Economic Report

of the President

Transmitted to the CongressJanuary 1979

TOGETHER WITH

THE ANNUAL REPORTOF THE

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 1979

For sale by the Superintendent of Documents, U.S. Government Printing OfficeWashington, D.C. 20402

Stock Number 040-000-00399-1

CONTENTS

Page

ECONOMIC REPORT OF THE PRESIDENT 1

ANNUAL REPORT OF THE COUNCIL OF ECONOMIC

ADVISERS* 17

CHAPTER 1. PROGRESS AND PROBLEMS IN 1978 25

CHAPTER 2. REDUCING INFLATION 54

CHAPTER 3. THE ECONOMIC OUTLOOK 92

CHAPTER 4. THE WORLD ECONOMY—MANAGING INTERDEPENDENCE . 135

APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE

COUNCIL OF ECONOMIC ADVISERS DURING 1978 163

APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOY-

MENT, AND PRODUCTION 177

*For a detailed table of contents of the Council's Report, see page 27.

(HI)

ECONOMIC REPORTOF THE PRESIDENT

ECONOMIC REPORT OF THE PRESIDENT

To the Congress of the United States:

Two years ago when I took office our economy was still struggling torecover from the deep recession of 1974-75. Unemployment was wide-spread, and a substantial part of our industrial capacity stood idle.

Today 7 million more Americans are at work, and factories across thecountry have regained high levels of output. Family incomes, after ad-justment for inflation, have risen handsomely and so have business profits.

The task now confronting us is to manage an economy operating atclose to its capacity—to sustain prosperity and extend its benefits morewidely among our citizens.

Under the best circumstances, designing economic policies to carry outthat task calls for restraint and careful choices. Developing such policieshas been made more complex by the acceleration of inflation last yearand the declining growth of productivity that was partly responsible forit.

My economic and budgetary program deals forthrightly with the eco-nomic realities we face today. It is based on four principles.

First, reducing inflation must be our top economic priority. Inflationendangers the gains in employment and income that we have made dur-ing the past 2 years. We must act forcefully and effectively to combat in-flation, and we must persist until the battle is won.

Second, government must do its job better. Reducing inflation willrequire budgetary austerity and moderation of economic growth. Withproductivity growth at a low ebb, living standards will not rise as fast asthey have in the past 2 years. In such a climate, waste, inefficiency, or mis-placed priorities are particularly intolerable. It is now more essentialthan ever that our government, in both its budgetary and regulatoryprograms, make the best use of the resources at its disposal and seekbetter, less costly means to achieve our national objectives.

Third, we will not reduce inflation at the expense of the most vulner-able members of our society—the poor, the elderly, and those who havedifficulty finding jobs even in a high-employment economy. Ours is acompassionate Nation, dedicated to a sense of fairness. We will not losesight of those who most need our help.

Fourth, our policies must reflect the fact that the United States is avery important part of a closely related world economy. We will con-tinue to pursue domestic policies and undertake other actions as neces-sary and appropriate to foster a strong and stable dollar, and we willjoin with other countries to promote an open and growing worldeconomy.

In the months ahead, I will work closely with the Congress to ensurethat the policies adopted by this government are consistent with thesefour precepts. The budget for 1980 must be very tight, and I intend tomake sure that a fiscal policy of firm and measured restraint is main-tained. But the budget must continue and strengthen our most essentialprograms, and I have supported such programs strongly. In order tofurther the fight against inflation, I will seek prompt adoption of my realwage insurance program and my proposals for hospital cost containmentand regulatory reform.

I will continue to seek the cooperation and support of the Americanpeople in the fight against inflation. Last October, I proposed to theNation a program of price and pay standards designed to brake theprice-wage spiral that has beset our economy for more than a decade.This program has received substantial support from the Americanpeople, and I will make every effort to enlist the broadest possible coop-eration with it in the year to come.

The pay and price standards ask every American to exercise restraint.Every American should therefore expect the government to ensure thatits own actions will contribute to, not undermine, the voluntary effortto reduce inflation. Steadfast pursuit of fiscal and monetary disciplineand limits on the inflationary impacts of other government actions arecrucial to the success of the anti-inflation program. Together, the actionsof government and the private sector can lay a new foundation for a dur-able prosperity.

Progress and Problems in 1978

Among my first actions in office were steps to strengthen economicgrowth and speed the return to a high-employment economy. Thoseactions paid generous dividends. In 1977 our rate of economic growthincreased by nearly a full percentage point over the prior year, and in1978 the Nation's output of goods and services advanced by a healthy4 J4 percent. Today our Nation is using its industrial capacity more fullythan a year ago.

Last year 3 million new jobs were created. A larger proportion ofour people is at work now than at any other time in our history. Gains

in employment during the past 2 years have been especially strongamong women and members of minority groups.

Unemployment declined to less than 6 percent of the labor force dur-ing 1978. Nearly l/2-million fewer Americans were unemployed in De-cember 1978 than 2 years earlier. Unemployment among minoritygroups has also begun to decline from the very high levels that persistedearlier in the recovery, but these groups still bear a disproportionateshare of the burden of unemployment.

Gains in employment and output produced strongly rising incomesfor most Americans during 1978. Disposable personal income, adjustedfor inflation, rose by more than 3 percent over the 4 quarters of last year.The income of our country's farmers, which was severely depressed in1976 and 1977, showed a marked recovery.

Business profits rose more than 10 percent in 1978, thereby promotingconditions for the continued growth in investment needed for productivityimprovement and healthy economic expansion. Business investment innew plant and equipment also strengthened in 1978, raising the pro-portion of our national output devoted to capital formation to thehighest level in 4 years.

On most counts, the prosperity of our Nation rests on a solid base.Our economy at the end of last year was still growing strongly. Themomentum of expansion will be sustained early this year by the reduc-tions in taxes on individual incomes and corporate profits that were pro-vided in the Revenue Act of 1978. Last year, as in the earlier years of therecovery, the process of economic expansion remained relatively wellbalanced. Business inventories are lean. Industrial firms and financial in-stitutions are in good financial condition. Shortages and speculative buy-ing generally are absent. But inflation does pose a serious threat to theNation's continued economic health. If we make progress in reducinginflation, the prospects are good for a successful transition from a periodof economic recovery to a period of moderate but sustained growth.

For more than 10 years, our country, like many other nations, hasfaced stubborn inflation. During the course of 1978 our infla-tion problem worsened. Consumer prices rose by about 9 percent, a largeacceleration from the 6% percent rate of inflation in 1977. Increases inwages also were larger and, since productivity gains declined sharply,costs of production moved up much more strongly.

The anti-inflation effort was given top priority in 1978. In May, I rec-ommended that the Congress reduce by $5 billion and delay 3 monthsthe tax cut that had been proposed earlier. In October, I set forth a strong

and comprehensive program to combat inflation. Shortly thereafter, incooperation with other countries, the Nation undertook a series of meas-ures to strengthen the dollar abroad and further contribute to a reduc-tion of inflation at home.

Inflation in 1978

Rising inflation last year stemmed from several sources. Cold winterweather affected food supplies and prices. Depreciation of the dollar inforeign exchange markets added to prices of imports and to prices ofgoods produced by U.S. firms that compete with imported products.Costs of land and building materials were driven up by exuberant de-mands for new homes, and the rise of mortgage interest rates added tothe costs of buying a home. At the same time, the cumulative effectsof government legislation and regulation over recent years gave furtherimpetus to cost pressures.

A large part of the worsening of inflation last year, however, stemmedfrom poor productivity. Over the past decade or more, the rate of growthin our productivity has been slowing. In late 1977 and throughout 1978,the slowdown in productivity growth reached serious proportions. Lastyear the productivity of our economy increased by less than 1 percent.

The reasons for the weakening of productivity growth in our country,especially its poor performance last year, are complex and are not fullyunderstood. But the consequences are well known. With slower produc-tivity growth, our living standards individually and as a Nation cannotrise as fast. Slower productivity growth means that the resources avail-able for carrying out governmental programs become scarcer. It meansthat large increases in wages and other incomes put greater upwardpressure on costs and prices. If we ignore the realities of slower produc-tivity growth—if governments continue to press forwaid with unabatedclaims on resources, and private citizens continue to demand large gainsin money incomes—our inflationary problem will worsen.

Dealing with Inflation

Inflation injures every person in our country. It means that paychecksdo not go as far as they once did. It means that savings accumulated forretirement or for a child's education become inadequate. Many poor andelderly persons see prices they pay for food, shelter, and heat rise rapidlywhile their incomes rise slowly or not at all. These problems are so acutethat they demand an all-out effort to reduce inflation. Yet rising pricesand costs have additional and very serious effects on our economy as awhole.

Inflation drives up interest rates. It undermines the competitiveness ofour industries and the value of our dollar abroad. Confidence of busi-nesses in the future is reduced and investment plans are upset. Consum-ers3 confidence in their own future is sapped. Sooner or later, these effectsof inflation will undermine the basis for economic expansion and makesustained prosperity impossible.

Finally, the corrosive effects of inflation eat away at the ties that bindus together as a people. One of the major tasks of a democratic govern-ment is to maintain conditions in which its citizens have a sense of com-mand over their own destiny. During an inflation individuals watch infrustration as the value of last week's pay increase or last month's largersocial security check is steadily eroded over the remainder of the year bya process that is beyond their individual control. All of us have to planfor the future when we lend or borrow, save for a child's education, changea job, buy a home, or choose a career. The future is uncertain enoughin any event, and the outcome of our plans is never fully within our owncontrol. When the value of the measuring rod with which we do ourplanning—the purchasing power of the dollar—is subject to large andunpredictable shrinkage, one more element of command over our ownfuture slips away. It is small wonder that trust in government and in socialinstitutions is simultaneously eroded.

It is for all of these reasons that reducing inflation must now be theprimary concern of economic policy.

Policies to Control Inflation

Firm, sustained and carefully applied fiscal and monetary restraint mustbe the first element in our effort to reduce inflation. We have entereda period in which the high rate of economic growth that we experiencedwhen the margin of unused resources was larger no longer is appropriate.We will apply the needed restraint and stick with it.

We will not try to wring inflation out of our economic system by pur-suing policies designed to bring about a recession. That course of actionwould be unfair. It would put the heaviest burden of fighting inflationon those who can least afford to bear it. It also would be ineffective.Twice in the past decade inflation has accelerated and a recession hasfollowed, but each recession brought only limited relief from inflation.The underlying pressures behind rising prices and costs continued to bestrong, and inflation eventually accelerated again when recovery began.Stop-and-go policies do not work. A successful anti-inflation programmust be durable to deal with a long-run inflation problem. Our programmeets that test.

When I announced my anti-inflation initiatives last October, I pledgedto pursue a restrained budgetary policy in fiscal year 1980. I have keptthat pledge. The central element of my fiscal program is tight controlover Federal spending:

• Growth in Federal spending will be curtailed. As in 1979, Fed-eral outlays in the next fiscal year will increase in real terms bysignificantly less than 1 percent.

• The share of the Nation's output accounted for by Federal spend-ing will be reduced to about 21 percent in fiscal 1980, a full yearahead of the schedule that I had earlier announced.

Restricted growth in Federal spending, combined with the revenuesyielded by a moderately growing economy, will reduce the budget deficitto $29 billion in fiscal 1980, less than half its size in the year before Itook office. This course of fiscal policy will exert the measured restraintthat is needed. Excessive demands upon the Nation's resources will beavoided. Growth in economic activity will slow to a little below the risein the Nation's economic potential.

These measures of fiscal policy are being complemented by firm andcareful monetary restraint on the part of the Federal Reserve Board. Inthis way, monetary and fiscal policy are supporting each other to combatinflationary pressures and foster a healthy and stable economy.

Other Governmental Actions

I am taking other steps to reduce the inflationary effects of govern-ment actions. I have directed the agencies of the executive branch to payspecial attention to ensuring that the regulations they issue do not im-pose unnecessary burdens on the public, and I shall continue the effortsthat got under way in 1978 to improve the regulatory process.

Last year the deregulation of the airline industry brought Americanconsumers the benefits of substantially lower prices and better service.This year I intend to seek congressional approval of legislation to increasethe role of competitive forces in the trucking and railroad industries. Iwill submit to the Congress legislation to reform the process by whichregulations are developed by Federal agencies, and to increase the empha-sis on a careful balancing of costs and benefits. And I am taking stepsto reduce the burden of paperwork imposed by the government on theprivate sector.

Government must set a clear example in the fight against inflation.For that reason, I ordered last year that the rate of pay increase for Fed-eral workers be held to 5.5 percent and that sharp limitations be imposedon new Federal hiring.

