2 18.3 24.7 31.7 30.5 6.1 6.0 5.7 5.2 5.7 0) 0) 0) 0) 0) 5.6 10.9 11.1 10.5 11.6 3.7 4.4 4.4 4.5 4.6 4.7 5.8 6.6 7.2 7.6 .5 .6 .7 .7 .7 171.9 177.7 191.0 209.5 205.1 239.0 276.0 36.2 43.1 7.0 8.4 0) 0) 14.3 11.7 4.7 4.8 9.2 9.5 .8 .8 224.7 251.3 ... .. 1935. ... 1936— 1937 1938 _._ 1939... 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 19512 _ _ .. _ • 0.2 -.2 Seasonally adjusted annual rates 1950: First half Second half 225.0 253.0 32.6 39.8 6.7 7.2 1951: First half Second half 2 271.8 280.0 43.0 43.2 8.4 8.5 1950: First quarter Second quarter Third quarter Fourth quarter 219.3 230.6 245.8 260.1 30.5 34.8 37.4 42.2 6.6 6.8 7.0 7.4 1951: First quarter Second quarter Third quarter *____ Fourth quarter2... 269.4 274.3 278.1 282.0 42.9 43.0 42.8 43.7 8.3 8.4 8.4 8.6 _ 0) 0) (0 (') 0) 0) 0) 0) 0) 0) .7 —.7 17.6 11.0 4,7 4.7 8.1 10.2 .7 .8 216.7 232.8 11.6 11.8 4.8 4.8 9.2 9.8 .8 .8 247.0 255.6 21.0 14.2 11.0 11.1 4.7 4.7 4.7 4.7 7.8 8.4 9.4 11.1 .7 .7 .8 .8 216.3 217.1 227.3 238.3 11.5 11.8 11.8 11.8 4.8 4.8 4.8 4.9 8.8 9.6 9.6 10.1 .8 .8 .8 .8 244.1 249.9 253.2 258.0 12 Less than 50 million dollars. 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.—The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). 174 TABLE B-9.—Disposition of personal income, 1929—51 [Billions of dollars] Less: Personal Personal tax and income nontax payments Period 1929 _ 1930 1931 1932 1933 1934 .. _ _ 1935 1936 1937 1938 1939 _ _ _ _ 1940 1941 1942 1943 _ 1944 1945 1946 1947 1948 1949 _ _ .. __ . 1950 1951 * . Less: Equals: Personal Equals: DisposconPersonal able sumption net personal expendi- saving income tures Net saving as percent of disposable personal income 85.1 2.6 82.5 78.8 3.7 4.5 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 24.1 171.9 177.7 191.0 209.5 205.1 20.9 18.8 21.5 21.1 18.6 151.1 158.9 169.5 188.4 186.4 123.1 146. 9 165.6 177.9 180.2 28.0 12.0 3.9 10.5 6.3 18.5 7.6 2.3 5.6 3.4 224.7 251.3 20.5 28.4 204.3 222.8? 193.6 204.4 10.7 18.5 5.2 8.3 \ "I Seasonafly adjusted annual rates 1950: First half Second half 216.7 232.8 19.2 21.6 197.4 211.2 186.7 200.4 10.7 10.7 5.4 5.1 1951: First half Second half 1 247.0 255.6 27.7 29.2 219.3 226.4 205.0 203.8 14.3 22.6 6.5 10.0 216.3 217.1 227.3 238.3 19.0 19.5 20.2 23.1 197.3 197.5 207.1 215.2 184.7 188.7 202.5 198.4 12.5 8.9 4.6 16.8 6.3 4.5 2.2 7.8 244.1 249.9 253.2 258.0 27.4 28.0 28.4 30.0 216.8 221.8 224.7 228.0 208.2 201.7 202.5 205.0 8.5 20.1 22.2 23.0 3.9 9.1 9.9 10.1 1950: First quarter Second quarter Third quarter Fourth quarter.. 1951: First quarter Second quarter Third quarter _ .l_ Fourth quarter 1 ._ ... Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. NOTE.—-The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). TABLE B-10.— Total and per capita disposable personal income in current and 1951 prices, 1929-51 Total disposable personal income (billions of dollars) Per capita disposable personal income (dollars) Period 1951 prices l Current prices Current prices 1951 prices * Population (thousands) 3 1929 82.5 123.7 678 1,016 121,770 1930 1931 1932 1933 1934 73.7 63.0 47.8 45.2 51.6 115.5 110.3 94.8 94.2 101.8 599 508 383 360 408 939 890 760 750 805 123,077 124, 040 124, 840 125, 579 126,374 68.0 66.1 71.1 65.5 70.2 112.2 127.1 131.4 124.3 134.5 456 516 552 505 536 882 992 1,020 958 1,027 127, 250 128,053 128,825 129,825 130,880 75.7 92.0 116.7 132.4 147.0 143.9 164.9 186.1 193.3 204.5 573 690 866 968 1,062 1,089 1,237 1,381 1,413 1,477 132, 114 133, 377 134,831 136,719 138, 390 151.1 158.9 169.5 188.4 186.4 203.4 199.1 193.1 203.2 203.3 1,080 1,124 1,176 1,285 1,250 1,454 1,409 1,339 1,386 1,363 139, 934 141,398 144, 129 146, 621 149, 149 204.3 222.8 219.0 222.8 1,347 1,443 1,444 1,443 151, 689 154,353 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 _ _ . . ___ _ _ _ _ . _. 1945 1946 1947 1948 1949 1950 1951 » _ Seasonally adjusted annual rates 1950: First half- . -.Second, half 1951- First half 3 Second half _- - 1950: First quarter. Second quarter Third quarter Fourth quarter 1951: First quarter Second quarter Third quarter 3 Fourth quarter . . 197.4 211.2 216.0 221.9 1,306 1,385 1,430 1,456 151, 132 152, 438 219.3 226.4 220.0 225.8 1,427 1,460 1,431 1,456 153,699 155, 107 197.3 197.5 207.1 215.2 217.3 214.7 219.4 224.4 1,308 1,305 1,362 1,409 1,441 1,418 1,443 1,469 150, 847 151, 390 152, 068 152, 774 216.8 221.8 224.7 228.0 218.1 221.8 225.4 226.2 1,413 1,440 1,452 1,467 1,422 1,440 1,456 1,455 153,396 154, Oil 154, 724 155, 469 1 Dollar estimates in current prices divided by an over-all price index for personal consumption expenditures. This price index was based on Department of Commerce data shifted from a 1939 base. 2 Provisional intercensal estimates of the population of continental United States including armed forces overseas, taking into account the final 1950 census total population count. Annual data are as of July 1; quarterly and semi-annual data as of middle of period. 3 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. NOTE.—The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Sources: Department of Commerce and Council of Economic Advisers. 176 TABLE B—11.—Labor force, employment, and unemployment, 1929-51 Total labor force (including armed forces) * Period Civilian labor force Armed forces i Total civilian labor force Employment 2 Total Agri- Nonagricultural cultural Unemployment Unemployment as percent of total civilian labor force Thousands of persons, 14 years of age and over Monthly average: 1929 49, 440 260 49, 180 47, 630 10, 450 37, 180 1,550 3.2 50, 080 50,680 51, 250 51,840 52,490 260 260 250 250 260 49, 820 50, 420 51,000 51, 590 52, 230 45, 480 42,400 38, 940 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 55,600 270 300 320 340 370 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, 890 390 1,470 3,820 8,870 11, 260 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 6 ,608 6 ,748 6 ,571 11, 280 3,300 1,440 1,306 1,466 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 64 599 (' . 1,500 (3) 63,099 62,884 59, 957 61,005 7*, 507 7,054 52, 450 53, 951 3,142 1,879 5.0 3.0 63,776 65,422 1,347 1,653 62, 429 63, 769 58, 555 61, 358 7,233 7,781 51, 322 53, 578 3,874 2,411 6.2 3.8 (33) () 62, 254 63, 513 60,189 61,820 6,744 7,365 53, 446 54,455 2,065 1,693 3.3 2.7 1,408 1,366 1,346 1,330 1,320 1,311 1,315 1,337 1,453 1,734 1,941 2, 136 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 7.3 7.6 6.7 5.7 4.9 5.2 5.0 3.9 3.7 3.0 3.5 3.6 61, 514 61,313 62, 325 61, 789 62,803 63,783 64,382 64,208 63,186 63, 452 63,164 62, 688 59, 010 58, 905 60,179 60,044 61, 193 61, 803 62, 526 62, 630 61, 580 61,836 61, 336 61, 014 6,018 5,930 6,393 6,645 7,440 8,035 7,908 7,688 7,526 7,668 7,022 6,378 52, 993 52, 976 53, 785 53,400 53, 753 53, 768 54, 618 54,942 54, 054 54, 168 54,314 54,636 2,503 2,407 2,147 1,744 1,609 1,980 1,856 1,578 1,606 1,616 1,828 1,674 4.1 3.9 3.4 2.8 2.6 3.1 2.9 2.5 2.5 2.5 2.9 2.7 1930 1931 1932 1933 1934 - - _ _ 1945 . 1946 1947 1948 1949 1950 1951 __ _ 1950* First half . Second half __ _. (33) 1951* First half Second half __ () 1950* January February March - _April May June July August . September _ _ __ O ctober November ._ December 1951* January February March April May June July August September October November December ,__ ________ _ _ 62, 835 63,003 63,021 63,513 64,108 66, 177 65, 742 66,204 65, 020 65, 438 65, 453 64,674 (8) (3) (3) i( ) (3) (3) (3) i 3 (3) i 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 the 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, illness, bad weather, temporary lay-off, and industrial disputes. »Not available. 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 (1940-51). 177 TABLE B—12.—Number of wage and salary workers in nonagricultural establishments, 1929-51 * [Thousands of employees] Total wage Manufacturing and Period salary work- Total ers Monthly average: 1929. . 1930 1931 1932 1933. . 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946. 1947 1948 1949. . 1950 . 1951 * 31,041 29, 143 26, 383 23,377 23, 466 25, 699 26, 792 28, 802 30, 718 28, 902 30, 287 32, 031 36,164 _ 39, 697 42, 042 41,480 40, 069 41,412 ._ 43, 371 44, 201 43, 006 44,124 46, 266 1950: First half 42, 710 Second half. -. 45, 538 1951: First half.. 45, 880 Second half *__ 46, 731 42, 125 1950: January 41, 661 February 42, 295 March April . . 42, 926 43, 311 May 43, 945 June 44, 096 July 45, 080 August September 45, 684 October 45, 898 November 45, 873 December 46, 595 1951: January 45, 246 February 45, 390 March 45, 850 April May ..._ 45,998 46, 226 46, 567 June July 46, 432 46, 724 August September *... 46, 921 October* 46, 841 November f.__ 46, 736 Government, tion tract (FedServFiand Trades nance ice 2 eral, construc- public State, tion utili and ties local) Trans- Con- porta- 10, 534 9,401 8,021 6,797 7,258 8,346 8,907 9,653 10, 606 9,253 10, 078 10,780 12, 974 15,051 17, 381 Non- MinDur- duraing able ble goods goods (3) (33) (3) (3) (3) () (33) (3) (3) () 4,683 5,337 6,945 8,804 11,077 17,111 10, 858 15,302 9,079 14, 461 7,739 15,247 8,373 15, 286 14, 146 14, 884 8,315 7,465 8,008 15,926 8,914 14, 220 7,568 8,449 8,927 8,897 7,342 7,324 15,549 15,925 15, 928 13, 980 13, 997 14, 103 14, 162 14, 413 14, 666 14, 777 15, 450 15,685 15, 827 15, 765 15, 789 15, 784 15, 978 16, 022 15, 955 15, 853 15, 956 15, 813 16,008 16,020 15, 940 15, 861 7.418 7, 548 (3) (33) (3) (3) (3) () (33) (3) () («) 5,394 5,443 6,028 6,247 6,304 6,253 6,222 6,722 6,874 6,970 6,681 6,876 7,013 6,653 7,100 6,997 7,031 6,638 6,673 6,685 6,604 6,702 6,799 8,664 7,101 8,717 8,742 8,877 8,969 9,003 8,975 8,998 8,839 8,878 8,902 8,922 8,944 «595 6,614 7,809 7,964 7,978 8,294 8,423 8,618 1,078 1,000 864 722 735 874 888 937 1,006 882 845 916 947 983 917 883 826 852 943 981 932 904 919 870 939 923 914 «861 7,156 7,262 7,209 7,072 7,042 7,101 7,053 6,952 6,878 6,958 6,974 7,130 7,118 7,018 6,917 938 939 940 946 922 950 946 939 938 937 932 930 924 911 915 927 906 922 916 911 916 1,497 1,372 1,214 970 809 862 912 1,145 1,112 1,055 1,150 1,294 1,790 2,170 ,567 ,094 ,132 ,661 ,982 2,165 2,156 2,318 2,573 2,070 2,565 2,432 2,742 1,919 1,861 1,907 2,076 2,245 2,414 2,532 2,629 2,626 2,631 2,571 2,403 2,281 2,228 2,326 2,471 2,598 2,686 2,754 2,809 2,761 2,750 2,637 3,907 3,675 3,243 2,804 2,659 2,736 2,771 2,956 3,114 2,840 2,912 3,013 3,248 3,433 3, 619 3,798 3,872 4,023 4,122 4,151 3,979 4,010 4,143 3,903 4,117 4,116 4,176 3,869 3,841 3,873 3,928 3,885 4,023 4,062 4,120 4,139 4,132 4,123 4, 125 4,072 4,082 4,112 4,132 4,137 4,161 4,176 4,190 4,178 4,167 4,167 6,401 6,064 5,531 4,907 4,999 5,552 5,692 6,076 6,543 6,453 6,612 6,940 7,416 7,333 7,189 7,260 7,522 8,602 9,196 9,491 9,438 9,524 9,716 9,281 9,766 9,650 9,795 9,246 9,152 9,206 9, 346 9,326 9, 411 9.390 9,474 9,641 9,752 9,896 10,443 9,592 9,554 9,713 9,627 9,683 9,732 9,667 9,641 9,774 9,871 10,024 1,431 1,398 1,333 1,270 1,225 1,247 1,262 1,313 1,355 1,347 1,382 1,419 1,462 1,440 1,401 1,374 1,394 1,586 1,641 1,716 1,763 1,812 1,879 1,797 1,827 1,859 1,903 1, 772 1,777 1,791 1,803 1,812 1, 827 1,831 1,837 1,827 1,821 1,820 1,828 1,831 1,839 1,854 1,865 1,874 1,893 1,908 1,914 1,894 1,898 1,901 3,127 3,084 2,913 2,682 2,614 2,784 2,883 3,060 3,233 3,196 3,321 3,477 3,705 3,857 3,919 3,934 4,055 4,621 4,786 4,799 4,782 4,761 4,764 4,746 4,776 4,729 4,806 4,701 4,696 4,708 4, 757 4,790 4,826 4,841 4,827 4,816 4,757 4,723 4,694 4,666 4,657 4,682 4, 745 4,789 4,835 4,852 4,839 4,834 4,772 4,733 3,066 3,149 3,264 3,225 3,167 3,298 3,477 3,662 3, 749 3,876 3,987 4,192 4,622 5,431 6,049 6,026 5,967 5,607 5,454 5,613 5,811 5,910 6,346 5,822 5,998 6,246 6,466 5,777 5,742 5,769 5,915 5,900 5,832 5,741 5,793 6,004 6,039 6,037 6,376 6,088 6,122 6,217 6,292 6,377 6,377 6, 356 6,401 6,544 6,532 6,497 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 B-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 autom otive repair service industry from the trade to the service division. s Not available. 4 Estimates based on incomplete data. 6 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. 178 TABLE B-13.—Average weekly hours in selected industries, 1929-51 Retail trade (except Bitumi BuildClass I Hotels Wholeing eating Telenous (yearsale con- steam and round) Noncoal rail- phone trade Durable strucdrinkroads Total goods durabl mining tion ing goods places) Manufacturing Period Monthly average: 1929 44.2 0) (0 38.4 1930 1931 1932 1933 1934 42.1 40.5 38.3 38.1 34.6 0) 0) 32.6 34.8 33.9 0) 0) 41.9 40.0 35.1 33.5 28.3 27.2 29.5 27.0 0) (>) 0) 0) 0) 28.9 43.1 41.1 38.9 38.8 40.4 1935 1936 . . 1937 1938 1939 . . 36.6 39.2 38.6 35.6 37.7 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 38.8 38.9 39.1 1940 1941 1942 1943 1944. 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 1945 1946 1947 1948 1949 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 »37.3 36.7 48.5 45.9 46.3 46.1 43.5 (2) 39.4 37.4 39.2 38.5 1950 4 1951 40.5 40.7 41.2 41.6 39.7 39.5 35.0 35.0 36.3 37.4 40.8 C1) 1950: First half Second half... 39.9 41.1 40.5 41.8 39.1 40.2 32.3 36.1 35.4 37.1 1951: First half Second half *_. 40.9 40.4 41.8 41.3 39.8 39.1 34.6 35.5 1950: January February March. __ _. April May _ _ _ _ _ June July August September October November December 39.7 39.7 39.7 39.7 39.9 40.5 40.5 41.2 41.0 41.3 41.1 41.4 40.0 40.1 40.2 40.7 40.8 41.3 41.1 41.8 41.7 42.1 41.8 42.2 39.4 39.3 39.2 38.5 38.9 39.5 39.8 40.5 40.1 40.3 40.3 40.5 1951: January February March April.. May June Julv August September * _ _ October* November 4 .. 41.0 40.9 41.1 41.0 40.7 40.7 40.2 40.3 40.6 40.4 40.3 41.5 41.6 41.9 42.0 41.8 41.8 40.9 41.3 41.5 41.6 41.3 40.2 40.0 40.0 39.7 39.3 39.4 39.3 39.1 39.3 38.9 39.1 44.8 0) 0) C1) (0 (0 0) 0) 0) (') 0) 8 ' 8(') 8( 0 - iO0) 80) 0)0)0) (0 0) 0) 0) 0) (0 0) 0) 0) 0) 8 8 S41.0 0)0)40.3 0) 0) 0) 0) 0) 0) 0) 0) 0) « 0) 0) 0) 0) 0) 0) 0) 0) 40.9 40.7 40.3 40.4 45.2 44.3 44.2 38.9 39.2 40.7 40.7 40.5 40.1 43.9 43.3 40.5 41.0 38.7 39.1 40.4 40.9 40.4 40.6 43.9 43.9 36.6 38.3 41.4 (l) 39.0 39.3 40.6 40.9 40.0 40.2 43.3 43.2 824.5 «25.4 39.2 36.0 34.1 34.7 34.6 35.5 35.5 36.1 36.4 38.5 34.8 33.7 34.5 35.6 36.5 37.0 36.9 37.6 36.7 37.4 37.3 36.7 39.8 39.8 41.6 39.9 40.2 41.9 39.4 42.7 40.5 41.8 41.4 40.0 38.5 38.6 38.5 38.7 38.9 39.1 39.4 39.3 39.6 39.4 38.0 39.1 40.6 40.3 40.3 40.1 40.4 40.6 40.9 40.9 40.7 40.9 40.8 41.2 40.4 40.4 40.3 40.2 40.4 40.9 41.2 41.1 40.4 40.3 40.0 40.7 43.9 43.8 43.8 44.0 44.1 43.8 43.8 44.0 43.8 44.0 43.7 43.9 37.6 34.1 33.6 33.9 33.3 34.8 32.7 34.9 36. 