8

Although these actions by government will not, by themselves, bringinflation to an end, they are indispensable. They can create an environ-ment that encourages voluntary cooperation with the pay and price stand-ards. Without restraint by government, the pressures of an overheatedeconomy easily could render meaningless the best efforts of businesses andworkers to reduce price and wage increases. However, it will take broadcooperation from the private sector if the voluntary effort is to succeedin reducing inflation.

Voluntary Wage and Price Standards

The voluntary wage and price standards call for an average rate ofpay increase of 7 percent or less this year. I also have askedbusinesses to hold their average rate of price increase to at least one-halfpercentage point below the average rate of increase in 1976-77. Wheresuch price deceleration is not possible, the standards provide for limita-tions on profit margins.

To meet these standards, both workers and businesses must exerciserestraint. But they are fair and flexible standards. If they are widely ob-served, as I believe they will be, we can reverse the momentum of theprice-wage cycle and gradually bring down the rate of inflation.

I recognize that cooperation with this program entails uncertaintiesfor workers who comply with the wage standards. They may lose ifothers do not comply, or if forces beyond anyone's control cause pricesto rise unexpectedly. In order to provide them some assurance that thosewho cooperate will not suffer as a result, and thus to motivate widerobservance of the standards, I have proposed to the Congressa program of real wage insurance. Under this program, if inflation in-creases by more than 7 percent this year, groups of workers that meetthe 7 percent pay standard will receive a tax credit at a rate equal to thedifference between the actual inflation rate and 7 percent. This creditwill insure workers' real wages over a range of inflation as high as 10percent this year, far higher than is expected to occur.

The elements of my anti-inflation program are mutually supportiveand designed to mount a sustainable attack on our long-run inflationproblem. Voluntary cooperation with the pay and price standards isessential to reversing the momentum of inflation. Government needs totake strong action to avoid contributing to inflationary pressures in orderto ensure that the benefits of voluntary restraint are fully realized. To-gether, these policies offer our best opportunity to win the fight againstinflation.

Outlook for 1979

My anti-inflation program will support the health of our economy in1979 in two respects. First, the rate of inflation should slow this year—to about 7 */2 percent over the year as a whole, and to somewhat below7 percent by the end of the year. Second, moderation of inflation willhelp us avoid a recession and improve the prospects for sustained eco-nomic growth in 1980 and beyond.

Over the 4 quarters of 1979, the Nation's output should rise by about2*4 percent, somewhat less than the economy's potential growth. Thisshould create an economic climate in which the wage and price standardshave good propects for success. The labor force will continue to expandstrongly and most new workers will find jobs.

Further progress in reducing inflation can be expected in 1980 as theeffects of the anti-inflation program begin to cumulate. Moderate growthin the year ahead, combined with substantial progress against infla-tion, will lay the basis for an enduring prosperity.

In the years beyond 1980, as we are successful in containing the growthin Federal spending and bringing down the rate of inflation, we can looktoward reductions in Federal taxes. Rising real income and inflation,even at a reduced pace, push taxpayers into higher tax brackets andthereby raise the average effective tax rate. Both to sustain economicgrowth and to relieve citizens from unwarranted tax burdens, tax reduc-tions will, from time to time, be highly desirable.

It would be unwise—and, indeed, very dangerous—to commit our-selves now to any mechanical formula for future reductions. No suchformula will pass the test of budgetary responsibility. Our knowledge offuture economic conditions and developments affecting the rate ofinflation is too limited to make such decisions at this time. There is simplyno substitute for the difficult process of matching our overall budgetarypolicies year by year to the economic requirements of the Nation.

Policies to Meet the Nation's Needs

In a period when the overall growth of budgetary resources mustbe tightly restrained, budget decisions take on special importance. Somereal growth in our defense budget is essential to meet our national securityneeds and keep our international commitments in the face of the grow-ing military strength of our potential adversaries.

Within the domestic budget I have given special priority to the needsof the poor and the disadvantaged. I have recommended substantialfunding for programs that address their needs for assistance in

10

health care, education, employment and training, and basic subsistence.The 1980 budget directs the resources of those programs more carefullytoward those most in need. Similarly I have sought to maintain and, insome cases, expand the assistance provided to our financially troubledcities and counties. I have paid particular attention to the need to moveahead with the development of alternative energy sources, including solarenergy, and to spur basic research and development, which has beenlagging in our country.

We cannot be satisfied with the condition of our economy while manyof our disadvantaged citizens, especially among minorities, are unable tofind work even in periods of prosperity. In 1978, the Congress enactedwith my support the Full Employment and Balanced Growth Act. Thatact restates and amplifies the responsibilities of economic policy that havefaced our Nation in recent decades. The act challenges us to provide thefullest possible opportunities for useful employment, to rely on the privatesector as the principal provider of jobs, and to create an environmentof price stability that will make it possible to sustain prosperity. Theseare very ambitious goals that challenge us as a Nation to set our sightshigh. The act also establishes important new procedures for movingtoward the realization of full employment and price stability.

Neither can we rest while large numbers of Americans still live inpoverty. This Nation has made a concerted effort to provide for thosein our society who are in need. We have assisted the poor to acquire thebasic necessities of life. We have taken steps to assure adequate incomesand medical care for the elderly. And we have helped to assure betterhealth care, nutrition, and education for the young. My budget for 1980continues to respond to the challenge that poverty sets before our Nation.

Each of these challenges calls for action by the government. In aperiod of inflation, however, our ability to act is limited. We cannot doeverything, but we must do what we can and do it well. That is theframework within which I have constructed my budgetary program for1979 and 1980. This budget provides a carefully balanced spending planwhich will ensure that the activities of the Federal Government are welladministered and effective, and that we continue to respond to the im-portant needs of the country.

My 1980 budget provides important building blocks for the future inmany areas:

• Health programs, which I have expanded substantially during myfirst 2 years in office, will be maintained at those levels and in somecases increased. In addition, consistent with the development of a

11

National Health Plan, new resources have been provided for theChild Health Assessment Program, which will extend Medicaidbenefits to over 2 million low-income children. Funds have also beenprovided for extending Medicaid coverage to 100,000 low-incomepregnant women not now eligible.

• Authority for new spending for education is maintained at the levelthat I provided in my budget last year. This program will supportspending nearly 20 percent greater, in real terms, than 2 years ago.

• Publicly assisted housing will be provided through subsidies for325,000 new units for families with low or moderate incomes.

• Job-related programs will include funds that will support an averageof 546,000 public service jobs, phasing down to 467,000 jobs by theend of 1980. These jobs have been targeted more tightly to serve thestructurally unemployed. Another 424,000 training opportunitiesalso will be provided for the structurally unemployed. Programs toprovide employment and training opportunities for youths remaina high priority. More private sector job opportunities will be madeavailable through the new private sector initiative and the targetedemployment tax credit.

• A welfare reform program, to take effect in 1982, will expand aidto families with dependent children, increase the earned income taxcredit for low-wage workers, substantially improve employment op-portunities for the Nation's neediest citizens, and provide fiscalrelief to State and local governments with severe welfare burdens.Important reforms in the administration of the program will makeAmerica's welfare system easier to operate.

• Aid to our cities and counties will continue to be provided throughrevenue sharing, community development block grants, urban masstransit assistance, and urban development action grants. My budgetprovides new resources for the National Development Bank andrequests funding in fiscal 1979 and 1980 for a new program ofspecial fiscal assistance to cities and counties with severe unemploy-ment problems.

This spending program provides for our Nation's vital needs, whileremaining within the constraints required by today's inflationaryeconomy.

The International Economy

Developments last year reminded us once again of the interdependenceof our economy and those of other nations around the world. Our tradingpartners are looking at our ability to deal with our economic problems athome as an indicator of the strength and leadership they can expect fromthe United States. We will not disappoint them.

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Nineteen hundred and seventy-eight was a year of significant progressin the world economy. Real output began to pick up in industrial coun-tries other than the United States. Important initiatives in the inter-national arena occurred in trade policy, in balance of payments ad-justment, and in financial markets—all influenced by the cooperationshown at the Bonn Summit.

Late 1978 and early 1979 will mark the culmination of the Tokyoround of Multilateral Trade Negotiations. These historic negotiations—which began in 1975 and were intensified in 1977—should lead to thefirst comprehensive overhaul of the rules of international trade since the1960s.

The need for a revamping of the trading system is clear. Our largeforeign trade deficit stems in part from a loss of American vitality inworld markets. But it has also resulted from the tariff and nontariffbarriers of our trading partners. Over the coming years, under a finalmultilateral trade agreement, barriers at home and abroad will be recip-rocally dismantled.

During 1979 I will be working closely with the Congress to adoptthe final multilateral trade agreement, along with implementing legis-lation, that will foster robust export growth and free and fair competitionin world trade under rules that are both equitable and economicallysensible. These measures will provide a framework for trade that willenhance our living standards in the decade to come.

In recent years, the United States has had a serious balance of pay-ments deficit. Our imports surged as we grew rapidly and drew heavilyon imported oil. Our exports lagged because of slow economic growthabroad. These factors contributed to a trade deficit rising from about$10 billion in 1976 to an annual rate of almost $45 billion in early1978. As a result of the sharp increase in our external deficit and theacceleration of inflation in the United States, the value of the dollar inforeign exchange markets fell substantially last year.

We have taken important steps to correct the deficit:

• In late 1978, Congress enacted the National Energy Act, the firstcomprehensive legislation for dealing with our energy problems.The effect will be to reduce our oil imports in 1985 by 2.5 millionbarrels per day.

• In 1978, I announced the first phase of a National Export Policy.By setting up a framework to increase support for exports and re-duce disincentives to export, we can begin to increase our share ofworld commerce. Fundamental improvement in our trade positionis critical to a healthy dollar.

13278-216 O - 79 - 2

• A strong and effective anti-inflation program has been put intoplace. An integral part of that program consists of monetary andfiscal policies that will moderate the rate of economic expansion.These actions will help reduce our large foreign trade deficit.

These policies were beginning to bear fruit by the end of 1978. Ex-ports today are growing more rapidly than the domestic economy. Themerchandise trade deficit declined from a $38-billion annual rate in thefirst half of last year to about $32 billion in the latter half of the year. Nar-rowing of the deficit should continue and we foresee a marked improve-ment in the more comprehensive current account measure.

Nineteen hundred and seventy-eight was also a year of unusual in-stability in international financial markets. In the fall, movements inthe exchange value of the dollar became very disorderly, and its declinebecame clearly excessive.

On November 1, I announced a series of steps to restore order to theforeign exchange markets and to correct the excessive decline of thedollar. Up to $30 billion in foreign exchange resources were assembledby the United States, to be used in coordination with other countriesutilizing their own resources, to protect the dollar's value in currencymarkets. Domestic interest rates were raised significantly to help reduceinflation and strengthen the dollar in exchange markets. And the UnitedStates underlined its commitment to deal with its inflation problem andstrengthen its underlying economic position.

These actions have improved the tone of the exchange markets andcontributed to a rise in the value of the dollar. More importantly forthe longer term, they are helping to create more stable conditions in theexchange markets, in which the value of the dollar can better reflect thefundamental strength of the U.S. economy.

Progress also was made in 1978 in achieving closer economic coopera-tion among the leading industrial nations. I met in Bonn with the leadersof the six major industrial countries to discuss major economic problemsfacing us. Out of this came a concerted action program to restore greaterbalance and confidence in the international economy and in world fi-nancial markets. Together, we took the necessary steps to achieve thoseends—the United States committed itself to combat inflation and reduceoil imports, Germany and Japan to increase growth and reduce tradesurpluses, others to take measures on trade or inflation. Only throughcontinued economic cooperation and sound policies can we attain thegoal of full employment and price stability that is our ultimate objective.

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Building for the Future

During this coming year, we as a Nation have an opportunity tostrengthen our economy and lay the basis for continuing prosperity. Thegains of the last 2 years have been notable. We have made great progressat home in recovering from the recession, and we have strengthened thestature of the United States in the world economy. In the year ahead, wecan secure and extend those gains by working together to moderate infla-tion. I am confident that we will rise to the challenge.

January 25, 1979

15

THE ANNUAL REPORT

OF THE

COUNCIL OF ECONOMIC ADVISERS

LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS,

Washington, D.C., January 24,1979.MR. PRESIDENT:

The Council of Economic Advisers herewith submits its 1979 AnnualReport in accordance with the provisions of the Employment Act of 1946 asamended by the Full Employment and Balanced Grbwth Act of 1978.

Cordially,

Charles L. SchultzeChairman

Lyle E. Gramley

William Nordhaus

19

CONTENTS

PageCHAPTER 1. PROGRESS AND PROBLEMS IN 1978 25

An Overview of the Year 25The Major Sectors of Aggregate Demand in 1978 29

Personal Consumption Expenditures 29Housing 31Business Fixed Investment 32Net Exports 33Inventory Accumulation 34Government Spending 34

Labor Market Developments 36Prices and Wages in 1978 38

Food Prices in 1978 40Depreciation of the Dollar . 42Housing Costs 43Medical Care 45

Aggregate Demand Management in 1978 45Fiscal Policy 46Monetary Policy 48Credit Flows in 1978 52

CHAPTER 2. REDUCING INFLATION 54

The 1978 Acceleration of Inflation 54Inflation in 1978 56Explaining the 1978 Inflation 58Causes of Wage Acceleration 66The Productivity Slowdown 67Potential GNP 72

Economic Policy in an Inflationary Environment 76Aggregate Demand Policy 77Standards for Wage and Price Behavior 80Regulatory Policy 85

CHAPTER 3. THE ECONOMIC OUTLOOK 92

The Economy in 1979 and 1980. 92Fiscal Policy for 1979 and 1980 93Monetary Policy 94The Economic Forecast 97Price and Wage Developments 104

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CHAPTER 3. THE ECONOMIC OUTLOOK—Continued Page

Economic Objectives and Policy for the Longer Run 106The Humphrey-Hawkins Act 107Goals for the Economy to 1983 108Requirements to Achieve the Economic Goals 110Attaining the Goals for Unemployment and Inflation.... 117Summary 123

Investment Policy Report 124Postwar Trends in Investment and Capital Formation. . . 124Investment Incentives 127Research and Development 132The Supply of Investment Capital 132Small Businesses 134

CHAPTER 4. THE WORLD ECONOMY—MANAGING INTERDEPENDENCE. 135

The Global Economy: Developments and Prospects 137Growth and Inflation 139Prospects 143Current Account Developments and Prospects 143

International Financial Developments 147The Operation of Flexible Exchange Rates 148Important 1978 Developments 153The November 1 Initiative 155The European Monetary System 156

The Changing Environment of World Trade 157The Multilateral Trade Negotiations 158U.S. Domestic Trade Policy 160The National Export Policy 160

APPENDIXES:

A. Report to the President on the Activities of the Councilof Economic Advisers During 1978 163

B. Statistical Tables Relating to Income, Employment, and

Production 177

List of Tables and ChartsTables

1. Shares of National Income, 1959-78 27

2. Growth in the Major Components of Real Gross NationalProduct, 1975-78 29

3. Changes in Real Business Fixed Investment, 1975-78 32

4. Unemployment Rate and Growth in Employment and LaborForce, by Demographic Group, 1978 38

5. Alternative Measures of Inflation, 1976-78 39

6. Measures of Wage Rates and Costs, 1973-78 39

7. Changes in Prices, Costs, and Profits, Per Unit of Output,Private Nonfinancial Corporate Sector, 1973-78 40

22

List of Tables and Charts—ContinuedTables Page

8. Changes in Retail Food Prices, 1977-78 409. Changes in Currency Values and Consumer Prices, by Country,

Third Quarter 1977 to Third Quarter 1978 4310. Actual and High-Employment Federal Receipts and Ex-

penditures, National Income and Product Accounts, Calen-dar Years 1973-78 46

11. Federal Unified Budget Outlays as Percent of Gross NationalProduct, and Budget Surplus or Deficit, Fiscal Years 1955-80. 48

12. Annual Rate of Change in Selected Consumer and ProducerPrices and Employment Costs, 1960-78 56

13. Selected Measures of the Rate of Wage Increase, PrivateNonfarm Economy, 1976-78 61

14. Mean Wage and Benefit Adjustments in Major CollectiveBargaining Agreements, 1976-78 62

15. Labor Productivity Growth, 1948-78 6816. Productivity Growth by Industry, 1950-77 7117. Potential Gross National Product and Benchmark Unemploy-

ment Rate, 1973-78 7518. Estimated Annual Budgetary Cost of Real Wage Insurance

Proposal 8419. Cyclical Contractions in Mortgage Credit and Housing Starts,

1959-74 9520. Growth in Deposits, 1977-78 9621. Economic Outlook for 1979 9722. Economic Goals, 1979-83 10923. Net Saving by Sector, 1973 and 1975 11224. Federal Unified Budget Receipts and Outlays Under Current

Policy Budget, Fiscal Years 1979-83 11425. Private Net Saving and Investment and the Unemployment

Rate, 1952-80 11526. Saving Rate and Population Growth, by Age of Household

Head 11627. Selected Unemployment Rates, Fourth Quarter 1972 and

Fourth Quarter 1978 11828. Real Nonresidential Fixed Investment as Percent of Real

Gross Domestic Product, 1966-76 12629. Capital Expenditures by Business for Pollution Abatement, by

Industry, 1976-78 12730. Determinants of Business Fixed Investment, 1955-78 12831. Annual Growth in Real GNP in the United States and Other

Major Industrial Countries, 1960-79 13932. Annual Growth in Real GNP in Major Industrial Countries,

1960-78 139

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List of Tables and Charts—ContinuedTables Page

33. Annual Growth in GNP Per Employed Worker in MajorIndustrial Countries, 1964-78 140

34. Changes in Consumer Prices in Major Industrial Countries,1976-78 141

35. World Current Account Balance, 1975-78 14436. Current Account Balances for Selected Major Industrial

Countries, 1976-78 145Charts

1. Selected Interest Rates and Bond Yields 492. Unit Labor Costs and Deflator, Nonfarm Business 573. Capacity Utilization Rates 594. Unfilled Orders-Shipments Ratio, Durable Goods Manu-

facturing 605. Selected Unemployment Rates 646. New Hire and Quit Rates in Manufacturing 657. Actual and Potential Gross National Product 758. Real Nonresidential Fixed Investment as Percent of Real

GNP 1259. Unemployment in the U.S. and Five Major Industrial

Countries 13710. Consumer Price Inflation Rate in the U.S. and Six Major

Industrial Countries 13811. Weighted-Average Exchange Value of the U.S. Dollar 15112. Monthly Average of Daily Exchange Rate Changes 15313. U.S. Share of Fifteen Industrial Countries' Exports of Manu-

factured Goods 161

24

CHAPTER 1

Progress and Problems in 1978

THE U.S. ECONOMY LAST YEAR maintained substantial momen-tum in its fourth year of expansion. Output and employment rose and

unemployment fell. But the year was marred by a serious acceleration in therate of inflation and a decline in the value of the dollar that was sharper thanfundamental economic conditions warranted. Although economic growthslowed from 5yi percent over the 4 quarters of 1977 to 4% percent during1978, real income rose in all sectors, and all demographic groups experiencedemployment gains. A reasonable balance was maintained among sectors ofreal spending. Business fixed investment grew vigorously and residential con-struction remained strong despite sharply rising interest rates.

During the years immediately preceding 1978, the rapid growth asso-ciated with economic recovery had absorbed many of the capital and laborresources idled by the 1974-75 recession. Thus it became appropriate thatgrowth should slow to a pace more in line with the long-term potential ofthe economy. The decline in the growth rate during 1978 was the first stepin that transition.

Much remains to be done to provide adequate employment opportuni-ties for those who cannot find jobs even in a high-employment economy.This task cannot be accomplished solely through aggregate demand policy,however, without risking further acceleration of inflation. Aggregate de-mand management must now aim at a more moderate rate of economicexpansion to combat inflation while structural measures are developed toattack remaining pockets of unemployment.

AN OVERVIEW OF THE YEAR

The quarterly pattern of growth during the year was once again uneven.Unusually severe winter weather and a major strike in coal mining reducedoutput growth to zero in the first quarter. Both consumer spending andconstruction activity were curtailed by the adverse weather. In the secondquarter, both of these sectors rebounded strongly, and virtually all of thesales and production lost in the first quarter were regained. Taking a 2-quarter average, real gross national product (GNP) rose at a 4*4 percentannual rate in the first half of the year. In the second half of the year,there was again substantial disparity between the 2 quarters. Growth slowed

25

in the third quarter and accelerated in the final quarter. Over the 2 quarterstogether the annual rate of growth of real GNP averaged 4}4 percent, thesame as for the first half.

The increase in employment over the 4 quarters of last year was slightlyless than in 1977—3.3 million compared to 3.9 million. It remained verylarge by historical standards, however, as the growth of productivity slowedsignificantly. The unemployment rate continued the marked decline begunin the latter part of 1977, falling from 6.6 percent in the fourth quarter of1977 to 5.8 percent by the final quarter of 1978.

All sectors achieved further increases in real income in 1978. Aside fromthe farm sector, however, the gains were more modest than in the previous3 years of stronger fiscal stimulus and rapid recovery in real output. Thegrowth of real per capita disposable income, for example, slowed from 4.6percent in 1977—a year when personal income taxes were reduced—to 2.5percent over the 4 quarters of 1978. During the 3 years since the first year ofcyclical recovery from the 1974-75 recession, the growth rate has averaged3.2 percent, slightly above the 2/2 percent trend for the two decades from1953 through 1973. Corporate profits, in 1972 dollars, rose moderately fur-ther in 1978, following larger gains earlier in the recovery. Rising capacityutilization has lifted real profits at an average annual rate of 18 percent sincethe cyclical low in 1975. Both the rise in capacity utilization and the improve-ment in profitability helped to spur a recovery of business capital investmentto a 10 percent share of GNP.

Farm income is, of course, less sensitive to fluctuations in overall eco-nomic growth but very sensitive to other factors such as weather, foreigndemand, and agricultural policy. Farm income rose to an exceptionallyhigh peak in 1973-74 from which it drifted down until 1977. A sharprecovery occurred last year, with farm proprietors' income reaching $25.1billion for the year as a whole (national income and product accounts basis).In 1972 dollars, farm income in 1978 was $16.5 billion, or 14 percent higherthan a year earlier.

The division of income among employee compensation and other shareshas remained relatively constant during the most recent 3 years of ex-pansion, as shown in Table 1. The share received by employees as wagesand fringe benefits has risen slightly from the earlier part of the decadeand is up substantially from the 1960s. The corporate profits share hasimproved significantly from recession lows although it remains well belowthe high level of the preceding decade.

One of the most discouraging developments of 1978 was the very slowgrowth of productivity. Output per hour in the private nonfarm businesssector grew by only three-fourths of 1 percent during the year. (The reasonsare explored in Chapter 2.) Weakness in productivity growth did much toexacerbate inflation. Since increases in nominal wage costs were offset to alesser degree by productivity gains, unit labor costs rose more rapidly thanwas anticipated, and prices were pushed up faster. Furthermore, labor de-

26

TABLE 1.—Shares of national income, 1959-78

[Percent]

Item 1959-68average

71.2

2.3

8.1

12.3

6.1

1969-73average

75.3

2.0

6.2

9.4

7.0

1974-78average '

76.5

1.6

5.2

8.8

7.9

1976

76.3

1.4

5.2

9.3

7.9

1977

76.1

1.3

5.2

9.5

7.8

19781

Compensation of employees.

Proprietors' income:2

Farm

Nonfarm

Corporate profits2

Other'

76.4

1.5

5.2

9.4

7.6

1 Preliminary.2 With inventory valuation and capital consumption adjustments.* Rental income of perscns (with capital consumption adjustment) and net interest.Note.—Detail may not add to 100 percent because of rounding.Source: Department of Commerce, Bureau of Economic Analysis.

mand strengthened more rapidly than it would have done if productivitygrowth had been better, and this may have been a factor in the accelerationin hourly earnings early in the year.

Unlike earlier years of the recovery, when price indexes excluding foodand energy rose at a fairly steady rate of around 6 to 6^4 percent, 1978 wit-nessed a pervasive acceleration of prices and labor compensation. Com-pensation per hour in the fourth quarter of last year was almost 10 per-cent higher than a year earlier, in contrast to the 8 to 8/2 percent rate of in-crease during the preceding 3 years. And price increases were larger in 1978than in earlier years for almost all categories of goods and services. The GNPdeflator increased 8.3 percent over the 4 quarters of 1978, compared to 6.1percent in 1977. The consumer price index (GPI) rose by 9.2 percent overthe 12 months ending in November compared with 6.8 percent in 1977. Thismore rapid rise of prices, especially consumer prices, was attribuable not onlyto poor productivity performance but also to adverse developments in par-ticular markets.

Food prices rose sharply, since supplies of red meats were even more lim-ited than had been expected and adverse weather damaged fruit andvegetable crops. Moreover, the substantial depreciation of the dollar in inter-national exchange markets was accompanied by higher prices of imports andof competing domestic products.

In view of the worsening of inflation, the Administration in May post-poned the effective date for its proposed tax reduction from October 1978to January 1979 and reduced the proposed cut from $25 billion to about$20 billion. Growth in Federal outlays was also slower than had been esti-mated. For fiscal 1978, unified budget outlays were $12% billion below theestimate contained in last January's budget, and the estimate for fiscal 1979has been revised down by $7.6 billion. Real purchases of goods and servicesby all levels of government rose 2 percent over the 4 quarters of 1978, in con-trast to the 3^4 to 4 *4 percent that had been anticipated at this time last year.