7 36.4 36.7 35.3 35.8 36.8 37.5 37.7 38.1 38.2 38 2 38.' 6 42.2 41.2 42.0 40.8 41.1 41.2 40.3 42.3 39.2 0) 40.8 40.6 40.6 40.6 40.6 40.7 40.7 40.7 41.0 41.0 C1) 40.3 40.1 39.7 39.9 39.8 40.4 40.8 40.8 40.1 39.8 43.4 43.2 43.3 43.3 43.4 43.4 43.4 43.3 43.2 43.2 0) 38.9 39.2 38.9 38.7 39.0 39.4 39.8 39.2 39.4 39.1 (0 1 8 (0 O Not available. 2 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 average for 1950 which has been weighted by data on man-hours. Source: Department of Labor. 179 TABLE B-14.—Average hourly earnings in selected industries, 1929-51 Retail trade (except Bitumi- Build- Class I Hotels eating nous ing con- steam Tele- Wholesale (yearrailstruccoal phone trade and round) i Dura- Non- mining roads tion drinkble durable ing goods goods places) Manufacturing Period Total Monthly average: 1929 ... $0. 566 .552 1930 . 1931 .515 1932 .446 1933 .442 1934 .532 1935 .550 1936 .556 1937 .624 1938 .. .627 1939... .633 1940 .661 1941 .729 1942 ... .853 1943 .961 1944 1.019 1945 . 1.023 1946 1.086 1947 1.237 1948 _. 1.350 1949 1. 401 1950.... 1.465 1951 « 1. 590 1950: First half 1. 432 Second half... 1.494 1951: First half 1.575 Second half «.. 1.608 1950: January _ 1.418 February .420 March .424 April .434 May .442 June .453 July .462 August .464 September. ... .479 October .501 November .514 December .543 1951: January .555 February .561 March .571 April .578 May .586 June. 1.599 July.. 1.598 August 1.596 September «... 1.612 October e 1.614 November «... 1.619 (2) (2) (2) $0.497 .472 .556 .577 .586 .674 .686 .698 .724 .808 .947 1.059 1.117 1.111 1.156 1.292 1.410 1.469 1.537 1.673 1.497 1. 570 1.655 1.695 1.485 1.483 1.486 1.499 1.509 1.522 1.533 1.539 1.562 1.577 1.587 1.619 1.630 1.639 1.654 1.659 1.665 1.681 1.682 1.684 1.703 1.703 1.705 $0. 681 (2) .684 (22) .647 () .520 $0. 420 .501 .427 .673 .515 .530 .745 .794 .529 .856 .577 .584 .878 .582 .886 .602 .883 .640 .993 1.059 .723 1.139 .803 .861 1.186 1.240 .904 1.401 1.015 1.636 1.171 1.898 1.278 1.941 1.325 2.010 1.378 2.208 1.477 1.354 1.991 1.399 2.016 2.193 1.466 1.490 2.225 1.343 U.933 .350 7 1. 962 .353 2.009 2.022 .355 2.005 .358 .365 2.015 2.014 .375 .374 2.001 2.026 .379 .404 2.022 .419 2.013 .443 2.020 .456 2.038 .458 2.219 2.222 .460 2.231 .465 .474 2.218 2.232 .484 2.254 .488 2.213 .481 2.234 .490 2.216 1.491 1.501 (2) (2) (2) (2) (2) (2) $0. 795 .815 .824 .903 .908 .932 .958 1.010 1.148 1.252 1.319 1.379 1.478 1.681 4 1. 848 1.935 2. 031 2.192 1.990 2.065 2.166 2.223 1.976 .988 .995 .986 .998 .995 2.006 2.021 2.067 2.082 2.093 2.120 2.135 2.157 2.163 2.167 2.182 2.194 2.195 2.207 2.233 2.235 (2) $0. 636 .644 .651 .600 .595 .602 .651 .659 .676 .712 .714 .717 .751 .824 .897 .938 .942 1.116 1.170 1.309 1.419 1.549 (2) 1.544 1.554 « 1.710 (2) 1.550 1.567 1.532 1.546 1.536 1.532 1.553 1.533 1.560 1. 544 1.561 1.575 1.608 1.687 1.702 1.740 1.747 1.773 1.790 1.765 1.818 (22) () (2) (2) (2) (2) (2) (2) (2) (22) (2 ) () (2) (2) $0. 774 .816 .822 .827 .820 .843 .870 .911 (3) 1.124 1.197 1.248 1.345 1.398 1.484 1.382 1.414 1.458 1.514 1.380 1.391 1.376 1.381 1.381 1.386 1.395 1.392 1.409 1.426 1.422 1.440 1.450 1.469 1.453 1.450 1.451 1.475 1.490 1.501 1.521 1.532 (2) (2) (2) (2) (2) (22) 8 '» •8 8( ) (2) (2) (2) (2) (2) 8 (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) C22) ( ) (2) (2) (2) $1.268 1.359 1.414 1.483 1.582 1.456 1.508 1.569 1.598 1.432 1.446 1.453 1.466 1.463 1.476 1.494 1.489 1.497 1.508 1.519 1.541 1. 555 1.567 1.567 1.575 1.571 1.581 1.586 1.585 1.601 1.602 (2) 2 C2) $1.009 1.088 1.137 1.176 1.253 1.156 1.194 1.244 1.264 1.153 1.145 1.148 1.156 1.162 .175 .189 .192 .200 .199 .198 .187 .237 .236 .233 .249 .252 .256 .262 .259 1.269 1.266 (2) . ( ) (2) (2) $0.650 .709 .743 .771 .816 .758 .784 .807 .827 .753 .765 .755 .756 .756 .761 .765 .771 .783 .788 .795 .801 .804 .811 .801 .806 .807 .812 .817 .815 .831 .833 (2) 1 Money payments only; additional value of room, board, uniforms, and tips not included. 2 Not available. a 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. « Preliminary average; does not include any retroactive wage payments. 8 Estimates based on in complete data. f 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 average for 1950 which has been weighted by data on man-hours. Source: Department of Labor. 180 TABLE B-15.—Average gross weekly earnings in selected industries) 1929—51 Retail trade (except Bitumi Build- Class I eating Hotels nous ing con- steam Tele- Whole (year-1 sale Dura- Nonrailand strucphone trade coal roads ble durable mining tion drink- round) goods goods ing places) Manufacturing Period Total Monthly average: $25. 03 1929 23.25 1930 20.87 1931 1932 17.05 1933 16.73 1934 18.40 1935 20.13 1936 21.78 24.05 1937 1938 22.30 1939 23.86 25.20 1940 1941 29.58 36.65 1942 43.14 1943 1944 _ . 46.08 44.39 1945 43.82 1946 ' _ . 1947 49.97 54. 14 1948 1949 54.92 59.33 1950.6 . 64.63 1951 1950: First half 57.08 Second halL.. 61.38 1951: First half. .._. 64.42 Second half «. 64.89 1950: January - _. 56.29 February 56.37 March 56.53 56. 93 April May _ _ 57. 54 58.85 June 59.21 July August __ 60.32 60.64 September 61.99 October November 62.23 63. 88 December 1951' January . __ 63.76 63.84 February March. .__ . 64. 57 April _ 64.70 May . 64. 55 65. 08 June 64.24 July 64.32 August 6 September _ _ 65. 45 65.21 October 6 6 November _ _ 65.25 $27. 22 24.77 21.28 16.21 16.43 18.87 21.52 24.04 26.91 24.01 26.50 28.44 34.04 42.73 49.30 52.07 49.05 46.49 52.46 57.11 58.03 63.32 69.54 60.68 65.59 69.11 70.05 59.40 59.47 59.74 61. 01 61.57 62.86 63.01 64.33 65.14 66.39 66.34 68.32 67.65 68.18 69.30 69.68 69.60 70.27 68.79 69. 55 70.67 70.84 70.42 $22. 93 $25. 72 (2) 21.84 22.21 (2) 17.69 20.50 (2) 17.57 13. 91 (2) 16.89 14.47 (2) 18.05 18.10 $22. 97 19.11 19.58 24.51 19.94 22.71 27.01 21.53 23.84 30.14 21.05 20.80 29.19 21. 78 23.88 30.39 22.27 24.71 31.70 24.92 30.86 35.14 29.13 35.02 41.80 34.12 41.62 48. 13 37.12 51.27 52.18 38.29 52.25 53.73 41.14 58.03 56.24 46.96 66.59 63. 30 50.61 72.12 * 68. 85 51.41 63.28 70.95 54.71 70. 35 73.73 58.31 77.13 82.02 52.99 70.34 64.50 56.32 72.78 76.60 58.30 75.69 79.37 58.33 78.87 85.20 52.91 7? 47. 36 68.76 53.06 49. 83 67.00 53.04 78.75 68.83 72.79 52.17 70.70 52. 83 72.93 68.37 53.92 69.92 73.82 54.73 69.68 74.02 55.65 71.04 75.99 71.92 55.30 75.86 56.58 72.99 77.87 57.19 73.27 78.07 58.44 77.77 77.80 58.53 76.63 78.35 58.32 76.14 75.67 58.40 74.66 77.44 58.16 75.63 79.75 57.93 73. 86 81.83 58.47 77.67 82.71 58.48 73.71 83.63 57.91 77.23 84.31 58. 56 81.99 85.30 58.00 80.66 86.27 58.69 (2) (2) $28. 49 27.76 26. 76 23.34 23.09 24.32 26.76 28.01 29.20 30.26 30.99 31.55 34.25 38.65 43.68 46.06 45. 69 51.22 54.17 60.34 61.73 63.20 (2) 62.57 63.67 570.78 (2) 61.69 62.37 63.73 61.69 61.75 64.19 61.19 65.46 63.18 64.54 64.63 63.00 67.86 69.50 71.48 70.99 71.80 73.05 72.14 74.66 71.27 (2) (2) (2) (2) (22) () (22) () (2) (2) $29. 81 31.53 31.94 32.44 32.74 33.97 36.30 38.39 (2) (22) (2) () (22) () (22) (2) () (22) () (22) (2) () (22) () (3) 44.04 44.77 48.92 51.78 54.38 58.08 53.52 55. 33 56.89 59.51 53. 13 53. 69 52.98 53.44 53.72 54.19 54.96 54.71 55.80 56.18 54.04 56.30 56.41 57. 58 56.52 56.12 56.59 58.12 59.30 58.84 59.93 59.90 (2) (22) () $51.99 55.58 57.55 60.36 64.47 58.80 61.68 63.79 65.28 58. 14 58.27 58.56 58.79 59.11 59.93 61.10 60.90 60.93 61.68 61.98 63.49 63.44 63.62 63.62 63.95 63.78 64.35 64.55 64. 51 65.64 65.68 (2) (2) (2) (2) (22) () (2) (2)2 ( 2) () (2) (22) () (2)2 (2 ) (2) () <22) () $40. 66 43.85 45.93 47.63 50.26 46. 76 48.50 49.80 50.82 46.58 46.26 46.26 46.47 46.94 48.06 48.99 48.99 48.48 48.32 47. 92 48.31 49.85 49.56 48.95 49.84 49.83 50.74 51.49 51.37 50.89 50. 39 (2) (2) (22) (2) () (22) () (22) ( 2) () (22) () (22) (2) () (22) () (2) (2) $29. 36 31.41 32.84 33.85 35.31 33.26 34.38 34.96 35.74 33. 06 33.51 33.07 33.26 33. 34 33.33 33. 51 33.92 34.30 34.67 34.74 35.16 34.89 35.04 34.68 34.90 35.02 35.24 35. 46 35.29 35.90 35.99 (2) 1 Money payments only; additional value of room, board, uniforms, and tips not included. 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. 67 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 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 bench mark levels, thereby providing consistent series. The half-year data are straight arithmetic averages of the monthly figures and not strictly comparable with the annual average for 1950 which has been weighted by datajon man-hours. Source: Department of Labor. 2 181 TABLE B-16.—Indexes of industrial and agricultural production, 1929-51 f 1935-39 =100] Industrial production Manufactures Period 1 Total Minerals Total Durable Agricultural production 2 Nondurable 110 110 132 93 107 97 91 75 58 69 75 90 74 57 68 74 98 67 41 54 65 84 79 70 79 81 93 80 67 76 80 95 104 101 93 79 1935 1936 1937 1938 1939 87 103 113 89 109 87 104 113 87 109 83 108 122 78 109 90 100 106 95 109 86 99 112 97 106 96 85 108 105 106 1940 1941 1942 1943 1944 125 162 199 239 235 126 168 212 258 252 139 201 279 360 353 115 142 158 176 171 117 125 129 132 140 110 114 128 125 130 203 170 187 192 176 214 177 194 198 183 274 192 220 225 202 166 165 172 177 168 137 134 149 155 135 129 134 129 141 140 200 219 209 229 237 273 187 194 148 165 138 139 1929 1930 1931 1932 1933 1934 1945 1946 1947 1948 1949 . _ _ .-_ . 1950 19513 _ Adjusted for seasonal variation 1950' First half Second half _ _. . 1951: First half 8 Second half 1950: January February March April May June July August September October November December 1951* January February March April May June July August September October... November 8* December - _ - _. ._. _. _-_ - .. 189 211 198 220 220 254 181 193 138 158 (4) (4) 222 217 233 226 274 272 199 189 162 167 («) (4) 183 180 187 190 195 199 196 209 211 216 215 218 192 192 194 199 204 208 206 218 220 225 224 229 209 207 211 222 231 237 235 247 251 261 260 268 179 180 181 180 181 184 181 195 194 196 195 197 130 118 144 140 145 151 144 159 163 166 160 157 (*) (44) (4) () (44) () (44) ( 4) () (4) (*) (4) 221 221 222 223 222 221 212 217 219 218 218 218 231 232 234 234 233 231 222 226 228' 226 227 227 268 271 277 279 276 274 265 267 272 274 275 276 201 201 199 198 198 197 187 193 193 188 188 187 164 158 158 164 165 165 156 165 167 174 171 168 (44) () (44) (4 ) ( 4) () (44) () ( 44) (4) () (4) . 1 For industrial production, axerage of monthly indexes is used for year or half year. Index of volume of farm production for human use. »4 Estimates based on incomplete data. , Because of the extreme seasonal nature of agricultural crop production, only an annual index has been computed. Sources: Board of Governors of the Federal Reserve System and Department of Agriculture. 2 182 TABLE B—17.—Production oj selected commodities in the free world, 1950-51 1950 Commodity Unit Aluminum Bread grains Coarse 5grains ^ Cobalt 5 Copper Cotton Fats and oils T3 Free Rest Rest Free world United of free world United of free total States world total States world Thous. metric tons.. 1,295 _ __ _ Million bushels 3 4, 350 Million bushels 3 9, 104 Thous. pounds 15, 855 Thous. metric6 tons.. 2,281 Thous bales 321,922 Thous. short tonsoil content 17, 350 Fertilizer (nitroge- Thous. metric tonsnitrogen content. . 3 3, 682 nous) Iron ore Million metric tons. 198 Lead 5 Thous. metric tons.. 1,459 Lumber . Million board feet 57, 400 Manganese ore Thous. metric tons._ 3,200 Million poundsMeat carcass weight 61,200 Thous. metric tons.. 8,160 Newsprint Nickel « _ - . . Thous. metric tons.. 120 Petroleum (crude) Million barrels 3,477 Rubber (natural and synthetic) Thous. long tons 2,385 Thous. long tons 5,564 Sulfur— native Tin 6 . Thous. metric tons.. 170 Tungsten8 Metric tons 9,000 Wood pulp (mechanical and chemical) Thous. metric tons.. 29,300 Million poundsWool greasy basis 3,519 Zinc» Thous. metric tons.. 1,737 652 823 643 1,583 760 3 1, 050 3 3, 300 4 4, 426 4 1, 024 4 3, 402 3 4, 897 3 4, 207 4 9, 408 4 4, 738 4 4, 670 660 15, 195 18, 000 950 17, 050 823 1.458 2,362 862 1,500 3 9, 877 312,045 4 27, 635 4 15, 800 4 11, 835 6,154 11, 196 17,600 |g JL •<x>££ ^ « -f22 +17 +28 -2 +3 -3 +11 +14 +44 +12 +4 +5 +3 +26 +60 -2 11 6,375 11, 225 +1 +4 Q 3996 3 2, 686 4 3, 815 4 1,046 4 2, 769 +4 +5 +3 100 98 245 130 115 +24 +30 +17 2 390 1,069 1,579 381 1,198 +8 2 +1 +12 39, 400 18, 000 56, 500 39, 900 17,000 -6 126 3,074 3,400 107 3,293 +6 -15 +7 22, 109 39,091 61, 800 22, 365 39, 435 900 7,260 8,500 990 7,510 120 128 128 1,972 1,505 3,950 2,240 1,710 «476 5,192 2,020 1,909 2,859 372 5,646 165 170 6,980 11,400 8900 5,223 2,570 1,959 423 165 8,830 +1 +1 +1 +4 +10 +3 +7 +14 +14 & +20 +89 +3 +1 +1 +143 -3 +27 +27 +27 13,400 15, 900 32,200 15,000 17, 200 +10 +12 +8 1 2 253 561 Estimates based on incomplete data. Barley, oats, and corn. 3 Data are for crop year 1950-51. Data are for crop year 1951-52. « Production represents metal content of mine production. 6 Bales of 478 pounds net. * Less than 0.5 percent. 8 Synthetic rubber. 4 Source: Department of State. 19511 United States Percentage change, 1950 to 1951 * Quantity 183 3,266 1,176 3,609 1,941 260 635 3,349 +3 +3 +3 1,306 +12 +13 +11 TABLE B-18.