27

Both domestic and international conditions in 1978 also prompted a morerestrictive monetary policy. The Federal funds rate increased from 6J4 per-cent to about 10 percent during the year. Other short-term interest ratesrose commensurately. As is typical, long-term rates rose less than those onshort-term securities.

Tightening fiscal and monetary policies were one cause of the slowereconomic growth in 1978 than in 1977. The postponement of the tax cut andslower growth of Federal purchases contributed to a more moderate rise inconsumer incomes and expenditures during 1978 than had been foreseen ayear earlier. The inflation itself also played a part in slowing growth. In-creases in food and import prices siphoned purchasing power away from mostdomestic consumers.

The largest single reason for the slower growth in 1978 than in 1977 wasthe leveling out of residential construction after a prolonged rise in housingstarts beginning early in 1975. This leveling may have been partly the resultof the increased restraint that developed in financial markets over the year.The more important influences were probably a filling of backlogs of demandand the fact that the home-building industry was operating at nearly fullcapacity.

The economy at the end of 1978 still showed substantial momentum, butthe serious inflation problem and its interaction with the international valueof the dollar have created a marked degree of uncertainty. Nominal interestrates are approaching historically high levels, to some extent as a result of thenecessary steps taken at the beginning of November as part of the dollar sup-port package. Financial restraint has not yet had significant adverse effectson spending, but it is difficult to predict how consumers and businesses willrespond to rising interest rates in the current environment. Furthermore, thecontinuation of inflation casts a shadow on the economic horizon. Com-pliance with the anti-inflation program announced by the President in Octo-ber is fundamental to maintaining a strong economy. This program isdiscussed in detail in Chapter 2.

If success is achieved in containing inflation this year, the prospects arefavorable for maintaining a satisfactory growth rate and avoiding a reces-sion. There are no major imbalances plaguing us. Capacity bottlenecks arerelatively rare; capacity has been growing at a sustainable pace; inventoriesin most lines of business are reasonably balanced with sales; and liquiditypositions, although declining, are not severely strained. The internationaltrade position has been improving.

Continued strength in the near term seems assured. Employment andoutput rose strongly in the fourth quarter. Orders for durable goods haveincreased substantially. And the January 1 tax cut will help to sustain con-sumer spending early in the year. But the outlook for the latter part of 1979will depend heavily on moderating inflation and on careful coordinationbetween fiscal and monetary policies.

28

THE MAJOR SECTORS OF AGGREGATE DEMAND IN 1978

Private demand sustained the economic expansion through its fourthyear. The continued strength of business fixed investment last year was anotable aspect of the composition of demand (Table 2). Housing startsdemonstrated remarkable resilience; despite tightening credit conditionsthey remained near the high level that had been reached at the end of 1977.Consumption expenditures grew somewhat faster than disposable incomeduring the year; and the saving rate declined from its already relatively lowlevel at the end of 1977. In contrast, growth in State and local spending overthe 4 quarters of 1978 was at a slower pace than in 1977; the effects of the1977 economic stimulus measures—many channeled through the State andlocal sector—gradually diminished. Federal purchases in real terms declinedslightly due to a variety of special factors.

TABLE 2.—Growth in the major components of real gross national product,1975-78

[Percent change, seasonally adjusted annual rate]

Component

Gross national product __

Personal consumption expendituresNonresidential fixed investmentResidential investmentGovernment purchases:

FederalState and local .

Domestic final sales3 . . .

1975 IVto

1976 IV

4.6

5.78.6

23.6

.2- 2 . 7

5.0

1976 IVto

1977 IV

5.5

4.89.1

15.3

6.34.3

5.7

1977 IVto

1978 I V i

4.3

3.88.3

- . 8

- . 33.5

3.7

1977 IVto

197811

4.2

2.212.4

- 1 . 3

2 - 1 2 . 24.6

2.2

197811to

1978 IV i

4.3

5.44.3

- . 3

13.22.3

5.2

1 Preliminary.2 Largely attributable to fluctuations in Commodity Credit Corporation expenditures.3 Gross national product excluding change in business inventories and net exports of goods and services.

Source: Department of Commerce, Bureau of Economic Analysis.

PERSONAL CONSUMPTION EXPENDITURES

Personal consumption is typically a major source of stimulus in the earlystages of recovery. The current expansion is no exception. Between mid-1975and the end of 1976 the personal saving rate declined substantially, and thefraction of disposable income spent on durable goods rose. Consumptionsubsequently became a less important source of stimulus, but it remainedan expansionary factor in 1978. The increase in consumption came to 3.8percent in real terms during the last year, one-half percentage point morethan the increase in real disposable income.

Since 1975 the household sector has significantly increased its stocks ofdurable goods. In the process, outstanding consumer debt rose enoughto lift the ratio of debt repayments to disposable income from a 1975low of 15.6 percent to 16.8 percent at the end of 1977. It is therefore notsurprising that the rate of growth of spending (in 1972 dollars) for durablegoods declined substantially to 5.0 percent in 1978, compared to 11.3 per-

29

278-216 O - 79 - 3

cent in 1977. Nonetheless, durable goods purchases in real terms held atabout 15 percent of real disposable income, the level reached late in 1977.Auto sales remained at a high rate of 11T/4 million units a year but did notrise further. Despite steep price increases for foreign cars, the foreign carshare of the new car market declined relatively little during the year.

With durable goods sales remaining comparatively high, the volume ofoutstanding consumer installment credit rose substantially further in 1978;during the year the net increase amounted to $44 billion. In the fourth quar-ter, repayments of consumer installment debt had reached 17.7 percent ofdisposable personal income, four-tenths of a percentage point above the 1971peak (the earliest available data for the present series). Total repayments,including mortgage repayments, amounted to almost 23 percent of disposableincome in the third quarter.

The high fraction of consumers' income absorbed by debt repaymenthas created some concern that a downturn in consumer demand mightensue. Survey data on the use of consumer installment credit suggests, how-ever, that the increase in the ratios of installment credit extensions and re-payments to disposable income may have been due to rapid growth in thenumber of households in the age bracket associated with relatively heavycredit usage. Rapid growth has occurred in the number of young adults inthe 18- to 34-year age bracket; this group uses credit the most heavily.An absence of excessive debt burdens is also suggested by the fact thatdelinquency rates on installment loans did not rise during the year.

At the start of last year the Administration forecast a rise of real consump-tion of about 4^2 percent, measured fourth quarter to fourth quarter, orabout three-fourths percentage point more than the 3.8 percent actuallyrealized. The reason for this difference was slower growth of real disposableincome. This slowdown, in turn, is partly explained by the postponement ofthe effective date of the proposed tax cut from October 1, 1978, to January 1,1979. A more important cause, however, was the increase in the rate of infla-tion that occurred during the course of 1978. Effective tax rates were in-creased as households were moved into higher tax brackets. Furthermore,the 11 percent rise in food prices reduced the growth of real incomes formost consumers, as did the price increases associated with the decline of thedollar's value in foreign exchange markets.

In the past, sharp unexpected increases in the rate of inflation haveincreased the personal saving rate. Inflation generally tends to raise the costof borrowing and curtail the growth of real wealth. In addition, consumersmay become less confident of their future prospects. In contrast, the savingrate declined in 1978. The continued strength of consumer expenditures inthe face of high actual inflation rates and rising nominal interest rates may tosome extent have stemmed from anticipatory buying in advance of expectedprice increases. Evidence from surveys suggests that some consumers con-sidered the present time to be propitious for buying because they expected

30

prices to rise further. This may have helped sustain the already high level ofdurable goods purchases.

Relative price changes appear to have contributed to changes in thecomposition of consumption during 1978. For example, real purchases oftransportation services and clothing and shoes rose more sharply thantotal consumption. In these areas, price increases were below the averagefor all consumer goods and services. A shift in the composition of food con-sumption, as a result of the rapid rise in food prices, was probably the majorreason for the decline in the measured real value of food consumption.Whenever food prices rise steeply consumers tend to shift toward less costlyfoods, although they do not necessarily eat smaller quantities of food. Forexample, the sharp reduction in supply and sharp increase in the price of redmeats generated a significant shift of consumption to poultry and dairyproducts.

HOUSING

Housing activity remained on a plateau throughout last year, followingnearly 3 years of steady advance. Real residential construction, on acalendar year basis, was 3.5 percent above that in 1977, and there were 2.0million housing starts last year. The number of single-family starts wasjust below the 15/2-million record level of 1977, while multiunit startsrose to 592,000. Over the 4 quarters of 1978, however, residential con-struction in real terms declined slightly, in contrast to a rise of 15 percentin the previous 4 quarters. This flattening out of residential investmentoutlays was a dominant element in the slower growth of real GNP in 1978.

In the first quarter, housing starts fell about 20 percent as a result ofthe inclement winter in the North Central and Northeast regions. Theshortfall was largely made up in the second quarter; then housing startsleveled out at an annual rate of around 2 million units.

This leveling of housing starts and residential construction in 1978 wasnot surprising. Three years of strongly rising building activity had filledbacklogs of demand created by the depressed level of new constructionduring the 1973-74 period of credit restraint and low income. Moreover,the sharp rise in prices of a wide range of building materials suggests thatthe building industry was operating at close to capacity in 1978. Indeed,the striking feature of the housing sector last year was its continued highlevel of activity in the face of sharply rising interest rates.

The resilience of housing in a year of tightening financial markets islargely attributable to the ability of specialized mortgage lenders to competemore effectively for savings. Beginning in June, new regulations permittedcommercial banks and thrift institutions to issue 6-month certificates ofdeposit on which rates paid are tied to those on 6-month Treasury bills. Thesenew money market certificates sustained the supply of mortgage credit, butthey did not prevent interest rates on mortgages from rising along withother rates. The national average effective mortgage rate for new houses

31

reached 10 percent by the end of the year. The strength of demand, particu-larly for single-family units, in the face of such high mortgage interest ratesresults partly from the large number of people who were born in the babyboom of 1946-57 and are now reaching age brackets where the rate of home-ownership is traditionally high. Demand may also be stimulated by theexpectation that houses will continue to be a good inflation hedge. Overthe past 7 years purchase prices for new homes, adjusted for changes inquality and size, have risen at an annual rate about one-third faster thanother prices. The tax deductibility of mortgage interest and the favorabletax treatment of capital gains from home sales add to the attractiveness ofsuch investment.

Multifamily housing starts rose 2.9 percent in 1978. They were stillabout 400,000 below the 1972 peak of 1 million, which included closeto 200,000 publicly subsidized starts. The number of subsidized starts lastyear was almost 165,000, up substantially from the lows of 1975 and 1976.For all rental housing the vacancy rate remained close to 5 percent throughthe third quarter of last year, a historically low figure. Rents rose 7.3percent, almost 1 percentage point more than in 1977. This probably con-tributed to an improvement in profits and helped to stimulate multiunitbuilding.

BUSINESS FIXED INVESTMENT

A year ago there was widespread concern that business fixed investmentwas not demonstrating its usual cyclical response to improvement in suchbasic determinants as the rate of growth of output, business profits and cashflow, and the cost of capital. In fact, revised data for 1977 that became avail-able last July showed a much stronger rise of investment than had appearedearlier, and growth last year continued to be relatively strong. The rate ofreal growth of business fixed investment over the 4 quarters of last yearwas 8.3 percent (Table 3). For the year as a whole investment rose to 10percent of GNP, close to its share in the high investment periods of the 1960sand early 1970s.

Investment in structures, which had been disturbingly weak earlier inthe recovery, climbed 12.7 percent in 1978, and by year-end it ex-

TABLE 3.—Changes in real business fixed investment, 1975-78

[Percent change, fourth quarter to fourth quarter]

Component

Nonresidential fixed investment _ _. ___ _ _

StructuresProducers'durable equipment.. _ _ _ _

Autos and trucksOther

1975

- 9 . 9

- 7 . 2-11 .2

2.9-14.8

1976

8.6

3.011.4

21.58.3

1977

9.1

7.010.1

27.04.2

19781

8.3

12.76.4

11.04.5

1 Preliminary.

Source: Department of Commerce, Bureau of Economic Analysis.

32

ceeded its previous peak reached in the fourth quarter of 1973. Growth ofreal spending for producers' durable equipment, on the other hand, slowedto 6.4 percent during the year, in contrast to 10.1 percent during the preced-ing year. Business purchases of autos and trucks grew much less rapidlythan earlier. Strength in investment was greatest in durable goods manu-facturing—particularly in machinery and in stone, clay, and glass—and alsoin electrical utilities and petroleum refineries.