—New construction activity, 1929-51 [Value put in place, millions of dollars] Private construction Total new construction Period 1935 1936 193 / 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 194g 1949 Total public Military and naval Nonresidential building High- Other ways public 3 3,625 2,694 1,988 2,486 19 659 1,266 542 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 30 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 1,214 1,065 861 1,020 3,628 5,751 10,660 6, 322 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 12, 000 16, 627 21, 572 22, 584 3,235 9,638 13, 131 16, 665 16, 181 1,100 4,015 6,310 8, 580 8,267 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 6,403 690 188 204 158 137 937 354 599 1,301 2,068 398 895 1,514 1, 856 2,129 373 925 1,179 1,592 2,069 27,902 _ 29,863 20, 789 20, 823 12, 600 10,915 3,777 4,907 4,412 5,001 7,113 9,040 177 1, 045 2,402 3,318 2,350 2,225 2,184 2, 452 -- _ 1950 1951 Other private 2 5,883 3,768 "1,676 1,231 1,509 . - - Nonresidential building (nonfarm) 8,307 ... _ Total private 1 Residential building (nonfarm) 10, 793 8,741 6,427 3,538 2,879 3,720 1929 1930 1931 1932 1933 1934 Public construction Seasonally adjusted annual rates 26, 542 1950: First half Second half... 29, 262 19, 576 22,002 11, 794 13, 406 3,366 4,188 4,416 4,408 6,966 7,260 124 230 2,222 2,582 2,410 2,290 2,210 2,158 1951: First half Second half... 1950* January February March April May June July August September — October November December 30, 718 29,008 21, 902 19, 744 11, 884 9,946 5,206 4,608 4,812 6,190 8,816 9,264 690 1,400 3,290 3,346 2,388 2,062 2,448 2,456 25, 140 25, 764 26, 640 27,000 26, 916 27, 792 28,164 28,884 29, 532 29, 748 29, 976 29, 268 18, 144 19,188 19, 320 19, 716 20, 244 20,844 21, 612 22,080 22,320 22, 320 21, 996 21,684 10,488 11,544 11, 556 12,000 12, 312 12, 864 13, 488 13, 812 13, 932 13, 608 12, 936 12, 660 3,252 3,324 3,288 3,324 3,480 3,528 3,672 3,804 3,996 4,320 4,644 4,692 4,404 4,320 4,476 4,392 4,452 4,452 4,452 4,464 4,392 4,392 4,416 4,332 6,996 6,576 7,320 7,284 6,672 6,948 6,552 6,804 7,212 7,428 7,980 7,584 156 132 120 120 108 108 108 168 216 276 288 324 2,100 2,196 2,184 2,196 2,364 2,292 2,160 2,256 2,508 2,772 2,880 2,916 2,460 2,076 2,820 2,736 2,004 2,364 2,256 2,304 2,376 2,172 2,520 2,112 2,280 2,172 2,196 2,232 2,196 2,184 2,028 2,076 2,112 2,208 2,292 2,232 1951* January February March April May June July August September October November December 30, 072 30, 528 32, 004 31, 524 30, 384 29, 796 29, 316 29, 076 29, 136 28, 704 28,872 28,944 21, 984 22,632 22, 896 22, 140 21, 156 20,604 20, 496 20, 124 20,052 19, 608 19, 296 18, 888 12, 708 12, 996 12, 864 11, 892 10, 656 10, 188 10, 032 9,696 9,780 10, 044 10,188 9,936 4,680 4,980 5,220 5,388 5,568 5,400 5,352 5,268 5,076 4,380 3,876 3,696 4,596 4,656 4,812 4,860 4,932 5,016 5,112 5,160 5,196 5,184 5,232 5,256 8,088 7,896 9,108 9,384 9,228 9,192 8,820 8,952 9,084 9,096 9,576 10, 056 372 480 624 780 912 972 996 1,128 1,212 1,356 1,668 2,040 3,072 3,036 3,264 3,396 3,480 3,492 3,300 3,312 3,300 3,240 3,408 3,516 2, 292 2,136 2,760 2,664 2,280 2, 196 2,136 2,172 2,172 2,028 1,932 1,932 2,352 2,244 2,460 2,544 2,556 2,532 2,388 2,340 2,400 2,472 2,568 2,568 1 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. 2 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. TABLE B-19.—Business expenditures for new plant and equipment, 1929-52 [Millions of dollars] Manufacturing and mining Transportation Total i Period Manufactur- Mining Railroad ing Total Other Electric and gas utilities Commercial and miscellaneous a 1929 9,165 3,596 (3) (3) 840 (4) (4) 4,729 1930 1931 1932 1933 1934 7,610 4,712 2,608 2,137 3,080 2,541 1,435 930 992 1,460 (33) () (33) (3) (33) () (33) (3) (44) () (44) (4) 4 () () 865 360 164 101 218 8( ) (4) 4,204 2,917 1,514 1, 044 1,402 3,738 5,077 6,730 4,520 5,213 1,790 2,450 3,330 1,830 2,323 (33) (3) () (3) 1,943 (3) (33) () (3) 380 166 306 525 238 280 (44) () (44) () 280 (44) (4) (4) () 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 7,406 12, 922 17,426 20, 032 18, 021 4,426 7,347 9,396 9, 936 7,887 3,983 6,790 8,703 9,134 7,149 443 557 693 802 738 552 573 906 1,319 1,350 321 659 798 700 525 630 1,045 1,897 2,683 3, 140 1,477 3,298 4,429 5,394 5,119 17, 832 23, 125 8,175 11, 947 7,491 11,141 684 806 1,136 1,564 437 517 3,167 3,654 4,917 5,443 1035 1936 1937. 1938 1939 ._ _._ ._- 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951« ... , _ . _ _ () () 4 Annual rates, not adjusted for seasonal variation 1950: First half. Second half 15, 604 20, 058 6,928 9,422 6, 316 8,666 612 756 1,060 1,210 338 536 2,822 3,512 4,456 5,378 1951: First half Second half * 21, 552 24, 700 10,684 13, 212 9,912 12, 372 772 840 1,430 1,698 522 512 3,292 4,016 5,624 5,262 1950: First quarter Second quarter Third quarter Fourth quarter 14, 476 16, 732 18, 048 22, 068 6,360 7,496 8,156 10, 688 5,776 6,856 7, 436 9,896 584 640 720 792 928 1,192 1,140 1,280 316 360 492 580 2,612 3,032 3,284 3,740 4,260 4,652 4,976 5,780 19, 452 23, 652 23, 376 . 26,024 9,348 12, 020 12, 160 14, 264 8,616 11, 208 11, 364 13, 380 732 812 796 884 1,212 1,648 1,508 1,888 500 544 480 544 3,012 3,572 3,732 4,300 5,380 5,868 5,496 5, 028 22,916 12,872 12, 040 832 1,596 552 3,536 4,360 1951: First quarter _._ Second quarter Third quarter Fourth quarter 1952: First quarter 8 fl ' * Excludes agriculture and outlays charged to current account. 2 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. 8 Not available separately for years prior to 1939. 4 Included in commercial and miscellaneous prior to 1939. • Estimates for fourth quarter of 1951 and first quarter of 1952 are based on anticipated capital expenditures reported in late October and November. NOTE.—These figures do not agree with those shown in column 2 of appendix table B-5 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 (except manufacturing for 1939) are Federal Reserve Board estimates based on Securities and Exchange Commission and other data. Detail will not necessarily add to totals because of rounding. Sources: Securities and Exchange Commission and Department of Commerce (except as noted). 185 TABLE B—20.—Inventories and sales in manufacturing and trade, 1939—51 [Adjusted for seasonal variation] 1939 20,051 10, 802 1940 1941 1942 1943 1944 22, 176 28, 780 31,091 31,343 31,059 12, 134 15,811 18,624 21, 920 23, 985 1945 1946 1947 1948 1949 30,893 42, 942 50, 605 _ 55, 647 50,921 23. 852 27, 151 33, 156 36, 438 34, 467 1 02 Millions of dollars ."3 GO Ratio of inventories to sales 3 « Retail trade Inventories * Millions of dollars Ratio of inventories ^to sales * OQ e* . J8 Wholesale trade Inventories l 1 Millions of dollars Ratio of inventories to sales 3 Inventories l Period Manufacturing Inventories * Millions of dollars Ratio of inventories to sales 3 Total manufacturing and trade 2.12 3,052 2,187 1.35 5,534 3,504 1.53 1.73 1.60 1.66 1.40 1.33 12,819 6,859 16,960 8,172 19, 287 10,430 20,098 12, 820 19, 507 13, 782 2.07 1.80 1.78 1.52 1.45 3, 238 4,044 3, 78 3,684 3,912 2,410 3,033 3,426 3,830 4,152 1.30 1.2: 1. 19 .97 .94 6.119 7,776 8,023 7,561 7,640 3,865 4,606 4,768 5,270 5,851 1.49 1.49 1.76 1.42 1.32 1.30 1.35 1.44 1.47 1.55 18,390 24,498 28,920 31, 734 28,690 1.48 1.68 1.73 1.73 1.85 4,555 6,592 7,625 8,085 7,729 4,476 5,993 7,272 7,931 7,235 .91 .92 1.02 .99 1.07 7,949 6,503 11, 852 8,541 14, 060 9,967 15, 828 10, 877 14, 502 10, 893 1.21 1.15 1.28 1.41 1.40 1.77 11,465 5,112 12, 873 12, 617 15, 918 17, 630 16,339 60,434 39, 051 69,880 43, 707 1.38 33, 253 19, 064 1.55 41, 462 22, 219 1.56 9,388 1.73 10, 010 8,012 8,903 1.03 17, 793 11, 974 1.13 18,408 12,586 1.33 1.54 1950: First half... . 52, 828 36, 480 Second half . 60, 434 41, 621 1.42 29, 123 17, 540 1.35 33, 253 20,589 1.64 1.50 8,131 9,388 7,452 8,572 1.06 15, 574 11,489 1.01 17, 793 12, 459 1.31 1.35 1951: First half—. 69, 442 44, 382 Second half*. 69, 880 42,898 1.49 39, 009 22, 579 1.63 41, 462 21, 787 1.61 10, 151 1.88 10, 010 9,036 8,744 1.10 20, 282 12,768 1.16 18,408 12, 367 1.55 1.54 1950: January February. _ . March April May June July August September.. October November.. December— 51, 201 50, 872 51, 126 51, 465 52, 271 52, 828 52, 304 53, 619 55, 146 57, 112 58, 954 60, 434 34, 104 35,182 36, 107 35, 920 38, 331 39, 239 41, 387 43, 444 40,819 41, 208 40,612 42, 254 1.50 1.45 1.42 1.43 1.36 1.35 1.26 1.23 1.35 1.39 1.45 1.43 28, 707 28, 472 28,432 28, 599 28, 830 29,123 29, 104 29, 253 30, 123 30,947 32, 245 33, 253 15, 915 16, 579 17,230 17, 255 18, 988 19, 271 19, 766 21, 413 20, 101 20, 684 20, 524 21, 048 1.80 1.72 1.65 1.66 1.52 1.51 1.47 1.37 1.50 1.50 1.57 1.58 7,679 7,705 7,785 7,952 8,092 8,131 8,025 8,236 8,424 8,775 9,005 9,388 7,114 7,294 7,482 7,233 7,687 7,899 8,636 9,066 8,337 8,481 8,320 8,595 1.08 1.06 1.04 1.10 1.05 1.03 .93 .91 1.01 1.03 1.08 1.09 14, 815 14, 695 14, 909 14, 914 15, 349 15, 574 15, 175 16, 130 16, 599 17, 390 17, 704 17, 793 11,075 11, 309 11, 395 11, 432 11, 656 12, 069 12, 985 12, 965 12, 381 12, 043 11, 768 12, 611 1.34 1.30 1.31 1.30 1.32 1.29 1.17 1.24 1.34 1.44 1.50 1.41 1951: January February... March April May June July August September 4. October * November 4. 62, 050 63,416 65,240 67,361 68, 981 69, 442 70, 268 70, 083 69, 922 70,008 69, 880 45, 933 44, 826 44, 242 43,470 44, 748 43, 072 41,729 43,048 41, 348 44, 319 44,044 1.35 1.41 1.47 1.55 1.54 1.61 1.68 1.63 1.69 1.58 1.59 34, 120 34, 657 35, 557 36, 908 38, 068 39, 009 39, 908 40, 580 41, 089 41, 354 41,462 22, 560 22, 261 22, 605 22, 479 23,434 22, 133 21, 268 21, 776 20, 706 22, 592 22, 592 1.51 1.56 1.57 1.64 1.62 1.76 1.88 1.86 1.98 1.83 1.84 9,475 9,715 9,940 10, 107 10, 270 10, 151 10,315 10, 074 10, 072 10, 109 10,010 9,761 9,222 8,984 8,684 8,883 8,679 8,384 8,824 8,366 9,161 8,983 .97 1.05 1.11 1.16 1.16 1.17 1.23 1.14 1.20 1.10 1.11 18,455 19,044 19, 743 20, 346 20, 643 20,282 20, 045 19, 429 18, 761 18,545 18,408 13, 612 13, 343 12, 653 12, 307 12, 431 12, 260 12, 077 12, 448 12, 276 12, 566 12,469 1.36 1.43 1.56 1.65 1.66 1.65 1.66 1.56 1.53 1.48 1.48 1950 19514 1 Book value, end of period. 2 Monthly average shown for year and half-year and total for month. For annual and semiannual periods, ratio of average end-of-month inventories to average monthly sales; for monthly data, ratio of end-of-month inventories to sales for month. * 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. 3 186 TABLE B—21.—Sales, stocks, orders, and receipts at 296 department stores, 1939—51 Reported data (millions of dollars) 1 Period Sales (total for month) Monthly average: 1939 128 Stocks (end of month) 344 Derived data (millions of dollars) 1 Outstanding orders (end of month) Receipts (total for month) (2) New orders (total for month) Ratio Stocks to sales 130 (2) 2.69 2 Outstanding orders to sales Outstanding orders to^stocks (3) (2) 136 156 179 204 227 353 419 599 509 535 108 194 263 530 560 137 165 182 203 226 () 170 192 223 236 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 1.05 255 318 337 352 333 563 715 826 912 862 729 909 552 465 350 256 344 338 356 331 269 327 336 335 331 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 .41 347 335 942 1,131 466 437 361 353 370 349 2.71 3.38 1.34 1.30 .49 .39 1950: First half Second half 298 396 873 1, 012 333 598 306 416 318 423 2.93 2.56 1.12 1.51 .38 .59 1951: First half 3 Second half .- . 324 348 1,140 1,119 466 403 350 356 346 353 3.52 2.93 1.44 1.16 .41 .40 1950: January February Afarch April May June July August September October November December - _ 256 247 320 318 330 318 292 332 369 360 405 615 789 853 920 930 906 837 791 919 1,026 1,169 1,210 956 390 393 326 271 249 370 694 754 700 582 444 412 256 311 387 328 306 249 246 460 476 503 448 362 349 314 320 273 284 370 570 520 422 385 308 330 3.08 3.45 2.88 2.92 2.75 2.63 2.71 2.77 2.78 3.25 2.98 1.55 1.52 1.59 1.02 .85 .75 1.16 2.38 2.27 1.90 1.62 1.09 .67 .49 .46 .35 .29 .27 .44 .88 .82 .68 .50 .37 .43 1951: January _ February March April May June 337 284 347 312 339 326 257 309 343 388 442 992 1,089 1,217 ,240 ,193 ,112 ,069 ,106 ,117 ,152 1,149 657 652 467 338 295 386 434 395 404 408 374 373 381 475 335 292 245 214 346 354 423 439 618 376 290 206 249 336 262 307 363 427 405 2.94 3.83 3.51 3.97 3.52 3.41 4.16 3.58 3.26 2.97 2.60 1.95 2.30 1.35 1.08 .87 1.18 1.69 1.28 1.18 1.05 .85 .66 .60 .38 .27 .25 .35 .41 .36 .36 .35 .32 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 -. 1950 19513 . __ July August September October... _ _ _ November 1 2 3 Not adjusted for seasonal variation. Not available. Averages based on data through November. NOTE.—These figures are not estimates for all department stores in the United States. Figures for sales, stocks, and outstanding orders are based on actual reports from the 296 stores. Receipts of goods are derived from the reported figures on sales and stocks. New orders are derived from estimates of receipts and reported figures on outstanding orders. Semiannual and annual data on receipts and new orders cannot be derived directly from the monthly averages of sales, stocks, and outstanding orders. Source: Board of Governors of the Federal Reserve System. 977891—52- -13 187 TABLE B-22.—Consumers' price index, 1929-51 For moderate-income families in large cities [1935-39-100] All items Period Monthly average: Food Apparel Rent Fuel, elecHousetricity, furnishand reings frigeration Miscellaneous 1929 122.5 132.5 115.3 141.4 112.5 111.7 104.6 1930 1931 1932 1933 1934 119.4 108.7 97.6 92.4 95.7 126.0 103.9 86.5 84.1 93.7 112.7 102.6 90.8 87.9 96.1 137.5 130.3 116.9 100.7 94.4 111.4 108.9 103.4 100.0 101.4 108.9 98.0 85.4 84.2 92.8 105.1 104.1 101.7 98.4 97.9 98.1 99.1 102.7 100.8 99.4 100.4 101.3 105.3 97.8 95.2 96.8 97.6 102.8 102.2 100.5 94.2 96.4 100.9 104.1 104.3 100.7 100.2 100.2 99.9 99.0 94.8 96.3 104.3 103.3 101.3 98.1 98.7 101.0 101.5 100.7 100.2 105.2 116.6 123.7 125.7 96.6 105.5 123.9 138.0 136.1 101.7 106.3 124.2 129.7 138.8 104.6 106.4 108.8 108.7 109.1 99.7 102.2 105.4 107.7 109.8 100.5 107.3 122.2 125.6 136.4 101. 1 104.0 110.9 115.8 121.3 128.6 139.5 159.6 171.9 170.2 139.1 159.6 193.8 210.2 201.9 145.9 160.2 185.8 198.0 190.1 109.5 110.1 113.6 121.2 126.4 110.3 112.4 121.1 133.9 137.5 145. 8 159.2 184.4 195. 8 189.0 124.1 128.8 139. 9 149.9 154.6 171.9 185.3 204.5 227.4 187.7 204.3 131.0 136.0 140.6 144.1 190.2 210.9 156.5 165.0 168. 8 175.1 198.0 211.0 184.9 190.5 130.1 132.0 139.8 141.4 185.1 195.4 154.9 158.0 1951: First half Second half * 184.2 186 7 225.7 229 1 202.5 206.5 134.7 137. 