The increased strength in investment during the past 2 years reflected aresponse to growth in profits and increases in capacity utilization in manu-facturing during the course of the recovery. Corporate profits (with inven-tory valuation and capital consumption adjustments) rose 6.7 percent overthe 4 quarters ending in the third quarter of last year and amounted to 7%percent of GNP at the end of the period. This shows a substantial improve-ment from the 6 percent average ratio in 1974-75 though little changefrom 1977.

Capacity utilization in manufacturing rose from 83 percent in the latterpart of 1977 to almost 86 percent at the end of 1978. In general, utilizationrates were higher in the primary processing industries than in the advancedprocessing industries. Utilization in basic metals industries, which had beenrelatively low at the beginning of the year, rose dramatically and greatlyimproved profits in those industries.

Thus the rate of investment has been relatively high in the past 2years, and the structure of investment has begun to shift toward longer-livedassets. Nevertheless, a further rise in the share of GNP directed to businessfixed investment would be desirable, in order to maintain growth of thecapital stock in line with the rapidly rising labor force and to meet environ-mental and other regulatory requirements. This issue is discussed further inChapter 3.

NET EXPORTS

Real net exports fell substantially during the first 2 years of the currentexpansion. During 1977 net exports in 1972 dollars appeared to be levelingout at about $11—$12 billion, a little less than 1 percent of real GNP. Late in1977 and early last year, howrever, our net export position deterioratedfurther, although the magnitude of this deterioration was exaggerated by theeffects of the East Coast dockworkers' strike.

Throughout much of the 1977-78 period exports grew slowly while im-ports of both oil and other goods increased sharply. By mid-1978, however,reversals of these trends became evident; net exports in 1972 dollars in thelast half of 1978 were $3 billion higher than in the first half.

Agricultural products were once again one of the leading export sectors.Agricultural exports, in 1972 dollars, reached a relatively high level of $15.8billion in 1978, well above the $12.9-billion average in 1977. Poor crops inthe Southern Hemisphere last spring and income growth in the rest of the

33

world were the main reasons for the increased demand for U.S. farmproducts.

The volume of nonagricultural exports in the second quarter reboundedfrom depressed levels early in the year and continued to rise stronglythrough the rest of 1978. Accelerating growth in other countries made asignificant contribution to this advance. The depreciation of the dollar inlate 1977 and early 1978, which lowered U.S. export prices in foreigncurrencies, also encouraged exports, but its principal effect on exports willoccur in 1979.

Import volume grew at an annual rate of 11.6 percent from the begin-ning of the expansion until the end of 1977. This is somewhat morerapid than past experience would suggest, given the growth of U.S.income. That trend has since been reversed. Oil imports were 5.6 percentlower in 1978 than in the year before. The startup of 1.2 million barrels perday of Alaskan oil production displaced imported oil and more than offsetthe increase in U.S. oil consumption last year. The volume of non-oilmechandise imports grew more slowly during 1978 than in 1977, because ofless rapid U.S. growth and higher import prices due to dollar depreciation.

INVENTORY ACCUMULATION

The cautious inventory policy that has characterized the current expansioncontinued in 1978. This caution was reinforced by sharply rising short-term interest rates, which increased the cost of holding inventories. The rateof inventory accumulation in 1972 dollars last year was about three-fourthsof 1 percent of GNP. The ratio of inventories to final sales (in 1972 dollars)for the nonfarm sector was nearly constant. The stability of the inventory-to-sales ratio is especially noteworthy in the face of the 10 percent share ofGNP absorbed by business fixed investment. Such a high investment sharetends to raise the ratio of stocks to sales by virtue of its significant contribu-tion to inventories of work in progress.

One exception to this stability of inventory-to-sales ratios was at generalmerchandise stores. The ratio of real inventories to sales in this sector, whichhas shown a slight uptrend in the past decade, appeared to be moving upsharply during the summer and early fall months. A stronger pace of salesat these stores late in the year helped to alleviate this problem.

GOVERNMENT SPENDING

Government purchases rose less during 1978 than was expected a yearago. In real terms the actual increase was 2.0 percent.

Slower than expected growth was confined principally to the Federalsector, where the real value of purchases declined 0.3 percent. CommodityCredit Corporation purchases had been expected to decline. The shortfall inother purchases was about evenly divided between delays in the buildupof the Strategic Petroleum Reserve and shortfalls in numerous other cate-gories of nondefense purchases, which rose, in nominal terms, 4 percentage

34

points less than anticipated. The slow accumulation of petroleum reservesmeant lower oil imports and, on balance, had no effect on aggregate de-mand, in contrast to the other shortfalls.

State and local government purchases, in real terms, grew rapidly in thefirst half of last year but slowed in the second half. From the second quarterof 1977 through the second quarter of 1978—a common fiscal year for theseunits of government—the real value of State and local purchases rose by 4.9percent. This was a significant contrast to the virtual stability in 1975-77. Innominal terms compensation of employees rose by 10.2 percent over thisperiod while other purchases rose by 16.4 percent. Construction activity inthis sector (about one-third of other purchases) had been declining in realterms between the last quarter of 1975 and the first quarter of 1977, but itappears to have risen substantially in 1978. In the 3-month period ending inOctober the real value of street and highway construction was 5 percenthigher than a year earlier, sewer system construction was up 14 percent,and water supply construction was up 33 percent.

The acceleration of spending by State and local governments in 1977-78primarily reflects two forces: the rise in revenues during the economic ex-pansion and a sharp increase in Federal aid. A substantial part of the 1977-78 stimulus package was funneled through State and local governments,augmenting special countercyclical programs that had been initiated earlier.The principal components of the package were an expansion of publicservice employment, authorization of a second round of local public worksgrants, and expansion of antirecession fiscal assistance grants to State andlocal governments. Public service employment exceeded its target of 725,000jobs by the spring of 1978 and subsequently declined somewhat. Localpublic works grants were fully committed by the end of 1977, but the ex-panded value of outlays followed with a lag. Distribution of antirecessionfiscal assistance peaked in the third quarter of 1977 and ended a yearlater.

Real growth slackened in the second half of last year, in part becauseStates and localities entered new fiscal years in an environment influenced bypublic sentiment for tax reductions and restraint in government spending.

As a result of the increased growth in purchases and the pressure for taxreduction, the aggregate budget surplus in the State and local sector declinedsharply in 1978. The surplus on current and capital account (but exclud-ing social insurance trust accounts) fell from a peak of $12.8 billion (an-nual rate) in the third quarter of 1977 to $1.8 billion a year later. Of the$7.5-billion decline that occurred between the second and the third quarters,roughly $5% billion is attributable to California's Proposition 13, whichmandated a reduction of about 50 percent in local property taxes, or aboutone-fourth in total local revenues. This local tax cut was followed by asubstantial redistribution of funds from the State government, which hadbeen incurring a surplus, to the local governments.

35

Proposition 13 and similar measures in other States suggest the likelihoodof significantly slower growth in State and local spending in the near futureand an approximate balance or a deficit in the aggregate current and capitalaccount of this sector. In the fall elections, 11 States had proposals on theirballots that would immediately limit State and local taxes or expendituresor both. Such measures passed in eight of these States. Referenda mandatedsubstantial reductions of property taxes in Idaho and personal income taxesin North Dakota. The measures in other States differ in their form and thedegree to which they will constrain taxes and expenditures, but their enact-ment—by large margins in some cases—clearly indicates public sentimentfor budgetary restraint. This is likely to put downward pressure on bothspending and the current and capital account surplus.

Movements in this aggregate State and local surplus or deficit are domi-nated by national trends but conceal great diversity across States and amongcities and areas within States. Per capita personal income—perhaps the bestsingle measure of taxable resources—varies widely among States, but thegrowth trends in various regions have been narrowing these differentialsthroughout the twentieth century. The regions with the highest incomelevels have tended to experience the slowest growth. These same regionshave the highest per capita public sector expenditures, the highest tax effort,and the highest level of per capita Federal aid. Many forces help to createthis pattern: high-income localities may choose to spend more on publicservices as well as on private goods and services; where the cost of livingis high, more must be spent to obtain the same level of services; and somehigh-income areas also contain significant concentrations of poverty andhave greater needs. Extreme care must therefore be used in drawing generalconclusions about the fiscal condition of the State and local sector, or ofindividual areas within it, from the aggregate surplus or deficit.

The social insurance accounts of State and local governments continuedto show a moderately growing surplus throughout last year. By the end ofthe year the surplus had risen to $22.8 billion, up $3.7 billion from a yearearlier. Growth in this surplus has been augmented by strong earnings oninvestments as well as the excess of contributions over benefit payments.Continued growth in this surplus is likely as States and localities move toprovide actuarially sound funding of these trusts.

LABOR MARKET DEVELOPMENTS

Demand for labor continued to be unusually strong in 1978. Despiteanother sharp increase in the labor force participation rate, the creation ofnew jobs exceeded the growth of the labor force by a substantial margin,and the rate of unemployment declined further. The proportion of the work-ing-age population employed continued to climb in 1978, reaching 59.0percent in the fourth quarter.

36

The civilian labor force rose by 2% million over the 4 quarters of 1978.This is a 2.8 percent annual growth rate, well above the long-term trend rateof 2T/4 percent per year, which results from population growth and a long-term upward drift in labor force participation rates.

Women, teenagers, and blacks contributed most to the growth of thelabor force; their participation rates rose to new highs. The participationrate for adult women increased 1.5 percentage points to 50.1 percent, passingthe 50 percent mark for the first time. The teenage participation rate jumped1.6 percentage points to 58.5 percent, and that for blacks and other racialminorities increased 1.2 percentage points to 62.0 percent.

Employment increased by 3.3 million from the fourth quarter of 1977 tothe fourth quarter of 1978, a smaller gain than in 1977 but still large byhistorical standards. The growth in employment was surprisingly large inrelation to the rise in real GNP, reflecting the year's poor productivityperformance. The employment gain was broadly based across industries,with service-oriented and typically cyclical industries showing the largestgains.

Among manufacturing establishments, most nondurable goods indus-tries showed little or no growth in employment. Employment was reducedin such industries as apparel, textiles, leather products, and tobacco manu-factures. Some of the durable goods industries—particularly those related toconstruction and transportation—showed sizable gains. Among these werenonferrous primary metals, fabricated metal products, nonelectrical ma-chinery (particularly construction and related equipment and computers)and aircraft.

Employment also increased in other major sectors during the year. Ofthese, construction employment grew at the fastest pace, with gain of 11.6percent. Other large gains in employment were registered by finance, insur-ance, and real estate (5.3 percent) ; retail trade (4.1 percent) ; and services(4.4 percent).

Employment gains were greatest among women, blacks, and teenagers,the groups that led the labor force expansion. The employment increaseamong adult women (aged 20 and over) accounted for more than halfof the total; the percentage increase in their employment was more thandouble that of their male counterparts. Blacks and members of other racialminorities filled about one-third of the new jobs. Employment in thesegroups grew more than twice as fast as that of whites.

Overall, unemployment declined from 6.6 percent of the labor force inthe final quarter of 1977 to 5.8 percent in the fourth quarter of 1978. Most ofthe decline occurred early in the year. The unemployment rate for adultwhite women fell to 5.0 percent, but the white teenage unemployment rateshowed little change, since in that age bracket the growth in the labor forcewas as rapid as the rise in employment (Table 4).

Earlier in the recovery the unemployment rate for blacks had declinedmore slowly than that for whites, widening the gap between the two. In

37

TABLE 4.—Unemployment rate and growth in employment and labor force, bydemographic group, 1978

GroupUnemploy-ment rate(percent 0

1978 IV

Employment Civilian laborforce

Percent change from1977 IV to 1978 IV 2

Total.

White..

Both sexes 16-19 yearsMales 20 years and over . . .Females 20 years and over.

Black and other..

Both sexes 16-19 yearsMales 20 years and over . . .Females 20 years and over.

5.8

5.1

14.03.55.0

11.5

35.38.3

10.2

3.6

3.2

1.82.15.2

7.0

12.16.17.3

2.8

2.5

2.01.44.4

5.2

6.04.75.5

i Percent of civilian labor force in group specified; seasonally adjusted.s Adjusted for the increase of about 250,000 in employment and labor force in January 1978 resulting from changes

in the sample and estimation procedures introduced into the household survey.Source: Department of Labor, Bureau of Labor Statistics.

1978 some progress was made in reversing that pattern. The unemploymentrate for blacks declined by 1.7 percentage points to 11.5 percent, comparedto the 0.5 percentage point decline for whites to 5.1 percent.

Since mid-1975 there has been a fairly steady reduction in the percentageof unemployed persons who report job loss as the reason for their unemploy-ment. The percentage of unemployed who are reentrants to the labor forcehas been increasing fairly rapidly, while the percentage who are new entrantsand the percentage who quit their last job have both increased moderately.These typical cyclical patterns continued in 1978.

PRICES AND WAGES IN 1978

Price developments last year were a major source of disappointment andconcern. The consumer price index rose by 9.0 percent from November 1977through last November; producer prices of finished goods rose by 9.1 percentfrom December 1977 to December 1978, and the GNP deflator rose by 8.3percent during the 4 quarters of the year. In all cases the increases wereconsiderably greater than in each of the preceding 2 years.

As shown in Table 5, the acceleration of prices was widespread. Energyprices, which had been a major factor contributing to high inflation ratesin the 1973-75 period, did not play a large role last year. Food prices, how-ever, were once again an important influence. Even if one eliminates foodand energy prices from the price indexes—thus removing the effects ofexternal shocks to supply—the remaining prices show an acceleration in1978.

The upward movement in these other prices was a response to a widevariety of forces—including the pass-through of higher import prices as-sociated with depreciation of the dollar, the effects on home prices of in-

38

TABLE 5.—Alternative measures of inflation, 1976-78[Percent change, December to December, except as noted]

Measure 1976 1977 1978i

Consumer price index: -

All items

FoodEnergy 3 _.All items less food and energy..

Producer price index for finished goods:

All finished goods

Consumer goods

FoodsAll other..

Capital equipment..

Implicit price deflator for gross national product4.

Food consumptionOther goods and services..

4.8

.66.96.1

3.3

2.1

-2.54.9

6.4

4.7

.75.3

6.8

8.07.26.4

6.6

6.4

6.66.1

7.2

6.1

5.76.2

9.0

11.37.08.6

9.1

9.5

11.98.3

8.0

8.3

11.77.9

1 Consumer price changes are from November 1977 to November 1978. Changes for price deflators are preliminary.2 Data beginning January 1978 relate to all urban consumers; earlier data relate to urban wage earners and clerical

workers.3 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and gasoline, motor oil, coolant, etc.* Changes are from fourth quarter to fourth quarter.

Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics).

centives to invest in land and houses as an inflation hedge, and some supplybottlenecks in construction materials. A particularly troublesome phenom-enon, however, was the slow growth in productivity. This added directlyto costs of production and may indirectly have affected wage rates by in-creasing the demand for labor.

Table 6 shows the acceleration in hourly earnings and in total com-pensation per hour, the slower growth in productivity for the nonfarmprivate business sector, and the effects of both of these forces on unit labor

TABLE 6.—Measures of wage rates and costs, 1973—78

[Percent change, fourth quarter to fourth quarter, except as noted]

Item

Adjusted hourly earnings index 2

Union wage changes (total effective adjustment)'

Private nonfarm business sector, all persons:

Compensation per hour

Contribution of:

Wages and salaries and private fringes..Employer payments to social insurance.

Productivity

Unit labor costs..

1973

6.4

7.0

8.2

(4)(4)

-.7

9.0

1974

9.1

9.4

10.9

10.0.9

-3.4

14.9

1975

7.5

8.7

8.6

8.0.6

4.4

4.0

1976

7.4

8.1

8.5

7.7.8

2.6

5.8

1977

7.5

8.0

7.6

6.9

1.3

6.3

1978 1

8.2

7.5

9.8

8.71.1

.8

8.9

1 Preliminary.2 Adjusted for overtime in manufacturing and for interindustry employment shifts.3 Agreements covering 1,000 workers or more. Changes are for the four quarters ending in December through 1977 and

ending in September for 1978.* Not available.Source: Department of Labor, Bureau of Labor Statistics.

39

costs last year. Table 7 indicates that the rise in prices in the nonfinancialcorporate sector was less than the increase in unit labor costs. Neverthelessprofits per unit of output still continued to increase, although much lessrapidly than in 1977.

TABLE 7.—Changes in price, costs, and profits, per unit of output, privatenonfinancial corporate sector, 1973-78

[Percent change, fourth quarter to fourth quarter, except as noted)

Item 1973

8.6

2.2

- 6 . 3

6.3

6.4

1974

16.3

8.6

-26.0

23.1

13.8

1975

2.1

18.7

66.9

6.5

7.3

1976

7.3

1.5

.5

1.9

5.3

1977

5.6

6.1

16.4

2.1

5.8

1978»

Labor costs

Nonlabor payments

Corporate profits

Other nonlabor costs 2.

Implicit price deflator

8.7

3.3

1.2

4.2

6.8

1 Changes are measured from third quarter 1977 to third quarter 1978.2 Interest, rent, depreciation, and indirect business taxes.

Source: Department of Labor, Bureau of Labor Statistics.

Chapter 2 develops in considerably more detail the relation betweenwages, productivity, and prices. The following sections describe some ofthe special factors adding to inflation last year.

FOOD PRICES IN 1978

Retail food prices for the 12 months ending in November 1978 rose 11.3percent—well above the 8.4 percent increase for all items excluding food.Most of the increase in food prices occurred during the first half of theyear and was very broadly based. Prices for meats, poultry, fish, and eggsrose 18.9 percent (Table 8), and the index for fruits and vegetables was up11.5 percent. The index for all food consumed at home was 12.0 percenthigher. Prices of imported food rose less than in 1977, however, because coffeeprices declined from the record highs of 1977.

TABLE 8.—Changes in retail food prices, 1977-78[Percent change, seasonally adjusted annual rate]

Consumer price index component

All food

Food away from homeFood at home 3

Meats, poultry, fish, and eggs .Dairy products __ ._Fruits and vegetablesSugar and sweets.. _ __ _

1978

1

12.4

10.713.7

28.42.5

12.214.0

II

20.0

10.924.2

46.815.822.622.4

III

7.0

10.85.2

- 4 . 912.314.311.7

IV i

6.8

7.96.3

11.27.46.7

- 1 . 8

Nov. 1977to

Nov. 19782

11.3

10.012.0

18.99.5

11.511.6

1 Based on October-November data.2 Based on unadjusted data.3 Includes items not shown separately.

Note.—Data beginning 1978 relate to all urban consumers; earlier data relate to urban wage earners and clerical workers.

Source: Department of Labor, Bureau of Labor Statistics.

40

Increases of this magnitude in food prices were not anticipated as theyear began, and price forecasts for food had to be revised repeatedly in thefollowing months. There were a number of reasons for the unfavorabledevelopments: hog production failed to expand despite favorable grainprices; cattle marketings continued to decline; adverse weather curtailedsome crops here and abroad; government farm programs and price supportlevels were changed; prices of major grains rebounded from abnormallylow levels in 1977; costs of food processing and marketing went up; andthe increase in the minimum wage raised labor costs both for food market-ing and for restaurant meals.

The cattle cycle has always been a major determinant of U.S. meat prices.When ranchers become optimistic about future beef prices, they hold backcows and heifers for breeding purposes. Over a period of years, cattlenumbers rise until overexpansion of the herd occurs and the large supplieslead to a fall in beef prices. The cycle then enters its liquidation phase untilthe herd is reduced enough to make the longer-term price outlook morepromising. At that point the cycle begins again.

The past 4 years have witnessed a prolonged liquidation phase. Thenumber of cattle and calves on farms in the United States declined from132 million head in January 1975 to about 111 million head at the end oflast year. This represents a 16 percent drop, the sharpest ever recorded.With fewer cattle available in 1978, slaughter was down by 5 percent, andper capita beef consumption declined by more than 4 percent to 120pounds.

It was expected that lower beef production in 1978 would be largelyoffset by a higher output of pork and poultry. Analysis of the intentions ofhog producers in late 1977 indicated a probable 10 percent increase in porkproduction in the following year, but the severe winter weather radicallychanged the outlook. Conception rates fell, abortions increased, andthe average number of pigs per litter dropped 6 percent below normal.Disease, rising feed costs, uncertainty over government regulation of feedadditives and use of nitrites in processing, a.nd structural changes in theindustry also kept hog production from reaching expected levels. When itbecame evident that pork production was not expanding, meat prices beganto rise very rapidly, with strong consumer demand adding further pressure.

Adverse weather in 1978 also affected other food prices. Heavy rains inCalifornia delayed spring plantings last year and fresh vegetable prices rosedramatically. Most fruit crops were also reduced by bad weather, applesbeing the only major exception. In December 1978, freezing temperaturesin southern California and Arizona once again hurt citrus and freshvegetable crops.

In contrast, weather conditions during the growing season for grain werevery favorable in the major producing areas. The corn crop reached a recordof 7.1 billion bushels, and the national average corn yield exceeded 100bushels per acre for the first time in history. Other major grain harvestswere also fairly ample.

41

Changes in government farm programs and increased price support levelsfor agricultural products also led to retail price increases for some food prod-ucts in 1978. In January, import fees on foreign sugar were raised in orderto guarantee the effectiveness of the domestic price support program. InMarch, land diversion programs were expanded to improve grain prices. Thegrain reserve programs, which were instituted last year to provide someinsurance against the price-raising consequences of a crop failure, led tohigher wheat and flour prices while the reserves were being built up. Dairyprice support levels rose automatically in April and October, as required bystatute, but lower production and strong demand kept prices of milk anddairy products above those higher support levels.

Increasing costs and prices in the rest of the economy also affected foodprices. The value of farm commodities, together with the cost of importedfoods such as coffee and cocoa, accounts for 43 percent of retail food expendi-tures. The other 57 percent represents the cost of transporting, processing,and marketing the commodities. Thus, when the costs of labor, transporta-tion, packaging, and other inputs increased last year, the food sector wasaffected as were other sectors. Approximately one-half of the food priceincrease in 1978 was attributable to higher prices for these marketing services.

The 15.2 percent increase in the (nonfarm) minimum wage at the begin-ning of 1978 may have had a particularly large effect on restaurant andinstitutional food prices and on food marketing costs. Since many workers inthese industries are paid the minimum wage, an increase in that wage wouldquickly translate into higher costs. For food consumed away from home,which represents about one-fourth of total food consumption, prices rose 10percent during the year.

DEPRECIATION OF THE DOLLAR

Another source of inflationary pressure in the U.S. economy during 1978was the decline in the value of the dollar relative to other currencies.An index of the value of the dollar relative to the currencies of 10 otherindustrial countries—computed by using the percentage of world trade ofeach country as its weight (multilateral basis)—shows a 13.8 percent declinein the dollar from September 1977 to September 1978. Weighted by eachcountry's share of U.S. trade (bilateral basis), the decline was 8.9 percent.The difference between the two indexes is largely caused by the high share ofCanadian trade in the latter index and by the 8.0 percent decline of theCanadian dollar relative to the U.S. dollar.

Changes in the relative value of the dollar affect the price of importedgoods and thus the cost of living. Over the 4 quarters of 1978, prices of non-fuel imports rose 15J/2 percent. This was substantially less than the 24.3 per-cent rise in foreign prices in dollar terms in the 10 largest countries of theOrganization for Economic Cooperation and Development (OECD). Thedifference between these two price movements indicates that foreign pro-ducers absorbed a substantial amount of the fall in the dollar by reducing

42

their profit margins on exports. Such behavior is consistent with historicalexperience.

The rise in the prices of imported goods has a further effect on domesticprices by raising wage demands and by allowing price increases for goodsthat compete with imports. The econometric evidence suggests that overa 2-year period these indirect effects might amount to about twice the directeffects on prices of final products. A 10 percent depreciation will generallyresult in a roughly 11/2 percent increase in prices by the end of a 2- to 3-yearperiod, with approximately half of the effect coming in the first year.

The impact of the decline of the dollar on domestic prices is limited bythe denomination of oil prices in dollars. As a result, the price of importedfuel does not rise as the dollar falls. In addition, the Organization of Petro-leum Exporting Countries (OPEC) did not raise its prices in 1978. The largeincrease in OPEC prices announced on December 17 for 1979 means thatthis moderating influence will not be repeated this year.

Inflation affects the depreciation of the dollar as well as being affectedby it. Countries with low inflation rates tend to have strong currencies,and the appreciation of their currencies helps to hold down the rise of theirdomestic price levels (Table 9). Relative inflation rates are by no means theonly factors that influence the relative value of currencies. Indeed, in theshort run, factors such as relative interest rates, differences in real growth,the size of the current account balance, and expectations of traders inforeign exchange markets are likely to be dominant influences.

TABLE 9.—Changes in currency values and consumer prices, by country, third quarter1977 to third quarter 1978

[Percent change]

CountryConsumer

priceindex

Canada

France

Germany

Italy

Japan

United Kingdom.

9.3

9.3

2.4

11.9

4.0

7.8

Sources: Board of Governors of the Federal Reserve System and Organization for Economic Cooperation and Development.