5 143.8 144 4 210.8 211. 1 164.0 166.3 1950: January 15 February 15 March 15 April 15 May 15 June 15 July 15 August 15 September 15 October 15 November 15 December 15 168.2 167.9 168.4 168.5 169.3 170.2 172.0 173.4 174.6 175.6 176.4 178.8 196.0 194.9 196. 6 197.3 199.8 203.1 208.2 209.9 210.0 210.6 210.8 216.3 185.0 184.9 185.1 184.9 184.7 184.6 184.5 185.7 189.8 193. 0 194.3 195.5 129.4 129.7 129.8 130.1 130.6 130.9 131. 3 131.6 131.8 132.0 132.5 132.9 140.0 140.1 140.3 140.3 138.8 139.1 139.4 140.2 141.2 142.0 142.5 142.8 184.7 185.2 185.3 185.4 185.0 184.8 186. 1 189.1 194.2 198.7 201.1 203. 2 155.1 155.1 155.0 154.7 155.1 154.6 155.2 156.8 157.8 158.3 159. 2 160.6 181.5 183.8 184.5 184.6 185.4 185. 2 185.5 185.5 186.6 187.4 188.6 (2) 221.9 226. 0 226.2 225.7 227.4 226.9 227.7 227.0 227. 3 229.2 231.4 231. 9 198.5 202.0 203. 1 203 6 204.0 204.0 203.3 203 6 209 0 208.9 207.6 (3) 133.2 134.0 134.7 135.1 135.4 135.7 136.2 136 8 137.5 138.2 138.9 (2) 143.3 143.9 144.2 144.0 143.6 143. 6 144.0 144 2 144.4 144.6 144.8 (2) 207.4 209.7 210.7 211.8 212.6 212.5 212.4 210 8 211.1 210.4 210 8 162.1 163. 2 164.3 164. 6 165.0 164.8 165.0 1^5.4 166.0 166.6 168.4 (2) ._ _ ._ 1935 1936 1937 1938 1939 ._ 1940 1941 1942 1943 1944 . . 1945 1946 1947 1948 1949 _ _ . . __ . - . 1950 19511 1950' First half Second half 1951: January 15 February 15 March 15 April 15 May 15 June 15 July 15 August 15 September 15 October 15 November 15 December 15 - - - . . . . .-_ _ . _._ i8 Averages based on data through November, except for food. Not available. Source: Department of Labor. 188 (2) TABLE B-23— Wholesale price index, 1929-51 [1926«=100] Other than farm products and foods £ Farm products All commodities A I 3 4 i •d g w bO .2 ,£3 t)o & §•! 3« a ~f is I i! 2ft I S'g •s* 3* rS *3§s |«> a p 1 s Ho £ s 1 « EH w 95.3 104.9 99.9 91.6 109.1 90.4 83.0 100.5 95.4 94.0 94.3 82.6 1930 1931..—1932 1933 1934 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 78.5 67.5 70.3 66.3 73.3 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 1935 1933 1937 1938 1939 80.0 80.8 86.3 78.6 77.1 78.8 80.9 86.4 68.5 65.3 83.7 82.1 85.5 73.6 70.4 77.9 89.6 79.6 95.4 85.3 104.6 81.7 92.8 81.3 95.6 70.9 71.5 76.3 66.7 69.7 73.5 76.2 77.6 76.5 73.1 86. 4 87.0 95.7 95.7 94.4 85.3 85.7 95.2 90.3 90.5 79.0 78.7 82.6 77.0 76.0 80.6 81.7 89.7 86.8 85.3 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 Period Monthly average: 1929 X m If OS A OS O to O 1 1940 1941 1942 1943 1944 78.6 67.7 71.3 87.3 82.4 82,7 98.8 105.9 99.6 103.1 122.6 108.6 104.0 123.3 104.9 83.0 89.0 95.5 96.9 98.5 100.8 108.3 117.7 117.5 116.7 1945 1946 1947 1948 1949 105.8 121.1 152.1 165.1 155.0 128.2 148.9 181.2 188.3 165.5 99.7 109.5 135.2 151.0 147.3 118.1 137.2 182.4 188.8 180.4 1950 1951 i 161 5 170.4 166. 2 153.2 191.9 148.0 133.2 173.6 206. 0 122.7 153.2 120.9 180.5 196.4 186.9 169.4 221.1 172.2 138.2 189.1 225.6 142.7 175.9 141.1 105.2 130.7 168. 7 179.1 161.4 100.1 84.0 104.7 117.8 95.2 116.3 90.1 115.5 132.6 101.4 141.7 108.7 145. 0 179.7 127.3 149.8 134. 2 163.6 199.1 135.7 140.4 131.7 170.2 193.4 118.6 104,5 111.6 131.1 144.5 145.3 94.7 100.3 115.5 120. 5 112.3 153.8 160.5 157.4 146.8 180.2 137.2 131.6 169.4 195.6 115.7 145, 8 112.1 _ 169.2 180.5 175.0 159.7 204.1 158.6 134.9 177.9 216.5 129.5 160.4 130.0 1950- First half Second half 1951- First half 1 .. „ 182.6 200.2 186.0 171.5 234.3 180.8 137.8 188.4 227.4 145.7 178.1 142.3 Second half 178.3 192.6 187.8 167.3 207.9 163.6 138.7 189.9 223.7 139.6 173.7 139.9 1950* January February Tvlarch April Mav July August September October November December 154.7 159. 1 159.4 159.3 164. 7 165.9 176.0 177.6 180.4 177.8 183. 7 187.4 154.8 156.7 155.5 155.3 159.9 162. 1 171.4 174.6 177.2 172.5 175. 2 179.0 145.8 146.0 146.1 146.3 147.6 148.7 151.6 155.5 159.2 161.5 163. 7 166.7 179.3 179.0 179.6 179.4 181.0 182.6 187.2 195.6 203.0 208.6 211.5 218.7 138.5 138.2 137.3 136.4 136.1 136.8 142.6 149.5 158.3 163.1 166.8 171.4 131.0 131.5 131.5 130.9 131.9 132.6 133.5 134.2 134.9 135.3 135, 7 135.7 168.5 168.7 168.6 168.8 169.9 171.9 172.4 174.4 176.7 178.6 180.4 184.9 191.6 192.8 194.2 194.8 198.1 202.1 207.2 213.9 219.7 218.9 217.8 221.4 115.3 115.0 116.2 117.0 116.4 114.5 118.1 122.5 128.7 132.2 135.7 139.6 144.9 145.2 145. 5 145. 8 146.6 146.9 148.7 153. 9 159. 2 163.8 166.9 170.2 110.0 110.0 110.7 112.6 114.7 114.7 119.0 124.3 127.4 131.3 137.6 140.5 180,1 194.2 183. 6 202.6 184.0 203.8 183.6 202.5 182.9 199.6 181.7 198.6 - 179.4 194. 0 178. 0 190. 6 177.6 189.2 178. 1 192.3 178. 3 195. 2 .. JLZ&-8- • 194. 2 182.2 187.6 186. 6 185.8 187.3 186.3 186.0 187.3 188.0 189.4 188.8 187.5 170.3 171.8 172.4 172.3 171.6 170.5 168.6 167.2 167.0 166.7 166.9 167.4 234. 8 238.2 236.2 233. 3 232.6 230.6 221.9 213.7 212.1 208.3 196. 8 194.4 178.2 181.1 183. 2 182.8 182. 1 177.7 173.2 167.5 163.2 157. 7 159. 5 160.7 136.4 138.1 138.6 138.1 137. 5 137.8 137.9 138.1 138.8 138.9 139,1 139.2 187. 5 188.1 188.8 189.0 188.8 188.2 187.9 188.1 189.1 191.2 191.5 191.5 226.1 228.1 228.5 228.5 227. 8 225.6 223. 7 222.5 223.0 223. 6 224.6 224.8 144.5 147.3 146.4 147.9 145. 7 142.3 139. 4 140.1 140.8 141 1 138.7 137.8 174.7 175. 4 178.8 180.1 180.0 179.5 178.8 175. 3 172.4 171.7 172.0 172.0 142.4 142.7 142.5 142.7 141.7 141.7 138.8 138.2 138.5 139.3 141.4 143.4 151.4 152.8 152.7 152. 8 - - - - 155.9 157 3 _ 162.9 166.4 169. 5 169.1 171.7 175.3 1951' January February _ _ March April _ _ May June July .. August September October.. November December * / 77 **? * Estimates based on incomplete data; by Council of Economic Advisers. Source: Department of Labor (except as noted). 189 TABLE B—24.—Indexes of prices received and prices paid by farmers^ and parity ratio ^ 1929—51 [1910-14=100] Prices received Period Monthly average: 1929 Prices paid (including interest, taxes, and wage rates) Parity ratio * 148 160 92 1930 1931 1932 1933 1934 125 87 65 70 90 151 130 112 109 120 64 75 1935 1936... 1937 1938 1939. 109 114 122 97 95 124 124 131 124 122 92 93 78 78 1940 1941 1942.. 1943 1944 100 123 158 2192 2196 124 132 151 170 182 81 93 105 113 108 1945... 1946 1947. 1948 1949... 2206 2234 275 285 249 189 207 239 259 250 109 113 115 110 100 1950...1951 256 302 255 281 100 107 1950: First half. Second half 241 272 250 260 105 1951: First half Second half 306 296 279 283 110 105 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.. 235 237 237 241 247 247 263 267 272 268 276 248 248 250 250 253 254 256 257 260 261 263 265 95 96 95 96 98 97 103 104 105 103 105 108 1951: January 15 February 15. March 15 April 15 May 15 June 15 July 15 August 15 September 15. October 15- — November 15.. December 15.. 313 311 309 305 301 294 292 291 296 301 305 272 276 280 283 283 282 282 282 282 283 284 284 110 113 111 109 108 107 104 104 103 105 106 107 1 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. 2 190 67 TABLE B-25.—Percentage increases in wholesale prices and cost of living in the United States and foreign countries since June 1950 Cost of living Wholesale prices Percentage increase, June 1950 to latest date Country United States _ .. Western European countries; Austria 2 Belgium Denmark Franco Germany (Federal Republic) _ _ Greece Ireland Italy . Netherlands Norway Portugal Spain Sweden _ . Switzerland _ ._ Turkey United Kingdom . Latin America: Argentina Brazil Chile.. . Costa Rica Cuba _ Dominican Republic El Salvador Guatemala Mexico Nicaragua Paraguay Peru Venezuela __ 0) 0) . , i. Percentage increase, June 1950 to latest date Latest date 1951 December 11 November 15 August 12 September 17 October 5 September 14 September 34 October 32 August 17 August 16 October 11 July 11 September 7 October 8 September 11 August 13 October 13 Africa and Near East: Algeria Egypt _ Iran Iraq Israel _ Lebanon Morocco Tunisia Union of South Africa Latest date 1951 52 30 33 46 29 30 19 17 24 31 10 38 37 16 9 28 October October November November October September September November September November September September September October October October 27 43 -6 October September October 14 November 0 August 3 November 32 November 36 August 61 June 25 June 7 September 0) 20 7 September October 49 October 14 October 15 October 27 October 11 October 19 October 39 June-Aug. quarter 12 October 12 September 20 October 3 October 11 September 19 August 8 October 4 September 13 September 22 April 12 October 39 September 8 September 10 June 15 October 12 December 2 October 16 August *37 August 28 June 11 June 4 September Pacific and Far East: Australia India Indochina . __ Japan • New Zealand Philippines _ _ Thailand 31 10 35 56 17 17 14 August November September October September October September 27 4 16 27 15 12 JO Third quarter September August September Third quarter September August Other: Canada Finland 15 53 October October 15 18 October September 1 2 Not available. Covers basic materials only. 3 May 1950 to latest quarter. Retail food prices only. NOTE.—-The components of the indexes are not always the same for each country. Source: International Monetary Fund. 4 191 977891—52- -14 TABLE B-26.—Consumer credit outstanding, 1929-51 [Millions of dollars] Instalment credit Total consumer credit End of period Total Automobile sale credit Other i Charge accounts Other consumer credit 2 1929 6,252 3,158 1,318 1,840 1,749 1,345 1930 1931 1932 — 1933 1934 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 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 99& 1,094 1,046 1,063 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 1950 1951 3 20, 097 20, 400 13, 459 13, 300 4,126 4,000 9,333 9,300 4,239 4,500 2,399 2,600 1950' January February _ March April. 16, 368 16, 159 16, 338 16, 639 17,077 17,651 18, 295 18, 842 19,329 19,398 19, 405 20, 097 10, 836 10, 884 11,077 11,322 11,667 12, 105 12, 598 13, 009 13, 344 13, 389 13, 306 13, 459 3,179 3,256 3,355 3,470 3,600 3,790 3,994 4,107 4,213 4,227 4,175 4,126 7,657 7,628 7,722 7,852 8,067 8,315 8,604 8,902 9,131 9,162 9, 131 9,333 3,506 3,233 3,211 3,241 3,290 3,392 3,527 3,636 3,741 3,703 3,739 4,239 2, 026 2,042 2,050 2,076 2,120 2,154 2,170 2,197 2,244 2,306 2,360 2,399 19, 937 19, 533 19, 379 19, 126 19, 207 19, 256 19, 132 19, 262 19,362 19, 586 19,996 20, 400 13, 252 13,073 12, 976 12, 904 12, 920 12, 955 12, 903 13, 045 13, 167 13, 199 13, 259 13, 300 4,056 3,990 3,946 3,934 3,980 4,041 4,061 4,138 4,175 4,134 4,100 4,000 9,196 9,083 9,030 8,970 8,940 8,914 8,842 8,907 8,992 9,065 9,159 9,300 4,248 4,010 3,938 3,744 3, 793 3,804 3, 743 3,724 3,696 3,868 4,206 4,500 2,437 2,450 2,465 2,478 2,494 2,497 2,486 2,493 2,499 2,519 2,531 2,600 . 1935 1936 1937 . 1938 1939 - - ._- - 1940 1941 1942 1943 1944 . 1945 1946 1947 1948 1949 . -. May June _ July August _ September October November December 1951: January February March April May June JulyAugust September October November 33 December . ._ _. .__ __ 1 Includes other sale credit and loans, including repair and modernization loans insured by Federal Housing Administration. 2 Includes loans by pawnbrokers, service credit, and single-payment loans under $3,000 made by commercial banks. The single-payment loan item was revised in November 1950 to exclude loans over $3,000. See Federal Reserve Bulletin for November 1950, pp. 1465-1466. 3 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); 192 TABLE B-27.—Loans and investments of all commercial banks, 1929-51] [Billions of dollars] Total loans and investments End of period » 1929— June 6 5 1930—June — _ 1931—June 55 1932— June 5 1933— June 5 1934— June . 1935 1936 1937 1938 1939 - 1940 1941 1942 1943 1944 1945 1946 . 1947 1948 . 1949 1950 19517 .. ... 1950: January February March April May June.. July August September October November December . _ ... _ _ _ _ 1951: January February March . _ April.. May June _ _ _ _ _ _ July August _ September _ _ _ _ _ October November 7 _. December Loans Total s Investments Commercial and industrial loans 4 Total U. S. Government obligations Other securities 49.4 35.7 (6) 13.7 4.9 8.7 48.9 44.9 36.1 30.4 32.7 34.5 29.2 21.8 16.3 15.7 (66) () (69) () (6) 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 36.1 39.6 38.4 38.7 40.7 15.2 16.4 17.2 16.4 17.2 (66) (6) () 5.7 6.4 20.9 23.1 21.2 22.3 23.4 13.8 15.3 14.2 15.1 16.3 7.1 7.9 7.0 7.2 7.1 43.9 50.7 67.4 85.1 105.5 18.8 21.7 19.2 19.1 21.6 7.3 9.3 7.9 7.9 8.0 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 6.3 124.0 114. 0 116.3 114.3 120.2 26.1 31.1 38.1 42.5 43.0 9.6 14.2 18.2 18.9 17.1 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 10.2 126.7 133.8 52.2 58.4 21.9 26.6 74.4 75.4 62.0 62.2 12.4 13.2 121.2 120.6 120.3 120.3 121.2 121.8 122.3 123.3 123.6 124.5 125.4 126.7 42.9 43.1 43.7 43.8 44.1 44.8 46.0 47.3 48.9 49.9 51.5 52.2 17.2 17.2 17.1 16.8 16.7 16.9 17.3 18.3 19.4 20.0 21.1 21.9 78.3 77.5 76.6 76.5 77.1 77.0 76.3 76.0 74.6 74.6 73.9 74.4 68.0 67.1 65.8 65.5 66.1 65.8 65.0 64.2 62.5 62.5 61.7 62.0 10.3 10.4 10.8 11.0 11.0 11.2 11.4 11.8 12.1 12.1 12.1 12.4 125. 1 125.0 125.7 125.4 125.1 126.0 126.1 127.0 128.6 130.5 131.9 133.8 52.7 53.5 54.4 54.4 54.5 54.8 54.6 55.2 56.0 56.8 57.3 58.4 22.3 23.1 23.8 23.7 23.6 23.7 23.5 24.1 24.8 25.4 25.9 26.6 72.3 71.5 71.3 71.0 70.6 71.2 71.5 71.9 72.6 73.7 74.6 75.4 60.0 59.1 58.8 58.5 58.1 58.5 58.7 59.1 59.7 60.9 61.6 62.2 12.4 12.4 12.6 12.6 12.5 12.7 12.8 12.7 12.9 12.9 13.0 13.2 1 2 Excludes mutual savings banks. June and December figures are for call dates. Other monthly data are for the last Wednesday of the month. 3 Data are shown net. Includes commercial and industrial loans, agricultural loans, loans on securities, real estate loans, loans to banks, and "other loans," some of which represent consumer credit. 4 Beginning with 1948, data are shown gross, i. e., before deduction of valuation reserves, instead of net as for previous years. Prior to June 1947 and for months other than June and December, data are estimated on the basis of reported data for all insured commercial banks and for weekly reporting member banks. 5 June data are used because complete end-of-year data are not available prior to 1935 for U. S. Government obligations and other securities. 6 Not available. 7 Estimates based on incomplete data; 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). 193 TABLE B-28.—Deposits and currency, 1929-51 [Millions of dollars] Total deposits and currency End of period * U.S. Government 2 deposits Total excluding U. S. Government deposits fprivately-held money supply) * Total Currency outside banks Demand deposits adjusted « Time deposits • 1929 54,742 187 54, 555 3,557 22,809 28,189 1930 53, 572 48, 379 45, 370 42, 551 48, 106 324 518 516 1,019 1,836 53, 248 47,861 44, 854 41, 532 46, 270 3,605 4,470 4,669 4,782 4,655 20, 967 17, 412 15, 728 15, 035 18,459 28, 676 25, 979 24, 457 21, 715 23,156 52, 726 57, 595 56, 781 59, 878 64, 733 1,453 1,235 966 1,812 1,480 51, 273 56, 360 55,815 58,066 63,253 4,917 5,516 5,638 5,775 6,401 22, 115 25, 483 23, 959 25, 986 29, 793 24,241 25, 361 26, 218 26, 305 27, 059 71, 129 79, 098 100, 500 123, 391 151, 428 1,121 2,762 9,201 11, 003 21, 203 70, 008 76, 336 91, 299 112, 388 130, 225 7,325 9,615 13, 946 18, 837 23, 505 34, 945 38, 992 48, 922 60, 803 66, 930 27, 738 27, 729 28,431 32, 748 39, 790 176, 378 167,500 172, 330 172, 693 173, 851 25, 585 3,496 2,322 3, 574 4,070 150, 793 164, 004 170, 008 169, 119 169, 781 26, 490 26, 730 26, 476 26, 079 25, 415 75, 851 83, 314 87, 121 85, 520 85, 750 48, 452 53, 960 56,411 57, 520 58,616 1950 fl 1951 180, 574 189,500 3,657 3,800 176, 917 185, 700 25, 398 26, 500 92, 272 98, 200 59,247 61,000 1950: January February March April 173, 600 172, 800 172, 400 172, 500 173, 000 174, 715 174, 400 175, 500 176, 400 176, 300 177, 400 180, 574 3,900 4,600 5,300 4,100 3,800 4,751 4,100 4,500 4,800 3,500 3,500 3,657 169, 700 168, 200 167, 100 168, 400 169, 200 169, 964 170, 200 171, 000 171, 600 172, 800 173, 900 176, 917 24, 500 24, 700 24, 600 24, 600 24. 700 25, 185 24, 400 24, 500 24, 500 24, 600 24, 900 25,398 86,400 84, 500 83, 200 84, 300 85, 000 85, 040 86, 500 87, 400 88, 000 89, 200 90, 300 92, 272 58, 700 59, 000 59, 300 59, 500 59, 500 59, 739 59, 400 59, 100 59, 000 59, 000 58, 700 59, 247 178, 800 178, 900 179, 900 179, 800 179, 100 181,333 180, 800 181, 600 183, 800 185, 800 187, 100 189, 500 3,600 4,700 7,400 6,500 5,400 6,649 5,000 4,600 5,900 4,200 4,400 3,800 175, 200 174, 200 172, 500 173, 300 173, 700 174, 684 175, 800 177, 000 177, 900 181, 600 182, 700 185, 700 24, 600 24, 600 24, 400 24, 600 24, 900 25, 776 25, 100 25, 300 25, 400 25, 700 25, 800 26, 500 91, 600 90, 600 89, 000 89, 500 89, 500 88, 960 90, 700 91, 400 92, 000 95, 000 96, 300 98, 200 59, 000 59, 000 59, 100 59, 200 59, 300 59, 948 60, 100 60, 400 60, 500 60, 900 60, 600 61,000 1931 1932 1933 1934 > ' 1935 1936 1937 1938 1939 - 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 _. - — — May June July August September October November December . 1951* January February March . .. __ April May. June July __.August September October _ _ November December ' * June and December figures are for call dates. Other monthly data are for the last Wednesday of the month. i Includes U. 8. Government deposits at Federal Reserve banks and commercial and savings banks, and, beginning with 193S, includes U. S. Treasurer's time deposits, open account. 8 Includes deposits and currency held by State and local governments. < Includes demand deposits, other than interbank and U. S. Government, less cash items in process of collection. * Includes deposits in commercial banks, mutual savings banks, and Postal Savings System, but excludes interbank deposits. « Estimates based on incomplete data; 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). 194 TABLE B-29.—Estimated ownership of Federal obligations, 1939-51 l [Billions of dollars—par values ] Gross public debt and guaranteed issues * End of period Total Held by U.S. Government investment accounts Held by others State Total local held by and governothers ments 3 Commercial4 banks Nonbank private Federal corporaIndiReserve tions and viduals 6 banks associa4 tions 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 1945 1946 1947 1948 1949 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 66.2 60.3 58.6 56.2 57.7 63.9 64.1 65.5 65.6 66.5 1950 1951 7 256.7 259.5 39.2 42.3 217.5 217.2 7.8 8.0 61.8 61.5 20.8 23.8 60.1 57.9 67.0 66.0 1950* 'January February March April May June - July AugustSeptember 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 39.0 38.4 37.6 37.3 37.4 37.8 38.0 38.1 38.9 39.0 39.2 39.2 217.9 218.0 218.1 218.4 219.0 219.5 219.6 219.8 218.3 217.9 217.9 217.5 8.0 8.0 8.4 8.4 8.3 8.2 8.3 8.3 8.2 8.1 8.1 7.8 67.4 66.4 64.9 65.2 65.8 65.6 64.6 64.1 62.2 62.2 61.5 61.8 17.8 17.7 17.6 17.8 17.4 18.3 18.0 18.4 19.6 19.3 19.7 20.8 58.0 58.9 60.3 59.9 60.2 59.9 60.9 61.3 60.8 60.9 61.1 60.1 66.7 67.0 66.9 67.1 67.3 67.5 67.8 67.8 67.6 67.5 67.6 67.0 1951: January February March ._ April _-. May June July August September October __ November77 December 256. 1 256.0 255.0 254. 7 255.1 255.3 255.7 256.7 257.4 258.3 259.6 259.5 39.6 39.7 39.8 39.9 40.3 41.0 41.0 41.5 42.0 42.0 42.2 42.3 216.6 216.2 215.2 214.9 214.8 214.3 214.6 215.2 215.4 216.4 217.4 217.2 7.8 7.9 7.9 7.9 8.0 8.0 8.0 8.0 8.0 8.1 8.1 8.0 59.9 58.9 57.8 58.4 57.8 58.4 58.7 58.8 59.4 60.6 61.2 61.5 21.6 21.9 22.9 22.7 22.5 23.0 23.1 23.1 23.7 23.6 23.2 23.8 60.7 61.0 60.4 59.4 59.9 58.5 58.6 59.0 58.1 58.0 58.7 57.9 66.8 66.6 66.2 66.3 66.5 66.4 66.3 66.3 66.2 66.2 66.2 66.0 1 United States savings bonds, series A-D, E, and F. are included at current redemption values. 2 Excludes guaranteed securities held by the Treasury. Includes trust, sinking, and investment funds of State and local governments and their agencies, and Territories and possessions. < Includes commercial banks, trust cpmpanies, and stock savings banks in the United States and in Territories and possessions; excludes securities held in trust departments. s Includes insurance companies, mutual savings banks, savings and loan associations, nonprofit institutions, corporate pension trust funds, 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, includes holdings of Federal land banks. 6 Includes partnerships and personal trust accounts. ^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). 3 195 TABLE B-30.-—U. S. Government debt—volume and kind of obligations, 7929-57 [Billions of dollars] i Interest-bearing public debt Gross Marketable public public issues debt and guaranteed issues i Short- Treasury term issues 2 bonds End of period Nonmarketable public issues United States savings bonds Nonnterestbearing 3 debt Treas- Special ury issues ;ax and savings 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 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 (4) .6 .3 .1 .1 _ 256.7 259.5 58.3 65.6 94.0 76.9 58.0 57.6 8.6 7.5 33.7 35.9 2.4 2.4 (4) (*) _ __ 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 (44) (4 ) () (44) (4) (4 ) (4) ( 4) () (44) () (4) 256.1 256.0 255.0 254.7 255.1 255.3 255.7 256.7 257.4 258.3 259.6 259.5 57.4 57.4 57.4 57.4 57.4 58.9 60.3 60.8 61.9 63.5 64.5 65.6 94.0 94.0 94.0 80.5 80.5 78.8 78.8 78.8 78.1 78.1 78.1 76.9 58.0 57.8 57.8 57.7 57.6 57.6 57.5 57.5 57.5 57.5 57.6 57.6 8.7 8.7 8.3 8.1 8.2 7.8 7.9 8.0 7.8 7.7 7.7 7.5 34.0 33.9 33.5 33.6 34.0 34.7 34.7 35.1 35.6 35.6 35.9 35.9 2.4 2.6 2.4 2.4 2.4 2.4 2.3 2.3 2.4 2.4 2.4 2.4 (44) () (44) (4) ( 4) () (44) ( 4) ( 4) ( 4) (4) () 1940. 1941 1942 1943__ 1944 1945 1946 1947 1948 1949 _ __ _ _ 1950 1951 1950: January February March. April May June July August September October .. November December. _ _ _ __ 1951: January February ._ March April _May _ _ _ June_ July August -__ _ -__ . September October _ November. __ _.. December | 1 Total includes Postal Savings bonds, prewar bonds, adjusted service bonds, depositary bonds, Armed Forces leave bonds, and Treasury investment bonds, not shown separately. Excludes guaranteed securities held by the Treasury. 2 Includes Treasury bills, certificates of indebtedness, and Treasury notes. 3 Issued to U. S. Government investment accounts; these accounts also held 6.4 billion dollars of public marketable and nonmarketable issues on December 31,1951. * Less than 50 million dollars. Source: Treasury Department. 196 TABLE B-31.—Bond yields and interest rates, selected years, 1929-51 [Percent per annum] Average of rates Prime Bankers' Federal charged commerCorporate by accept- Reserve banks Aaa cial on shortbank ances, Taxable bonds paper, term 90 discount 4-6 bonds (Moody's) loans — rate days 15 years selected months and over cities U. S. Government security yields Period 3-month Treasury bills i Average: 1929 1933 1935 1937. 1939 (3) 0.515 .137 .447 .023 9-12 month issues 2 (44) (4 ) (4) () (4) (55) () (55) () (5) 4.73 4.49 3.60 3.26 3.01 (6) (66) (6) () 2.1 5.85 1.73 .76 .94 .59 5.03 .63 .13 .43 .44 .103 373 (4) 0.75 (5) 2.47 2.77 2.73 2.0 2.6 .54 .69 .44 .44 .375 .375 .594 1.040 1.102 .81 .82 .88 1.14 1.14 2.37 2.19 2.25 2.44 2.31 2.62 2.53 2.61 2.82 2.66 2.2 2.1 2.1 2.5 2.7 .75 .81 1.03 1.44 1.48 .44 .61 .87 1.11 1.12 7 1.00 1.218 1.552 1.26 1.72 2.32 2.57 2.62 2.86 2.7 3.1 1.45 2.17 1.15 1.60 1.59 1.75 1950: First quarter Second quarter Third quarter Fourth quarter 1.118 1.166 1.233 1.353 1.14 1.19 L27 1.44 2.24 2.31 2.34 2.38 2.58 2.61 2.63 2.67 2.60 2.68 2.63 2.84 1.31 1.31 1.47 1.71 1.06 1.06 1.18 1.31 1.50 1.50 1.62 1.75 1951: First quarter Second quarter Third quarter Fourth quarter 1.400 1.532 1.628 1.649 1.62 1.84 1.72 1.73 2.42 2.61 2.59 2.66 2.70 2.90 2.89 2.95 3.02 3.07 3.06 3.27 1.96 2.20 2.25 2.26 1.51 1.63 1.63 1.65 1.75 1.75 1.75 1.75 1941 1943 1945 1946, 1947 1948. 1949. . _ . . _ 1950 1951 5.16 2.56 1.50 1.33 1.00 7 1.00 1.00 ? 1.00 1.00 1.34 1.50 1 Rate on new issues within period. 23 Includes certificates of indebtedness and selected note and bond issues. Treasury bills were first issued in December 1929. *< Not available before August 1942. s6 Bonds-in this classification were first issued in March 1941. Not available on same basis. f 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 or callable in 1 year or less. NOTE.—Yields and rates computed for New York City, except for average of rates charged on short-term oans. Sources: Treasury Department, Moody's Investors Service, and Board of Governors of the Federal Reserve System. 197 TABLE B—32.—Profits before and after tax, all private corporations, 1929—51 [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 1951« Corporate profits after tax Corporate profits before tax Corporate tax liability 1 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 -.6 -.3 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 19.7 23.5 30.5 33.8 28.3 11.2 9.6 11.9 13.0 11.0 8.5 13.9 18.5 20.7 17.3 4.7 6.8 6.6 7.2 7.6 [3.8 Ff8.1 12.0 13.5 9.8 41.4 44.8 18.6 26.7 22.8 18.1 9.2 9.5 13.6 8.6 Total Dividend payments Undistributed profits 00 -.9 1.2 m T2.4 [4.9 '6.1 [6.2 L6'1 Seasonally adjusted annual rates 1950: First half Second half . 1951: First half Second half 3 1950: First quarter Second quarter Third quarter Fourth quarter 1951: First quarter Second quarter Third quarter 33 Fourth quarter .. 34.7 48.0 15.6 21.5 19.0 26.5 8.1 10.2 11.0 16.2 48.6 41.0 29.0 24.4 19.6 16.6 9.2 9.8 10.4 6.8 31.9 37.5 45.7 50.3 14.4 16.9 20.5 22.5 17.5 20.6 25.2 27.8 7.8 8.4 9.4 11.1 9.7 12.2 15.8 16.7 51.8 45.4 40.0 42.0 31.1 27.0 23.8 25.0 20.7 18.4 16.2 17.0 8.8 9.6 9.6 10.1 11.9 8.8 6.6 6.9 i Federal and State corporate income and excess profits taxes. a Minus 8 million dollars. » Estimates based on incomplete data; by Council of Economic Advisers. NOTE.—No allowance has been made for inventory valuation adjustment. See appendix Table B-6 for profits before tax and inventory valuation adjustment. The figures beginning with 1948 are based on the revised series of national income and product of the Department of Commerce. For detail, see the National Income Supplement to the Survey of Current Business, 1951. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). TABLE B-33.—Sales and profits of large manufacturing corporations, 1939-51 [Millions of dollars] Nondurable goods industries (94 corporations) 1 Durable goods industries (106 corporations) l Period Sales Profits Sales Before taxes After taxes Before taxes After taxes 1939 ... 1940 194] 1942 1943 1944 1945 1946 J947 1948 1949 — _ — 1950 Profits 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 12,376 19, 484 23,567 23,886 1,288 608 2,312 3,105 3,191 574 295 1,354 1,835 1,887 8,371 8,940 11,313 13, 364 12,790 1,133 1,425 1,787 2,208 1,843 555 908 1,167 1,474 1,211 29, 346 5,190 2,549 14,710 2,701 1,510 Totals for period, not adjusted for seasonal variation I960- First half Second half 13,229 16,117 2,135 3,055 1,197 1,352 6,705 8,005 1,086 1,615 1951- First half 1,007 8,583 1,659 662 850 17, 121 2,787 1950' First quarter 3 2 Second quarter2 Third quarter Fourth quarter 2 6,004 7,225 7,891 8,. 226 896 1,240 1,403 1,652 503 694 776 576 3,251 3,453 3,939 4,066 504 581 782 833 307 353 468 382 1951: First quarter * 5 Second quarter Third quarter 3 8,362 8,759 8,003 1,382 1,405 1,193 510 497 429 4,323 4,260 4,279 850 809 769 367 340 332 706 i 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. * Certain Federal income tax accruals for the first 6 months of 1950 and 1951, required by subsequent increases in Federal income tax rates and charged by many companies against third quarter profits, have been redistributed to the first and second quarters. Available information does not permit a similar redistribution of accruals charged against fourth quarter 1950 profits to cover 1950 liability for excess profits taxes. Estimates for third quarter 1951 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. 199 TABLE B-34.