HOUSING COSTS

Housing is the largest single component of the consumer price index, com-prising over one-third of the expenditures covered by this measure. This com-ponent encompasses many items, such as rent, utilities, and home purchasecosts. Most of these costs have been rising very rapidly.

Housing is one sector in which a classical demand-pull inflation seemsto have been occurring in 1978. The strong demand for houses has raisedthe price of both land and materials. The average price of a new single-

43

family house rose by 13/2 percent in the 12 months ending in October.Demands for construction materials have strained the capacity of somesupplying industries, and prices of building materials have risen strongly.Lumber prices, for example, have risen 33 percent in the last 2 years, andshortages of gypsum products have been common. The increase in energyprices since 1974 has also affected prices of building materials, particularlythe prices of insulation and asphalt products such as shingles.

If housing starts taper off this year as expected, some of these problemsshould become less severe. Energy conservation tax credits enacted latein 1978, however, may keep pressure on prices of insulation.

Some have questioned whether the widely used consumer price indexappropriately measures the real burden of rising housing costs in periods ofrapid inflation. Capturing the magnitude of rising housing costs in theindex is indeed difficult. Rental costs in multifamily dwellings are, in princi-ple, fairly easy to measure. Owner occupancy poses different problems, how-ever, because of the distinction between the costs of owning a house and thecosts of using its services.

During the most recent revision of the consumer price index, the Bureauof Labor Statistics reviewed the conceptual basis for the home purchaseportion of the index. In principle, there are two ways to measure the costof owner-occupied housing. The first is to measure the home prices, mort-gage interest rates, and other cost elements faced by those buying a homeduring the period in question. This is the method that has been used his-torically in the CPI. A second approach would be to price the flow ofservices from housing, using rents on equivalent units as a measure of thetrue cost of living in a house. This method is used in the national incomeand product accounts and in the implicit deflators for GNP and itscomponents.

When home prices move up, rents on comparable units will tend to rise.Unless vacancy rates are very low, however, rents will adjust upward onlygradually to a level that fully reflects the new and higher price of homes.Rent controls in some areas may contribute to the slowness of the process ofadjustment. Consequently in a period when housing prices are rising rapidlythe measurement technique now used in the CPI will show a faster increasein the cost of home-ownership than the alternative index based on equivalentrents. Conversely, when the increase in home prices slows, rents may keeprising for some time in order to close the gap, and the current CPI techniquewill show a slower price increase than the alternative.

Under either method of measurement, however, a period of rapid rise inhousing prices would increase the housing cost index faster than the rise inout-of-pocket costs paid by homeowners who had earlier purchased theirhomes at lower prices and contracted for mortgages at lower interest rates.An important part of the total rise in the CPI last year stemmed from thehomeownership component. New home prices rose by 11 percent and mort-

44

gage interest rates by 9 percent. Only about 10 percent of homeowners—those who actually bought a house last year—were directly affected by theresulting increases in the cost of homeownership.

MEDICAL CARE

Medical care costs have added significantly to inflation for most of thepast decade. Except for the period of mandatory wage-price controls from1971 through early 1974, medical care costs have risen much more rapidlythan other prices. From 1973 through 1977 the cost of medical care rose atan average annual rate of 10.2 percent, compared to 7.7 percent for the totalconsumer price index. During 1978 the increase in medical care pricesslowed to 8.8 percent, about the same rate as the total CPI.

The reason for this moderation is not completely clear. Prospects for man-datory cost containment legislation may have been partly responsible; thesuccess of some of the State cost containment programs may also have beeninfluential. It should be noted, however, that total hospital expenditures con-tinued to increase as a share of GNP since the deceleration early in 1978 inthe prices of many hospital services was partially offset by greater use ofthese services. A significant reacceleration of hospital costs also occurredlate in 1978. These developments point out the need for some more perma-nent means of containing the rise of hospital costs. The Administrationwill resubmit legislation with this aim in 1979.

AGGREGATE DEMAND MANAGEMENT IN 1978

The focus of aggregate demand policy changed during the past year,as inflation accelerated and unemployment fell faster than had beenexpected. The acceleration of inflation in the context of continued largeemployment gains prompted a lowering of the target for output growth.Fiscal and monetary policies shifted toward restraint.

In the fourth quarter of 1977, during the budget planning period, theunemployment rate stood at 6.6 percent. With normal increases in produc-tivity a 1978 economic growth rate well above the long-run trend wouldhave been needed to achieve a further significant reduction in unemploy-ment. Fiscal policy was designed to meet that objective by continuing,though gradually reducing, the stimulative effects of the Federal budget.

The stimulus measures adopted in 1977 were expected to have adwindling effect in the course of 1978. A reduction in income taxes, totake effect in the final quarter of the year, was proposed to offset thedampening effect on real growth of increases in social security taxes and ofthe higher effective tax rates resulting from inflation. Some normal cyclicalrise in interest rates was anticipated, but it was expected that monetary policywould be generally accommodative.

During the early months of the year, however, it became apparent thatthe slow growth in productivity, and the associated sharp increases in the

45

278-216 O - 79 - 4

demand for labor, were contributing to a serious acceleration of inflation.For this reason, it became appropriate to slow the growth of the economyto preclude the emergence of excess demand. This slowing would provide anenvironment in which structural anti-inflation measures and the dollarsupport program could be effective.

FISCAL POLICY

Shifts in the high-employment budget offer a useful way to summarizechanges in fiscal policy. The adjustments made to obtain the high-employ-ment budget remove from actual receipts and expenditures the effects offluctuations in the economy. Consequently, this budget shows the surplus ordeficit as it would he if the economy were moving smoothly along its poten-tial growth path. Changes in the high-employment surplus or deficit reflectthe effects on receipts attributable to inflation and to growth in potential realGNP as well as to discretionary changes in Federal expenditures and taxrates. Short-run changes in the high-employment surplus or deficit are rela-tively insensitive to assumptions regarding the level of potential GNP.

Table 10 shows that fiscal policy shifted toward restraint in 1978. For thecalendar year as a whole, the high-employment deficit was reduced by almostone-half from 1977 and declined continuously through 1978. The tax cut atthe beginning of 1979 will temporarily increase the high-employment deficit,but the high-employment budget will be about in balance by mid-1980.

The 1978 reduction in the high-employment deficit occurred for four rea-sons. First, the effects of the 1977-78 stimulus package gradually dissipated:public service employment peaked slightly above 725,000 jobs in the spring,

TABLE 10.—Actual and high-employment Federal receipts and expenditures,national income and product accounts, calendar years 1973—78

[Amounts in billions of dollars; quarterly data at seasonally adjusted annual rates]

Calendar yearor quarter

19731974

19751976197719782

1977:111IV

1978:1IIIIIIV.

Actual

Receipts

258.3288.6

286.2331.4374.5431.6

374.3385.5

396.2424.7441.7

Expendi-tures

265.0299.3

356.8385.2422.6461.0

430.7444.1

448.8448.3464.5

Surplus or deficit ( - )

Amount

- 6 . 7-10.7

-70 .6-53 .8-48 .1-29 .4

-56 .4-58 .6

-52 .6-23 .6-22 .8

Percentof GNP

- 0 . 5- . 8

- 4 . 6- 3 . 2- 2 . 5- 1 . 4

- 2 . 9- 3 . 0

- 2 . 6- 1 . 1- 1 . 1

High-employment

Receipts

256.8301.1

320.5356.9394.5446.6

392.2403.4

417.5438.1455.2475.8

Expendi-tures

265.1298.6

350.1380.3419.0459.6

427.4441.4

447.0447.1463.0481.2

Surplus or deficit ( - )

Amount

- 8 . 42.6

-29 .6-23 .4-24 .6-12 .9

-35 .3-38 .0

-29 .5- 9 . 0- 7 . 9- 5 . 4

Percentof GNPi

- 0 . 6.2

- 1 . 8- 1 . 3- 1 . 3- . 6

- 1 . 8- 1 . 9

- 1 . 4- . 4- . 4- . 2

1 High-employment surplus or deficit as percent of high-employment gross national product.2 Preliminary.Note.—Detail may not add to totals because of rounding.Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Treasury, Office of Management

and Budget, and Council of Economic Advisers.

46

and antirecession fiscal assistance to State and local governments ceased atthe end of the third quarter. Second, inflation and real growth moved indi-viduals into higher tax brackets during the year.

Third, Federal spending rose less rapidly than had been anticipated.The increase in total expenditures as measured in the national incomeand product accounts was $38.2 billion from the end of 1977 to the end of1978. This increase amounts to only 8.6 percent in nominal terms in aperiod when the GNP deflator rose 8.3 percent. The substantial shortfallin fiscal 1978 from the rate of spending anticipated in the January budgetcame to $12^2 billion on a unified budget basis, or 2.8 percent of total out-lays. The prospect of a shortfall became apparent fairly early last year, butno attempts were made to offset it, since additional fiscal restraint was adesirable outcome in view of unfolding economic circumstances.

For fiscal 1979, which began last October, budget projections were simi-larly scaled down; on a unified basis, fiscal 1979 Federal spending is nowexpected to be $493.4 billion or $7.6 billion below the original esti-mates made last January (adjusted to include earned-income tax credits inexcess of taxpayers' liabilities, which are now treated as outlays).

The fourth element in the shift toward fiscal restraint was the President'sdecision to revise his tax reduction proposal. Originally the Administrationhad requested a $25-billion tax reduction effective on October 1, 1978. InMay the President asked that the net reduction be scaled back to $20 billionand its effective date postponed to January 1, 1979. Reduction wasstill needed to offset the fiscal drag stemming from the changes in effectivetax rates occasioned by inflation and real growth, from increases in socialsecurity taxes previously enacted, and from the $6.6-billion increase in socialsecurity taxes legislated in 1977 to take effect in 1979. Nevertheless, a smallerand later reduction appeared appropriate in view of the need for greater fiscalrestraint. The Congress ultimately enacted a $20.6-billion reduction of per-sonal and business taxes plus a $0.7 billion increase in outlays for the earnedincome tax credit. This package yields a net revenue loss of $18.9 billionwhen allowance is made for the expiration of $2.5 billion in employment taxcredits. These tax measures are discussed in Chapter 3.

These adjustments to fiscal policy moved the budget more quickly towardtwo previously stated objectives of the Administration: reducing Federaloutlays to 21 percent of GNP and achieving a balanced budget in the contextof reasonable economic growth (Table 11). Fulfillment of these objectivesis a major challenge because it will require offsetting the upward pressure onFederal outlays from rising prices and from automatic increases in entitle-ment programs under current law.

MONETARY POLICY

Two major developments dominated monetary and financial conditionsduring 1978. The first was a substantial rise in interest rates. The secondwas the introduction of new financial instruments through which thrift

47

TABLE 11.—Federal unified budget outlays^ as percent of gross national product, andbudget surplus or deficit, fiscal years 1955-80

[Current dollars]

Fiscal years

1955-59 average..1960-64 average..1965-69 average..1970-74 average..

1975...1976 *_.1977__.1978__.

1979 (estimate).1980 (estimate).

Budget outlays as percent of GNP

Total i

18.319.219.920.3

22.422.522.022.1

21.621.2

Incomesecurity

3.04.14.05.6

7.57.87.57.2

6.97.1

Nationaldefense

Budget surplusor deficit ( - )

(billions ofdollars)

10.08.88.56.7

5.95.45.35.1

5.05.0

-2.3-4.2-7.2

-13.8

- 45 .2-63 .5-45 .0-48 .8

-37.4-29.0

1 Includes other outlays not shown separately.2 Transition quarter averaged with fiscal year 1976.

Sources: Department of Commerce, Department of the Treasury, Office of Management and Budget, and Council ofEconomic Advisers.

institutions could continue to attract funds, an innovation that modei«*tedsignificantly the degree to which high short-term interest rates depressedhousing construction.

Chart 1 shows the rise in both short- and long-term interest rates. Theseincreases came in several phases. A small upward movement in short-termrates occurred early in the year after the Federal Reserve raised the discountrate in January in response to international developments. This was followedby a period of relative stability through mid-April as the slow pace of eco-nomic activity in the first quarter led to quite moderate growth in the mone-tary aggregates. Very rapid growth in the aggregates began in the secondquarter and persisted into the summer. The efforts of the monetary authori-ties to moderate the growth of the aggregates resulted in substantial increasesin short-term interest rates. The Federal funds rate rose by 2 percentagepoints between March and the middle of October. Most other short-termrates rose in an approximately parallel fashion. Measures to defend the dol-lar, announced at the beginning of November, prompted a further dramaticincrease in rates. The discount rate was raised by a full percentage point,from 8J/2 to 9l/% percent, on November 1; between then and the end of theyear the Federal funds rate rose by another three-fourths of a percentagepoint to about 10 percent.