—Relation of profits before and ajter taxes to stockholders' equity, private manufacturing corporations•, by industry group, 7947-49 average and 1950—51 Percentage ratio of profits (annual rate) to stockholders' equity Industry group 1947-49 average Total 1950 1951 First Second Third First Second Third quarter quarter quarter quarter quarter quarter Before Federal taxes All private manufacturing corporations 23.2 28.0 19.6 24.8 31.2 32.8 30.4 25.5 Food - -. . Tobacco manufactures Textile mill products Apparel and finished textiles __ Lumber and wood products 23.6 19.6 24.8 21.6 26.0 22.4 21.2 22.8 18.0 29.6 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 20.8 20.4 29.6 22.0 34.0 18.4 20.4 23.2 11.2 31.6 18.9 22.5 11.8 11.5 20.6 Furniture and fixtures. _ _ Paper and allied products Printing and publishing (except newspapers) Chemicals and allied products Products of petroleum and coal 23.6 26.0 27.2 28.4 15.6 20.8 23.6 23.2 29.2 28.8 34.4 44.0 28.8 42.8 22.2 32.6 23.6 24.0 20.4 20.0 32.4 19.2 20.4 25.2 12.8 16.8 28.4 16.8 24.0 36.4 20.4 21.6 40.8 23.2 26.8 32.4 23.2 25.4 31.2 22.9 Rubber products Leather and leather products Stone, clay, and glass products. Primary nonferrous metal industries. Primary iron and steel industries 19.6 17.6 22.8 18.4 20.0 30.8 19.2 33.2 25.6 28.4 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 43.2 22.4 36.4 32.0 34.8 41.2 17.6 39.2 32.8 35.6 31.3 16.9 33.2 24.2 29.7 Fabricated metal products Machinery (except electrical and transportation) Electrical machinery Transportation equipment (except motor vehicles) Motor vehicles and parts 24.4 29.2 18.4 24.8 34.0 37.6 33.6 27.2 24.0 26.8 26.0 41.6 18.4 29.2 24.4 31.2 26.8 41.2 30.8 47.2 34.8 34.4 28.1 28.6 10.4 34.4 18.8 53.2 12.0 39.2 17.6 55.2 19.2 58.8 19.6 46.0 25.2 44.0 18.3 34.0 Instruments; photographic and optical goods; watches and clocks Miscellaneous manufacturing (including ordnance) 22.0 30.8 20.8 26.0 33.2 33.6 33.6 30.0 19.2 22.8 10.0 14.8 29.6 34.8 26.0 17.3 After Federal taxes All private manufacturing corporations 14.4 15.6 12.0 15.6 17.6 14.8 13.6 10.4 Food .Tobacco manufactures Textile mill products Apparel andfinishedtextiles . Lumber and wood products 14.0 12.0 14.8 12.4 16.8 12.4 11.6 12.8 10.0 17.6 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 10.0 9.6 14.4 11.6 17.2 9.2 10.0 10.8 4.4 16.0 8.8 9.2 4.8 4.8 10.6 Furniture and fixtures Paper and allied products Printing and publishing (except newspapers) Chemicals and allied products . . Products of petroleum and coal 14.0 16.0 15.2 16.4 8.4 12.8 15.2 14.4 16.0 16.4 16.0 18.4 11.6 17.6 9.8 12.4 14.4 14.8 15.2 11.6 18.0 14.0 12.8 15.6 10.0 9.6 17.6 13.2 14.4 20.8 14.0 10.0 17.2 14.4 13.6 14.0 15.2 12.4 10.7 14.5 Rubber products _ . _. Leather and leather products Stone, clay, and glass products Primary nonferrous metal industries . Primary iron and steel industries 11.2 10.4 14.0 11.6 12.0 16.8 10.8 17.6 15.2 14.4 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 18.8 10.8 16.0 16.0 13.6 15.6 7.2 16.8 14.8 13.6 12.2 6.5 12.0 10.4 8.5 Fabricated metal products Machinery (except electrical and transportation) __ __ Electrical machinery Transportation equipment (except motor vehicles) -.. Motor vehicles and parts 14.8 16.0 11.2 15.6 19.2 17.6 14.4 11.2 14.4 16.0 14.0 20.8 10.8 17.2 14.8 18.4 14.8 22.0 15.2 18.4 14.8 14.0 10.4 8.6 6.0 19.6 10.0 25.2 7.2 22.8 10.4 32.4 10.0 28.8 9.2 17.2 11.6 17.2 8.0 10.6 13.6 16.8 12.8 16.0 18.8 14.4 14.0 10.4 11.2 12.4 5.2 8.4 16.8 16.4 10.0 6.7 Instruments; photographic and optical goods; watches and clocks Miscellaneous manufacturing (including ordnance) Sources: Federal Trade Commission and Securities and Exchange Commission. 200 TABLE B—35.—Relation of profits before and after taxes to sales, private manufacturing corporations, by industry group, 1947-49 average and 1950—51 Profits in cents per dollar of sales 1951 1950 Industry group 1947-49 average Total First Second Third First Second Third quarter quarter quarter quarter quarter quarter Before Federal taxes All private manufacturing corporations _ 10.5 12.8 10.1 11.8 13.5 13.5 12.9 11.5 6.1 7.8 11.6 5.6 14.4 6.1 9.0 10.5 5.0 15.9 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 5.4 9.1 11.9 5.4 17.7 4.9 8.3 10.2 3.2 16.1 4.9 8.9 6.1 3.1 11.5 Furniture and fixtures Paper and allied products Printing and publishing (except newspapers) Chemicals and allied products _ Products of petroleum and coal 8.4 14.0 9.0 15.4 5.9 12.3 8.4 13.6 9.5 15.6 10.5 19.8 9.4 19.6 8.9 16.8 8.6 13.8 14.7 7.9 18.8 14.9 8.5 15.6 10.7 6.8 17.1 13.5 9.4 20.5 15.2 8.3 20.9 16.5 9.9 18.6 17.0 9.6 18.0 16.8 Rubber products Leather and leather products Stone, clay, and glass products _ _ Primary nonferrous metal industries. Primary iron and steel industries 7.7 5.7 13.7 13.4 11.5 10.6 6.5 18.8 17.3 15.5 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 13.0 6.9 19.7 18.2 16.5 12.2 5.9 20.1 19.3 16.6 10.0 5.7 18.6 14.9 16.2 Fabricated metal products __ . Machinery (except electrical and transportation) _ . Electrical machinery _ Transportation equipment (except motor vehicles) Motor vehicles and parts 10.8 12.4 9.7 11.4 13.0 14.5 13.1 11.6 6.5 9.9 13.3 14.3 10.7 11.3 12.6 11.7 13.6 14.0 15.0 15.1 14.5 12.2 13.1 11.1 5.5 12.2 8.9 17.5 6.2 15.3 8.6 17.8 9.3 18.0 7.9 14.0 8.2 13.8 6.7 12.4 12.2 15.9 12.6 14.3 16.8 16.0 15.6 14.8 8.9 10.4 5.5 7.7 12.5 13.8 11.3 8.7 Food Tobacco manufacturers Textile mill products Apparel and finished textiles Lumber and wood products __ _. Instruments; photographic and optical goods; watches and clocks Miscellaneous manufacturing (including ordnance) .. After Federal taxes All private manufacturing corporations Food Tobacco manufactures-.- ._ Textile mill products Apparel andfinishedtextiles Lumber and wood products ._ 6.5 7.1 6.2 7.4 7.6 6.1 5.8 4.7 3.6 4.8 6.9 3.3 9.2 3.4 4.9 5.8 2.8 9.4 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 2.6 4.3 5.7 2.8 9.1 2.5 4.1 4.7 1.3 8.2 2.3 3. 6 2.4 1.3 5.9 Furniture and fixtures Paper and allied products -- _ . Printing and publishing (except newspapers).-. _ _ _ - _ _ _ _ Chemicals and allied products Products of petroleum and coal. 4.9 8.6 5.1 8.8 3.2 7.5 5.4 8.4 5.3 9.0 4.9 8.3 3.8 7.9 3.9 6.4 5.2 8.6 11.1 4.5 10.3 10.7 5.4 9.6 8.2 3.8 10.6 10.7 5.6 11.7 10.5 3.9 8.8 10.2 5.0 7.9 11.0 4.7 6.2 10.6 Rubber products Leather and leather products Stone, clay, and glass products Primary nonferrous metal industries Primary iron and steel industries 4.3 3.3 8.4 8.3 6.9 5.8 3.7 10.1 10.2 7.9 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 5.7 3.3 8.5 9.0 6.4 4.7 2.4 8.5 8.7 6.4 3.9 2.2 6.8 4.3 7.0 Fabricated metal products Machinery (except electrical and transportation) Electrical machinery Transportation equipment (except motor vehicles) Motor vehicles and parts 6.6 6.8 5.9 7.1 7.3 6.7 5.6 4.8 39 6.0 7.3 7.2 6.4 6.7 7.7 7.0 7.6 7.5 6.6 5.9 6.2 5.0 4.9 3.3 32 7.0 4.7 8.3 3.7 8.9 5.1 10.5 4.8 8.8 3.7 5.2 3.75.4 2.9 3.9 Instruments; photographic and optical goods; watches and clocks Miscellaneous manufacturing (including ordnance) _ _ _-_ . 7.5 8.6 7.7 8.9 9.4 6.9 6.4 6.2 5.2 5.6 2.9 4.5 7.0 6.6 4.9 3.3 Source: Federal Trade Commission and Securities and Exchange Commission. 201 TABLE B—36.—Relation of profits before and after taxes to stockholders' equity and to sales, all private manufacturing corporations, by size class, 1947-49 average and 1950-51 1950 Assets class (thousands of dollars) 1947-49 average 1951 First Second Third First Second Third Total quarter quarter quarter quarter quarter quarter Ratio of profits before 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 _ _. 23.2 28.0 19.6 24.8 31.2 32.8 30.4 25.5 16.8 22.4 23.6 24.0 22.4 17.2 23.6 25.2 27.6 29.6 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 23.6 28.8 33.2 34.4 32.0 22.4 28.0 30.4 32.0 30.0 17.4 21.3 22.6 25.4 26.8 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 10.5 12.8 10.1 11.8 13.5 13.5 12.9 11.5 4.5 7.2 8.8 10.8 12.2 4.3 7.9 9.5 12.5 15.5 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 5.4 8.8 10.9 13.8 15.4 5.2 8.5 10.1 12.9 14.9 4.2 7.0 8.2 11.0 14.0 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 14.4 . 15.6 12.0 15.6 17.6 14.8 13.6 10.4 9.6 12.8 14.0 14.8 14.4 10.4 13.2 14.0 15.2 16.4 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 14.4 14.8 15.6 15.2 14.4 13.6 13.2 13.2 14.0 14.0 9.1 9.7 8.8 10.0 11.0 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_. - 6.5 7.1 6.2 7.4 7.6 6.1 5.8 4.7 2.6 4.2 5.2 6.6 7.8 2.6 4.4 5.2 6.9 8.6 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 3.3 4.5 5.2 6.0 7.0 3.2 4.0 4.4 5.6 6.9 2.2 3.2 3.2 4.3 5.8 Sources: Federal Trade Commission and Securities and Exchange Commission. 202 TABLE B-37.—Sources and uses of corporate funds, 1947-51 [Billions of dollars] 1947 Source or use of funds Uses: Plant an d equipment outlays — Inventories (change in book value) Change in customer receivables. Cash and U. S. Government securities Other current assets .- - 1048 16.2 7.1 7,6 1.2 -.1 18.0 __ 32.0 Sources: Internal: Retained profits and depletion allowances _._ Depreciation allowances ,_ .. _ Total uses 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 _._ Total external sources Total sources Discrepancy (sources less uses) _ . . _ _ 4.2 4.0 1.9 .1 1949 1950 16.1 -4.3 16.6 7.5 1951» 21.7 10.0 30 —.2 5.0 .3 8.6 5.0 3.0 .5 28.2 14.1 39.4 38.8 11.6 5.2 12.8 6.2 9.1 70 12.9 7.5 8.0 85 16 8 19 0 16 1 20 4 16 5 4.6 2.3 1.0 2.6 .6 4.4 1.2 .8 (8) 1.1 .7 —2.9 -2.1 _ -i -1.9 59 3.5 8.5 1.0 .7 7.1 .3 2.5 .9 59 4 9 37 15 5 9 7 —1 4 20 4 32.3 28.7 14.7 40.8 39.8 —.3 —.5 — 6 —1.4 —1.0 —.5 35 1.0 58 23 3 * Excludes banks and insurance companies. » Estimates based on incomplete data; by Council of Economic Advisers. * Less than 50 million dollars. Source: Department of Commerce estimates based on Securities and Exchange Commission and other financial data (except as noted). 203 TABLE B-38.—International transactions of the United States, 1948-51 [Millions of dollars] 1951 Type of transaction 1948 1949 1950 First Second Third Fourth Total i quarter quarter quarter quarter 1 Exports of goods and services: Recorded goods Other goods 2 __ __ __ -. Total goods . Services _ _ __ Income on investments Total exports _ _ 12, 651 695 12, 052 285 10, 275 383 14, 888 573 3,334 80 4 018 73 3 686 135 3 850 285 13, 346 2,246 1 375 12, 337 2,232 1,405 10, 658 2,024 1 743 15, 461 2,750 2,003 3,414 565 396 4 091 721 471 3 821 744 511 4 135 720 625 16, 967 15, 974 14, 425 20, 214 4,375 5,283 5,076 5 480 Imports of goods and_ser vices: Recorded goods Other goods 2 7 124 698 6 622 444 8 852 463 11 204 649 3 032 185 2 980 153 2 492 139 2 700 ' 172 Total goods Services Income on investments 7 822 2 162 284 7 066 2,184 353 9 315 2,376 437 11 853 2,893 417 3 217 612 86 3 133 706 99 2 631 856 93 2 872 719 139 _. .. 10 268 9,603 12, 128 15, 163 3 915 3 938 3 580 3 730 Surplus of exports of goods_and services: Recorded goods Other goods 2 Total imports 5 527 —3 5 430 —159 1 423 —80 3 684 -76 302 —105 1 038 —80 1 194 —4 1 150 'l!3 Total goods Services . Income on investments _ 5 524 84 1 091 5,271 48 1 052 1, 343 -352 1 306 3,608 —143 1 586 197 —47 310 958 15 372 1 190 —112 418 1 263 1 486 6 699 6 371 2 297 5 051 460 1 345 1 496 1 750 —855 —159 269 —10 16 —11 10 C3) 23 1,279 83 1, 102 27 1,092 -18 - Total surplus of exports Means of financing surplus of exports of goods and services: Liquidation of gold and dollar assets by foreign countries Dollar disbursements (net) by: International Monetary Fund International Bank U. S. Government sources (net):" Grants and other unilateral transfers _ Long- and short-term loans _ U. S. private sources (net): Remittances. -Long- and short-term capital 8 780 —60 —3, 645 -122 595 203 176 99 38 —20 37 4,157 886 5,321 647 4,120 164 4,508 151 1,035 59 678 522 481 412 112 96 94 110 856 589 1,316 750 249 284 2 215 Total means of financing 7,736 —1 037 Errors and omissions 7,156 —785 2,453 —156 5,699 -648 606 —146 1,582 —237 1,517 —21 1,994 —244 1 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. 2 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. 34 Less than $500,000. For detail, see appendix table B-40. s Excludes purchases or sales of obligations issued by the International Bank for Reconstruction and Development. Source: Department of Commerce (except as noted). 204 TABLE B--39.—United States exports and imports of goods and services, by area, 1948—51 [Billions of dollars, annual rates] 1951 Area Exports of goods and services: 2 ERP countries . _ _ _ ERP dependencies Europe, except ERP countriesCanada and Newfoundland Latin-4American republics Other Total exports Imports of goods and services: 2 ERP countries ERP dependencies Europe, except ERP countriesCanada and Newfoundland- __ Latin-American republics Other 4 1948 1949 1950 First Second Third Fourth Total i quarter quarter quarter quarter * 5.89 5.39 .27 2.48 4.22 3.26 .21 2.59 3.66 3.21 .18 2.73 3.92 2.59 (3) () (3) 16 97 15 97 14 42 20 21 2.20 2.22 2.69 .85 .74 4.43 .90 .58 .71 .89 (3) 3 (3) (3) (3) (3) .24 2.04 3 08 1.98 .18 2.01 2 94 1.54 .23 2.44 3 56 2.32 () (3) (3) 10 27 9 60 12 13 15 16 3 69 3 17 .03 .45 1.14 1.28 .03 .58 .72 1.67 1 73 —.31 -.04 .29 .36 6.70 6.37 Exports of goods and services to sterling area 8 Imports of goods and services from sterling area 2 67 1 93 Export5 surplus with sterling area .74 Total imports Export surplus of goods and services: 2 ERP countries ERP dependencies Europe, except ERP countriesCanada and Newfoundland Latin-American republics Other*. .__ Total export surplus .11 .19 .27 3 (3) (3) (3) (3) (3) (3) (3) 5.48 .52 .29 3.18 4.57 3.46 7.16 .68 .38 3.92 5.12 3 87 6 45 .74 .32 3.44 5.34 4 02 17 50 21 13 20 30 3.38 1.30 .26 2.47 4 90 3.35 3.64 1.21 .26 2.80 4 18 3 66 3 48 1.13 .18 3.04 3 51 2 98 15 66 15 75 14 32 2.10 —.78 .03 .71 -.33 .11 3 52 - 53 .12 1.12 .94 .21 2 97 —.39 .14 .40 1.83 1.04 1.84 5.38 5.98 (3) (3) (3) ((3)3) (3) 21 92 (3) (3) (3) (3) (3) (3) 14 92 (3) (3) (3) (3) (3) (3) 7.00 2.30 5.05 2.52 1 95 (3) 2 31 2 86 3 19 (3) 1.73 2.27 (3) 3.00 3 42 2.84 (3) .79 -.32 (3) -.69 -.56 .35 (3) ADDENDUM 12 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. Includes income on investments. 34 Not available. 6 Includes international institutions. In 1950 and 195], includes "special category" exports sold for cash, but excludes all transactions under the Mutual Defense Assistance Program. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce (except as noted). 205 TABLE B-40.—U. S. Government grants, other unilateral transfers, and loans to foreign countries, 1948-51 [Millions of dollars] 1951 Type of aid Unilateral payments: Military-aid programs: Mutual Defense Assistance Program Greek-Turkish aid Chinese aid EGA programs: European Recovery Program Other Army Civilian Supply Program *. Technical Cooperation Administration Philippine Rehabilitation Act. Interim aid and Post-UNRRA International Refugee Organization and other United Nations relief organizations Other -- 1948 1949 1950 First Second Third Fourth Total i quarter quarter quarter quarter 1 349 71 171 44 516 62 5 1 397 96 3 730 ' 92 1,082 2 719 114 500 1,468 (2) 322 3 (2) (2) 454 3 (3) (2) (2) « 435 1 (22) () (2) (3) 595 26 81 651 21 127 539 40 70 (2) (2) 3 4 5 4 (2) 7 166 (2) (2) 1 4 (2) 130 627 203 2 117 107 104 157 84 122 (2) (2) 14 41 7 47 6 32 (2) (2) Total unilateral payments. .. 4,362 Less: Unilateral receipts 205 5,585 264 4,295 175 (2) (2) 1,087 52 1,319 40 1,132 30 (2) (2) 4,157 5,321 4,120 4, 508 1,035 1,279 1,102 300 476 454 428 163 163 193 (2) (2) 39 83 25 81 70 30 168 30 2 (2) 6 3 9 26 20 12 28 22 6 (2) (2) (2) 4 1 4 2 4 2 (22) (2) () 1,416 443 679 205 414 287 (2) (2) 127 60 112 46 106 87 (22) () Equals: Net unilateral jpayments 1 Long-term loans and investments: United Kingdom loan European Recovery Program.. Export-Import Bank loans Surplus property credits, including ship sales ._ Raw-material credits to occupied areas United Nations building loan. Other Total long-term loans and Investments Less: Repayments Equals: Net long-term loans and investments Short-term loans (net) Total net unilateral payments, loans and investments (2) 1,092 (22) () (2) 973 474 127 134 67 66 19 -18 -87 173 37 17 -8 17 8 _. 5,043 5,968 4,284 4,659 1,094 1 362 1 129 1,074 1 2 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. Not available. *4 Less than $500,000. Includes disbursements in Germany administered by EGA from funds appropriated under the Army Civilian Supply Program. Source: Department of Commerce (except as noted). 206 TABLE B-41.—United States merchandise exports, including reexports, by area, 1936-38 quarterly average and 1947—51 Period Other Total exports in- Canada J Western Hemicluding reexports sphere ERP countries 2 Other Europe Asia* Australia and Africa Oceania Millions of dollars Quarterly average: 1936-38 1947 1948 1949 1950' 1951 3 742 3,835 3,163 3,013 2,569 4 3, 722 (5) 115 528 486 490 504 136 1,017 841 725 703 282 1,324 1,046 1,019 720 (5) (5) 31 118 49 41 35 (5) 122 562 507 534 369 (5) 23 80 38 49 36 (5) (fi) 32 205 196 155 91 1950: First quarter Second quarter _ _ Third quarter ».3 . Fourth quarter _ 2,365 2,510 2,451 2,949 397 530 505 583 640 668 706 798 776 762 587 756 33 35 37 34 399 381 334 364 37 38 30 38 84 96 79 103 1951: First quarter «... Second quarter 3. Third quarter 3. _ Fourth quarter 3_ 3,334 4,018 3,686 <3,850 623 756 606 (•) 867 960 979 (5) 814 1,028 871 « 62 82 62 470 549 516 (') 44 45 66 120 156 173 (5) (8) (•) Percentage of total Quarterly average: 1936-38 1947 1948 1949 I9608 100 100 100 100 100 15.5 13.8 15.4 16.3 19.6 18.3 26.5 26.6 24.1 27.4 38.0 34.5 33.1 33.8 28.0 4.2 3.1 1.5 1.4 1.4 16.4 14.7 16.0 17.7 14.4 3.1 2.1 1.2 1.6 1.4 4.3 5.3 6.2 5.1 3.5 1950: First quarter Second quarter. _ Third quarter ».3 _ Fourth quarter . 100 100 100 100 16.8 21.1 20.6 19.8 27.1 26.6 28.8 27.1 32.8 30.4 23.9 25.6 1.4 1.4 1.5 1.2 16.9 15.2 13.6 12.3 .6 .5 .2 .3 3.8 3.2 3.5 1951: First quarter ».„ Second quarter 3 _ Third quarter 3 _ . 100 100 100 18.7 18.8 16.4 26.0 23.9 26.6 24.4 25.6 23.6 1.9 2.0 1.7 14.1 13.7 14.0 .3 .1 .8 3.6 3.9 4.7 3. 6 1 Includes Newfoundland and Labrador. 2 Turkey is included with countries participating in the European Recovery Program 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 3 western zones. 3 Data by area exclude, while total exports include, "special category" exports. For this reason, exports by area will not add to total exports in these periods. * Estimates based upon incomplete data; fourth quarter by Council of Economic Advisers, s Not available. NOTE.—Data in this table cover all merchandise, including reexports, shipped from the United States customs area to foreign countries, including, in 1947 to 1951, 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 3. Source: Department of Commerce (except as noted). 207 977891—52 TABLE B-42.—Indexes of quantity and unit value of United States domestic merchandise exports, by economic class,, 1936—38 quarterly average and 1947—51 [1936-38=100] Total domestic exports Period Crude materials ManuCrude factured foodstuffs ! foodstuffs * Semimanufactures Finished manufactures Quantity indexes Quarterly average: 1936-38 1947. 1948 1949 „ 1950 2 1951 _ 1950' First quarter Second quarter Third quarter Fourth quarter __ 1951: First quarter ._ Second quarter Third quarter 2 Fourth quarter ._ 100 275 214 219 193 246 100 123 100 126 128 (3) 100 397 362 435 287 (3) 100 478 350 297 237 (3) 100 203 144 150 127 (3) 100 332 257 250 225 (3) 181 194 184 209 125 143 112 128 284 270 264 325 213 250 224 230 121 126 125 135 207 220 220 251 223 258 243 258 112 126 116 456 583 434 247 280 267 131 157 165 278 317 304 (3) (») (3) (3) (3) Unit value indexes Quarterly average: 1936-38 1947 1948 1949 1950 19512 100 188 200 186 180 205 1950: First quarter __ . Second quarter . _ Third quarter Fourth quarter 177 175 180 191 206 212 226 215 196 190 192 196 151 142 162 169 164 166 168 183 179 175 177 187 1951: First quarter Second quarter Third quarter Fourth quarter 202 210 206 202 263 275 249 (3) . 203 219 221 185 203 192 203 212 211 195 201 200 ._. 2 (3) 100 195 223 212 220 (3) (3) 100 248 255 225 193 (3) (3) 100 218 223 177 151 (3) (3) 100 169 184 174 170 (3) (3) 100 182 193 184 179 1 Export indexes of crude and manufactured foodstuffs, particularly those of unit value in 1950, are influenced by sales of large quantities of food products at prices considerably below market quotations. Such exports include sales from Government-owned surplus and shipments on which subsidies were paid by the Department of Agriculture. 2 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. 3 Not available. 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 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 (except as noted). 208 TABLE B-43.—United States general merchandise imports, by area, 7936-38 quarterly average and 1947-51 Total general imports Period Other Canada 1 Western Hemisphere ERP coun-2 tries Other Asia 2 Europe Australia and Africa Oceania Millions of dollars Quarterly average: 1936-38 1947 . 1948 1949 .. .. 1950 19513 . . 622 1,439 1,781 1,656 2,213 2,801 88 282 398 388 490 (4) 143 568 627 611 776 (4) 152 174 244 211 315 (4) 30 45 49 35 47 (4) 183 249 324 296 409 (4) 1950: First quarter Second quarter Third quarter Fourth quarter 1, 889 1, 931 2,388 2,644 404 478 504 575 727 645 913 818 240 243 323 455 45 45 49 50 302 363 417 555 49 52 47 60 1951: First quarter Second quarter Third quarter Fourth quarter s 3,032 2,980 2, 492 2,700 529 585 552 I4) 1,084 894 739 <.4) 513 514 457 63 57 39 0) 592 545 480 (4) S3 184 119 (4> (4) (4) 10 39 41 31 52 17 82 98 84 123 (0 122 103 136 132 • (4) 169 201 106 Percentage of total Quarterly average: 1936-38 1947 1948 1949 1950 _ .. 1950: First quarter. _ Second quarter Third quarter Fourth quarter 1951: First quarter Second quarter Third quarter . 100 100 100 100 100 14.1 19.6 22.3 23.4 22.1 23.0 39.5 35.2 36.9 35.1 24.4 12.1 13.7 12.7 14.2 4.8 3.1 2.8 2.1 2.1 29.4 17.3 18.2 17.9 18.5 1.6 2.7 2.3 1.9 2.3 2.7 5.7 5.5 5.1 5.6 100 100 100 100 21.4 24.8 21.1 21.7 38.5 33.4 38.2 30.9 12.7 12.6 13.5 17.2 2.4 2.3 2.1 1.9 16.0 18.8 17.5 21.0 2.6 2.7 2.0 2.3 6.5 5.3 5.7 5.0 100 100 100 17.4 19.6 22.2 35.8 30.0 29.7 16.9 17.2 18.3 2.1 1.9 1.6 19.5 18.3 19.3 2.7 6.2 4.8 5.6 6.7 4.3 1 Includes Newfoundland and Labrador. 2 Turkey is included with countries participating in the European Recovery Program 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. 3 Estimates based on incomplete data; fourth quarter by Council of Economic Advisers. 4 Not available. NOTE.—Data in this table cover all merchandise received in theTUmted 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). 209 TABLE B—44.—Indexes of quantity and unit value of United States merchandise imports foi sumption, by economic class, 1936—38 quarterly average and 1947—51 [1936-38=100] Total imports for consumption Period Crude materials Crude foodstuffs ManufacFinished tured food- Semimanumanufacfactures stuffs tures Quantity indexes Quarterly average: 1936-38 1947 1948 - . --1949 1950 19511 100 108 123 120 146 148 1950: First quarter Second quarter Third quarter __ _ Fourth quarter 137 136 154 158 152 140 155 161 121 94 125 111 98 113 143 113 189 213 220 247 107 107 119 125 147 1951: First quarter Second quarter Third quarter Fourth quarter * 163 147 131 151 161 144 136 149 108 92 126 129 120 227 215 182 141 141 126 100 129 139 125 152 0) (2) - (2) (2) 100 96 109 119 113 (2) (2) 100 83 91 97 117 (2) (2) 100 130 149 143 219 (2) 100 84 103 101 125 (*) Unit value indexes Quarterly average: 1936-38 1947 1948 1949 1950 1951 i . . -_ _ _ _ 100 213 235 224 243 304 (2) 100 180 203 195 214 1950: First quarter Second quarter Third quarter Fourth quarter 223 229 248 270 185 194 215 255 1951: First quarter Second quarter Third quarter Fourth quarter * 295 313 312 297 302 340 316 (*) (2) 100 311 343 330 454 (2) 410 433 485 491 2 () 508 521 516 100 208 212 202 203 (2) 199 199 203 210 3 () 214 224 224 100 191 217 198 193 (2) 245 248 253 262 176 179 197 220 a () 234 242 250 100 245 266 258 252 J 278 288 313 () * Estimates based on incomplete data; fourth quarter by Council of Economic Advise rs. 2 Not available. 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 (except as noted). 210 TABLE B-45.—United States exports of selected capital goods to ERP countries and underdeveloped areas, 1950-51 [Millions of dollars] 1951 1950 Goods and area First half Steel mill products: ERP countries 2 Latin American republics Asia 3 _ Africa _ _ _ Electrical machinery and apparatus:3 ERP countries 2 —_ Latin3 American republics Asia _ _ _ Africa _ _ Second half Second halfi First half 52 75 42 10 40 104 35 42 106 36 11 34 78 26 33 115 24 45 124 34 11 Engine, turbines, and parts, including locomotives: ERP countries*-Latin American republics Asia 2. Africa _ _ 8 32 20 4 17 48 9 6 Construction, excavating, and conveying machinery: ERP countries 2 . Latin American republics ...• Asia 2. ___ _ _ Africa.. _ 18 30 10 18 44 15 11 Mining, well, and pumping machinery: ERP countries 2__ Latin American republics Asia 2... _ Africa.. _ _ Machine tools:3 ERP countries 2 _ Latin American republics Asia 2 Africa, _ 10 _. ___. (*) Other metal working machinery: ERP countries 2 Latin American republics Asia 2 Africa... Agricultural machinery and implements: ERP countries a Latin American republics Asia 2 Africa 15 27 7 5 10 45 10 7 26 3 2 21 3 1 C4) 40 2 5 __ ._ 7 15 3 5 __._ 17 29 7 14 „ 15 8 Miscellaneous machinery, excluding aircraft and transportation equipment: ERP countries 2 _ Latin2 American republics Asia ... .. Africa 87 78 25 Tractors, parts, and accessories: * ERP countries 2 Latin American republics Asia 2 Africa. Trucks, busses, and2 chasses (new): * ERP countries Latin American republics Asia 2 _ _ . _ Africa _ 43 35 25 4 7 11 45 11 18 14 80 102 24 14 116 22 16 13 127 124 29 13 129 31 14 * Estimates based on data through September. Turkey is included in ERP countries and excluded from Asia. 3 Includes "special category" commodities in first half of 1950, but excludes them thereafter. < Less than $500,000. Source: Department of Commerce. 2 211 34 9 4 1 21 TABLE B-46.—Changes in selected economic series since 1939 and 1950 and during 1951 Percentage change ' 1939=100 Source: Appendix table No. Second half 2 1950 to 19512 1951, first half to 1951, second half 2 1951 Economic series 1950 Total 2 First half B-l... Gross national product Personal consumption expenditures Gross private domestic investment Government purchases of goods and services 310 287 494 358 303 594 354 304 634 362 302 554 15.6 5.6 20.2 2.1 -.6 -12.7 324 485 434 535 49.4 23.2 B-3... Gross national product in 1951 prices Personal consumption expenditures Gross private domestic investment Government purchases of goods and services _ 168 160 243 182 158 272 181 159 292 184 157 253 8.5 -1.5 1-2.0 1.9 -1.1 -13.3 159 220 198 243 38.6 23.0 386 379 15. 5 16.2 3.0 3.8 B-6... National income Compensation of employees 330 321 381 373 375 366 B-9___ Personal income Disposable personal income. _Personal net saving 310 291 396 346 317 685 340 312 530 352 323 837 11.8 9.1 72.9 3.5 3.2 58.0 251 141 269 141 266 139 272 142 7.1 -.1 2.3 1.7 116 114 131 78 145 33 (3) 114 133 73 149 20 (3) 113 132 70 148 22 (3) 115 135 77 151 18 (3) -.3 1.7 -6.0 2.9 -40.2 ._. _ _ 249 239 251 243 271 262 268 270 270 261 268 261 272 264 268 280 8.9 9.8 6.6 11.2 .7 1.4 .1 7.3 . _ _. B-16.. Industrial production Durable manufactures . Nondurable manufactures - - _ . _ . _ Minerals Agricultural production 183 217 172 140 130 201 250 178 156 131 204 251 183 153 (3) 199' 250 173 158 (3) 9.5 15.2 3.7 11.5 .7 -2.3 -.7 -5.0 3.1 C3) B-18-. New construction Private - _ __ . Residential (nonfarm) Nonresidential _ _ Other private Public .__ . . 340 474 470 481 478 187 364 474 407 624 542 237 375 499 443 662 521 231 354 450 371 586 562 243 7.0 .2 -13.4 29.9 13.3 27.1 -5.6 -9.9 -16.3 -11.5 7.9 5.1 B-19-. Business expenditures for plant and equipment-- _ _ Manufacturing 342 386 444 573 413 510 474 637 29.7 48.7 14.6 24.8 B-20.. Inventories, end of period Manufacturing ___ . Wholesale trade Retail trade 301 290 308 322 349 362 328 333 346 340 333 366 349 3C2 328 333 15.6 24.7 6.6 3.5 .6 6.3 -1.4 -9.2 362 373 366 342 405 435 407 359 411 442 413 364 397 426 400 353 11.9 16.5 11.1 5.1 -3.3 -3.5 -3.2 -3.1 173 215 187 126 188 186 239 203 130 208 185 237 201 129 208 188 241 205 132 208 7.8 11.2 8.8 3.8 10.9 1.4 1.5 2.0 2.1 .1 209 261 236 188 234 301 265 208 237 307 264 211 231 295 267 206 11.8 15.3 12.5 10.6 -2.4 -3.8 1.0 -2.5 B-10-. Per capita disposable personal income: Current prices 1951 prices B-ll.. Labor force, including armed forces Civilian labor force Employment Agricultural _ Nonagricultural Unemployment B-15.. Average gross weekly earnings: M anuf actur ing Durable goods . . Nondurable goods. . _ Building construction Sales Manufacturing Wholesale trade Retail trade - _ ._ ._ _ ._ ._ _ _ _ _ .. B-22.. Consumers' price index: All items Food Apparel _ _ _ Rent Housefurnishings _ ._ _ _ __. ___ B-23.. Wholesale price index: All commodities Farm products Foods Other than farm products and foods See footnotes at end of table. 212 (3) 2.0 2.7 9.2 1.9 -18.0 TABLE B-46.—Changes in selected economic series since 1939 and 1950 and during 1951—Continued Source: Appendix table No. Percentage change l 1939=100 1951 Economic series 1950 Total 2 First half Second half 2 1950 to 19512 1951, first half to 1951, second half 2 -3. a B-24_. Prices received by farmers Prices paid by farmers (including interest, taxes, and wage rates) 269 318 322 312 11.8 209 230 229 232 10.2 1.4 B-26-. Consumer credit outstanding, end of periodInstalment credit 286 304 290 301 274 293 290 301 1.5 - 1.2 5.92.7 B-27.. Loans and investments of all commercial banks, end of period Loans _ _ Investments in U. S. Government securities 311 303 329 340 310 319 329 340 5.6 11.9 6.2 6.6 265 266 250 266 .3 6.3 B-30.. Gross public debt and guaranteed issues, end of period __ _. . . 539 545 536 545 1.0 1.6- B-32.. Corporate profits: Profits before tax Profits after tax Dividend payments Undistributed profits 637 1520 242 1133 689 1207 250 717 748 1307 242 867 631 1107 258 567 8.2 -20.6 3.3 -36.8 -15.6 -15. a 6.5 -34.6 B-41.. Merchandise exports, including reexports .. <346 <502 M95 4508 44.9 2.5- B-43-. General merchandise imports *356 4450 4483 4417 26.6 -13. 6 1 Changes are computed from data as reported and therefore may differ slightly from changes computed from the indexes shown here. 23 Estimates based on incomplete data. Not available. 4 1936-38 average =100. 213 Index to the Annual Economic Review Including references to charts and text tables in the Annual Economic Review and the Economic Report of the President (For additional tabular material, see Appendixes A and B) Agriculture: Pagt Production 51,112 Labor 52, 107 Chart 8.—Civilian labor force 53 Prices 56,144 Price supports 112 Allocations of scarce materials (see also Materials): Policy and procedures 100, 102,115 International 128 Aluminum. (See Materials.) Atomic energy 110 Automobile production and employment (see also Durable goods) 54,114,118 Banks. (See Credit.) Capacity expansion: Chart 20.—New plant and equipment outlays in selected durable manufacturing industries 78 Chart 27.—New plant and equipment outlays in selected nondurable manufacturing industries 79 Programs 77,108 Chart 2.—Growth in basic capacity and production 5 Table 5.—Expansion of capacity or output of selected industries 77 Table 6.—Progress on facilities projects aided by tax amortization 80 Table 14.—Estimated plant and equipment expenditures in selected areas of programmed or Government-aided expansion 109 Longer-run problem 149 Civilian economic strength, maintenance 41 Chart 1.—Building our strength: gross national product in 1951 prices 3 Components, control of distribution 102 Conservation. (See Natural resource development; Materials.) Construction (see also Capacity expansion; Housing): Developments in 1951 80 Chart 5.—Economic indicators: changes from 1950 to 1951 27 Chart 19.—Business investment 75 Chart 22.—Construction 81 Curtailment 80, 98,102, 111 Chart 28.—Metals supply and requirements for civilian use 99 Public 93,109 Table 13.—New public construction expenditures for major development programs 94 Consumption expenditures 72 Chart 3.—Gains in living standards 7 Chart 16.—Personal income, spending, and saving 70 Chart 18.—Personal consumption expenditures for durable goods 72 215 Page Consumer goods, outlook 117 Chart 31.—Output of selected consumer durable goods 117 Consumers' prices 59, 145 Table 2.—Changes in consumers'] prices 60 Chart 77.—Consumers' prices 61 Chart 36.—Changes in personal assets and prices 138 Controlled Materials Plan 102 Copper. (See Materials.) Corporate finance 84 Chart 23.—Sources and uses of corporate funds 83 Corporate profits 64, 84 Chart 5.—Economic indicators: changes from 1950 to 1951 27 Chart 13.—Corporate profits 65 Credit: Developments in 1951 66 Chart 14.—Bank loans and investments 67 Chart 15.—Money supply 68 Table 3.—Factors changing the volume of the privately-held money supply 69 Policy 141-144 Debt, public. (See Government finance.) Defense. (See Security.) Defense Housing and Community Facilities and Services Act 108 Defense Production Act, amendments 144 Deficits. (See Government finance.) Dislocations of business 54, 114 Dispersal, local and regional Ill Durable goods: Production in 1951 49 Chart 7.—Production 50 Consumers' 72,117 Chart 3.—Gains in living standards 7 Chart 4.—Production of consumer durable goods contrasted with first half of 1950 11 Chart 18.—Personal consumption expenditures for durable goods 72 Chart 31.—Output of selected consumer durable goods 117 Producers' 75, 111 Chart 19.—Business investment 75 Capacity expansion 76 Chart 20.—New plant and equipment outlays in selected durable manufacturing industries 78 Major required adjustments . 100 Economy, Government. (See Government finance.) Education 94, 120 Electric power 51, 77, 80, 108-110 Chart 2.—Growth in basic capacity and production 5 Employment (see also Manpower; Unemployment) 52 Europe, Western 122 Chart 33.—Industrial production in Western Europe 123 Table 16.—Foreign trade of Western Europe with rest of world 124 Table 17.—Available resources in Western Europe 124 Expansion, programmed. (See Capacity expansion.) 216 Page Exports, U. S., in 1951 85 Chart 24.—Exports and imports of goods and services 85 Table 7.—United States exports and imports of goods and services 86 Export surplus, financing in 1951 88 Farm. (See Agriculture.) Federal Reserve policy 141-144 Finance. (See Corporate finance; Government finance.) Fiscal policy. (See Government finance.) Foreign aid 88, 121, 125 Table 15.—Foreign aid appropriated under Mutual Security Act of 1951 121 Table 78.—Net new funds made available to underdeveloped areas for economic assistance by United States Government and International Bank. 127 Foreign investment, private 88, 105, 126 Government finance: Federal, developments in 1951 88 Table 9.—Summary of Federal fiscal operations 89 National security programs (see also Security) 47, 92 Public debt operations 89 Chart 25.—The public debt. , 90 Consolidated cash accounts 90 Table 10.—Government cash receipts from and payments to the public 91 Table 77.—Federal cash payments to the public by function 91 Table 72.—Federal cash payments to the public by type of recipient and transaction 92 Chart 26.—Federal cash receipts from and payments to the public. . . 93 Nonmilitary construction programs 93 Table 73.—New public construction expenditures for major development programs 94 Federal programs, financing 131 Budget economies 131 Recent tax legislation 131 Nature of financing problem ahead 132 Chart 35.—Federal budget expenditures 133 Longer-run budget outlook 134 Pay-as-we-go tax policy 134 Sources of additional revenues 135 Effects of temporary deficits ». . . . 136 State and local government finance 94, 136 Hard goods. (See Durable goods.) Health 94, 120 Highways 94, 110 Hours, working 52, 106 Housing Ill, 118 Chart 28.—Metals supply and requirements for civilan use 99 Chart 32.—New housing starts , 119 Defense housing 107, 119 Import barriers, U. S 106, 126 Imports, U. S 86, 105 Chart 24.—Exports and imports of goods and services 85 Table 7.—United States exports and imports of goods and services 86 Table 8.—United States imports of selected metals 87 217 Page Income, personal 69 Chart 3.—Gains in living standards 7 Chart 5.—Economic indicators: changes from 1950 to 1951 27 Chart 16.—Personal income, spending, and saving 70 Chart 17.—Per capita disposable income 71 Distribution 71 Outlook 137 Industrial production, developments in 1951 49 Chart 7.—Production 50 Inflationary pressures (see also Stabilization): and production 103 The problem abroad 130 Chart 34.—Wholesale prices in selected countries 129 Outlook 137 International allocation of materials 128 International economic purposes of the United States 43, 121 International transactions of the United States (see also Exports; Imports; Foreign aid) 84 Inventories: Developments in 1951 82 Chart 19.—Business investment 75 Chart 23.—Sources and uses of corporate funds 83 Scarce materials 103 and stabilization 137, 139 Investment (see also Capacity expansion; Construction; Inventories): Developments in 1951 74 Chart 19.—Business investment 75 Chart 20.—New plant and equipment outlays in selected durable manufacturing industries 78 Chart 21.—New plant and equipment outlays in selected nondurable manufacturing industries 79 Chart 22.—Construction 81 Chart 23.—Sources and uses of corporate funds 83 Investment abroad, private 88, 105, 127 Public investment 93, 109 Table 13.—New public construction expenditures for major development programs 94 Government policies 108 Restrictions on nonessential investment Ill Labor force, shortages, supply. (See Manpower; Unemployment.) Lower priced lines of merchandise 118 Manpower (see also Dislocations of business; Unemployment): Labor force developments in 1951 52 Chart 5.—Economic indicators: changes from 1950 to 1951 , 27 Chart 8.—Civilian labor force 53 Manpower problems, outlook, policies 106 Materials, scarce (see also Allocations; Capacity expansion) 97-102, 105-106 Table 8.—United States imports of selected metals 87 Chart 28.—Metals supply and requirements for civilian use 99 Chart 29.—Uses of steel 101 Metals. (See Materials.) Migrant labor 107 Minerals (see also Materials): Production in 1951 51 218 Page Money supply 68 Chart 15.—Money supply 68 Table 3.—Factors changing the volume of the privately-held money supply. . 69 Mutual Security Act of 1951.. 121 Table 15.—Foreign aid appropriated under Mutual Security Act of 1951.... 121 Natural resource development 105,109,115 Nondurable goods: Production in 1951 49 Chart 3.—Gains in living standards 7 Chart 7.—Production 50 Capacity expansion 76 Chart 21.—New plant and equipment outlays in selected nondurable manufacturing industries. . . _ _ 79 Output. (See Production). Planning. (See Programming). Plant and equipment. (See Capacity expansion; Investment.) President's Materials Policy Commission 106 Price controls 144 Price incentives for minerals production 105 Price supports, farm 112 Prices, developments in 1951 55 Chart 5.—Economic indicators: changes from 1950 to 1951 27 Wholesale 55 Chart 9.—Wholesale prices 56 Table 1.—Changes in wholesale prices 57 Chart 10.—Wholesale prices of industrial products 58 Consumers' 59, 145 Table 2.—Changes in consumers' prices 60 Chart 11.—Consumers' prices 61 Chart 36.—Changes in personal assets and prices 138 Prices in other countries 130 Chart 34.—Wholesale prices in selected countries 129 Pricing standards 145 Procurement, and small business 116 Production (see also Agriculture): Developments in 1951 49 Chart 5.—Economic indicators: changes from 1950 to 1951 27 Chart 7.—Production 50 Problems and policy of increasing production 40, 103 and inflation 103 Factors limiting increase 104 Objective for 1952 113 Chart 1.—Building our strength: gross national product in 1951 prices. . 3 Chart 2.—Growth in basic capacity and production 5 Chart 30.—Gross national product; expenditures in 1951 prices. Productivity: and inflation 103 and expansion of production 106 and wage stabilization 147 Profits. (See Corporate profits.) Programming 43 Public investment 93, 109 Table 13.—New public construction expenditures for major development programs 94 219 Page Public participation in security program 44 Regional considerations and problems 111,114 Research, surveys, and development projects related to resources 110 Saving, personal: Developments in 1951 73 Chart 76.—Personal income, spending, and saving 70 Table 4.—Liquid and total personal saving 74 Outlook 137 Chart 36.—Changes in personal assets and prices t$$ Security, national, programs: Statement of economic purpose related thereto 39 Developments in 1951 47 Program now proposed 95 Chart 6.—National security expenditures for goods and services in 1951 prices 48 Chart 27.—The security program: expenditures for goods and services in 1951 prices 96 Chart 35.—Federal budget expenditures 133 Speed of the build-up 97 Services, output in 1951 52 Small business 115 Social security and welfare programs 121 Soft goods. (See Nondurable goods.) Stabilization (see also Inflationary pressures) 137 World aspects 130 Relation of various stabilization policies 140 Longer-range problem 148 State and local government finance 94,136 Steel. (See Materials.) Steel prices and wages 146 Stockpiling 48, 100 Strikes 54 Tariffs, U. S 106 Tax amortization 76 'Table 6.—Progress on facilities projects aided by tax amortization 80 Taxation. (See Government finance.) Technological research on conservation of scarce materials 106 Underdeveloped countries (see also Foreign aid; Foreign investment) 126 Table 18.—Net new funds made available to underdeveloped areas for economic assistance by United States Government and International Bank. 127 Table 19.—Output of selected commodities in certain underdeveloped areas. . 128 Unemployment: Developments in 1951 54 Chart 8.—Civilian labor force 53 Defense unemployment 54,114 Vocational programs 107 Voluntary Credit Restraint Program 137, 141 Wage negotiations in 1951 63 Wage stabilization 147 Wages, developments in 1951 61 Chart 12.—Average earnings in manufacturing industries 62 Work stoppages 54 U. S. GOVERNMENT PRINTING OFFICE: 19S2 220