The movement of long-term interest rates was determined by currentdevelopments in short-term rates, by anticipations of future interest rateand price developments, and by supply and demand considerations in capitalmarkets. Long-term rates drifted up somewhat during the first quarter,when demands for business credit remained strong, but leveled out sub-sequently as expectations developed that rates might be nearing cyclicalpeaks. With short-term rates continuing to increase, the yield curve byOctober had become inverted; that is, long-term rates were below short-term rates.

48

Chart 1

Selected Interest Rates andBond Yields

PERCENT PER ANNUM14

SHORT-TERM RATES

4 -

I I I I I I I I i 1 I I I I I I I I I I I I I I I I I I I I I I I I I I I 1 1 I I I I I I I I I I I 1 I I I I I I I I I I I 1 I I I

1973 1974 1975 1976 1977 1978

12

4 -

BOND YIELDS

I I I I I I I I I I I I I I I I I I I I I ! I I ! I u>1977 19781973 1974 1975 1976

NOTE: TREASURY BONDS ARE CONSTANT MATURITIES.SOURCES: DEPARTMENT OF THE TREASURY, BOARD OF GOVERNORS OF THE FEDERALRESERVE SYSTEM, AND MOODY'S INVESTORS SERVICE.

49

Behavior of the Major Monetary Aggregates

During the first half of the year the behavior of the monetary aggregatesparalleled fluctuations in the real economy. Growth of Mi (demand depositsand currency) and M2 (including, in addition to M1? time and savings de-posits other than negotiable certificates at large commercial banks) wasquite slow in the first quarter and much faster in the second quarter. Growthof these two monetary aggregates continued to be relatively strong in thethird quarter, despite rising interest rates and slowing growth of real GNP.

Between the final quarter of 1977 and the third quarter of last year, Migrew at an 8.2 percent annual rate, well above the upper end of the FederalReserve's long-term target growth range of 4 to 6^2 percent. Studies thatrelate the real value of Ma to real GNP and to short-term interest ratesindicate that the usual historical relationship held up fairly well through thisperiod. The continuation of rapid growth of the monetary aggregatesthrough the third quarter appears to have been largely attributable to therapid increases in nominal GNP which raised transactions demands. Therewas virtually no growth in Mi during the fourth quarter when interest rateswere rising sharply.

In the latter half of the year, two major innovations in financial marketstended to change the usual relation between the monetary aggregates on theone side and economic activity and interest rates on the other. The first inno-vation was the new regulation permitting commercial banks and nonbankthrift institutions on June 1 to begin issuing money market certificates(MMCs) of 6-month maturity in minimum denominations of $10,000.Commercial banks were permitted to pay a maximum yield on these certifi-cates equal to the discount rate on 6-month Treasury bills, but interestcould be compounded if the bank chose to do so. The maximum rate for non-bank thrift institutions is one-fourth of a percentage point above the rate pay-able by commercial banks.

The second innovation, introduced on November 1, was a regulationpermitting commercial banks to offer individual customers an automatictransfer service whereby funds are automatically transferred from acustomer's savings account to cover needs for funds in the customer'schecking account. By the end of the year it is estimated that there were $3.2billion in 420,000 accounts covered by this service. Use of these services canbe expected to grow over the future.

The introduction of MMCs influenced the growth of M2 by enablingbanks to retain time and savings deposits that they would otherwise havelost. Growth in M2 remained very strong in the third quarter, at a 10.8percent annual rate, but slowed significantly in the fourth quarter to 4.5percent.

The introduction of the automatic transfer service began to have a sig-nificant effect on the growth of Mi in the last 2 months of 1978. DuringNovember and December, Mi declined $0.6 billion. In the absence of thenew deposit services, Mi probably would have risen by about $1 billion.

50

In response to this effect on the behavior of the conventional aggregates,the Federal Reserve defined a new aggregate, Mi + . It includes, in additionto Mi, all passbook savings accounts at commercial banks and all checkabledeposits at nonbank thrift institutions (negotiable order of withdrawalaccounts, demand deposits at mutual savings banks, and share draft ac-counts at credit unions). This aggregate thus includes all transactionsaccounts plus those accounts from which transfers to the automatic transferservice accounts are most likely to occur. The annual rate of growth of thisaggregate dropped from 6.1 percent in the first half of 1978 to 2.4 percentin the second half.

Role of MMCs in Monetary Restraint

The new money market certificates played a critical role in the way theeconomy responded to monetary restraint in J978. Experience would haveled one to expect that the large rise in interest rates would sharply curtailthe availability of mortgage credit during 1978, with strongly adverse effectson home building. The growth of mortgage credit did taper off somewhatduring the year and residential construction activity did flatten out. Themagnitude of these responses was very small, however, compared with pastperiods of tight financial markets.

In previous periods of sharply rising market interest rates, individualsbegan at some point to divert funds from deposits in thrift institutions tomarket securities because of the low ceiling rates on deposit instruments.The growth of thrift deposits usually slowed to a 4-6 percent rangein such periods, and net new inflows (excluding crediting of interest) fellto around zero. This necessarily slowed the acquisition of mortgages by theseinstitutions, and consequently housing credit dried up.

During late 1977 and early 1978 this same pattern began to emerge.After the introduction of MMCs in the middle of the year, however, thepattern was dramatically reversed. As a result, mortgage acquisitions de-clined much less than in previous periods of rapidly rising market interestrates.

The introduction of these instruments does not wholly resolve the dis-intermediation problem or entirely buffer the housing market from creditrestraint. Home buyers are affected by the higher cost of credit, althoughthey are affected much less than before by the reduced availability of credit.Furthermore, since mortgage rates do not rise commensurately with short-term rates, the thrift institutions are confronted with reduced cash flowfor two reasons. First, the spread between the cost of new deposits andthe return from new mortgages narrows. Second, the composition of depositsbecomes more heavily weighted by the higher-interest certificates. Sincethis is occurring faster than the mortgage portfolio is rolled over, the averagecost of deposits is rising relative to the average yield on mortgages. In early1978, however, the spread between the return on the mortgage portfolio andthe cost of deposits had become quite large and the narrowing that occurred

51

in the second half of the year was relatively small. Therefore—barring aprolonged period of very narrow spreads between mortgage rates and short-term rates—savers, the thrift institutions, and the housing market will allbenefit from the new instrument.

The reduced sensitivity of mortgage credit availability to rising marketinterest rates smooths the adjustment of the economy to credit restraint.It also implies, however, that interest rates must move through somewhatlarger cyclical swings to achieve the effect on aggregate demand that wouldformerly have resulted from variations in both credit availability and interestrates. Such a change also means that the distribution and timing of theresponse of the economy to monetary restraint will be different. The periodahead will require adroit reading of the signals to judge the degree ofrestraint that is occurring and is appropriate.

CREDIT FLOWS IN 1978

Credit flows had been very strong at the end of 1977 and remained sothrough the first part of last year. The ratio of total funds raised in creditmarkets (exclusive of corporate equities) to GNP reached a record peakin the third quarter of 1977 and moved only slightly lower in the following2 quarters. Some decline developed in the second and third quarters oflast year. The ratio of total private funds raised to private GNP remainedon a record high plateau from the third quarter of 1977 through the firstquarter of last year but then began to decline.

The composition of credit flows shifted during the year. Mortgage creditflows peaked late in 1977 and then moderated somewhat. With the dollarvalue of residential construction continuing to rise, the ratio of net homemortgage extensions to household investment in residential constructionturned downward last year from a very high peak. The large volume ofmortgage credit that was being used in late 1977 and early 1978 relativeto residential construction suggested that homeowners were realizing capitalgains on houses when ownership changed hands and were using the fundsto finance other types of expenditures.

Consumer credit continued to grow strongly through the first half of theyear, reflecting the strength of new car sales and sales of other durables.The rate of installment credit extensions leveled out, however, in thesecond half of the year on a plateau slightly below the June peak.

Federal Government borrowing also declined relative to the total of fundsraised in credit markets. The moderation in Federal borrowing from domesticsources resulted from the shift in fiscal policy previously discussed and alsofrom an increase in official foreign purchases of U.S. securities with dollarsobtained through intervention in foreign exchange markets.

The nonfarm, nonfinancial corporate business sector borrowed heavily inthe fourth quarter of 1977 and the first quarter of last year. Indeed, creditmarket funds raised in the first quarter were more than a third greater than

52

a year earlier. The amount of funds raised leveled out subsequently at anannual rate below this peak but exceeded all previous years except 1974.Business borrowing from commercial banks, in particular, was exceptionallyheavy in the first half but slowed in the second half of the year. The strengthof capital spending relative to internal funds is the primary reason for therapid growth in business credit demands. The ratio of external funds raisedto capital expenditures rose to slightly under one-half in 1978, which is ahigh though not unprecedented figure.

Efficiency of Financial Markets

Both of the innovations in financial markets described above work toprovide individuals with a competitive return on their savings. The auto-matic transfer services perform another valuable function: they reduce theloss of efficiency associated with substantial shifts of funds from one type ofdeposit to another in response to interest rate differentials. Furthermore, topreserve the competitive position of nonbank thrift institutions, the FederalHome Loan Bank Board is considering giving nonbank thrift institutionsauthority to receive deposits from which third-party payments may be made.Such a move might further stabilize their deposit flows.

These changes, however, entail cumbersome bookkeeping and transac-tions procedures. A further consolidation of the institutional changes ini-tiated this year would be to move toward a uniform structure for commercialbanks and nonbank thrift institutions under which all of these institutionswould have authority to accept household checking deposits and to pay inter-est on them. The bill proposed by the Administration in the last Congress toauthorize negotiable order of withdrawal accounts for all U.S. banks andthrift institutions was one approach to this reform.

53

CHAPTER 2

Reducing Inflation

ECONOMIC POLICY IN THE UNITED STATES faces a formidablechallenge in the years immediately ahead. Inflation must be brought

under control if the strength of the economy is to be maintained and if thesignificant gains in employment and output over the past 4 years are not tobe jeopardized. Unwinding an inflation that has been building for more thana decade will require monetary and fiscal restraint to moderate the pace ofeconomic growth. We will have to learn to achieve social objectives withinthe constraints of tight government budgetary policies. Widespread com-pliance with the President's standards for wage and price behavior will beessential.

This chapter presents a diagnosis of our inflationary problem and explainswhat the Administration is doing about it. Special factors were partly re-sponsible for the acceleration of inflation during 1978,, as Chapter 1 indi-cated, but there was also a substantial increase in the underlying rate ofinflation. Unit labor costs rose sharply, reflecting some acceleration of wageinflation and a deterioration in the growth of productivity. These develop-ments, along with their important implications for economic policy, will beanalyzed in the following discussion.

THE 1978 ACCELERATION OF INFLATION

The current inflation has been gathering momentum for over 10years. The acceleration began in the late 1960s, when the economic stimulusof the Vietnam war added pressures to an economy already approachinghigh employment. With the economy operating at very high rates of resourceutilization, the rate of inflation rose from less than 2 percent in 1965 toabout 6 percent in 1969.

In 1969, policies of monetary and fiscal restraint were applied to cool theoverheated economy, but the results were disappointing. The economyheaded into recession, and unemployment rose from 3J/2 percent of thelabor force in 1969 to over 6 percent by the end of 1970. Nevertheless,inflation continued at a rapid pace. The rise of consumer prices, excludingfood, continued unabated in 1970, and the rate of increase of average hourlyearnings remained unchanged. W7hen inflation failed to respond significantlyto macroeconomic policy, a 90-day wage and price freeze was announced on

54

August 15, 1971; it was followed by a period of mandatory wage and pricecontrols.

Relaxation of the controls began in 1973 in response to distortions andinequities that had begun to develop in the economy. The relaxation coin-cided with a second acceleration of prices, which was in part a consequenceof rapid economic growth. Between the fourth quarter of 1971 and the firstquarter of 1973, real gross national product (GNP) increased at an annualrate of 7% percent, unemployment dropped sharply, and capacity utiliza-tion rose. The major inflationary pressures, however, came from a series oflarge external shocks to the American economy. A simultaneous expansionin virtually all the industrial countries and the 20 percent depreciation ofthe dollar between mid-1971 and mid-1973 raised the cost of foreign goods.A worldwide crop shortage caused food prices to soar. Finally, the oil em-bargo by the Organization of Petroleum Exporting Countries (OPEC) andthe subsequent rise in oil prices contributed to a nearly 60 percent increasein the energy component of the consumer price index (GPI) from the end of1972 to the end of 1975.

In early 1975 the rate of inflation fell substantially from the double-digit rate of 1974. The severity of the 1974-75 recession was partly respon-sible. But smaller increases in food and energy prices and the endof the price bulge associated with the lifting of controls were important con-tributing factors. By the middle of 1975 the underlying rate of inflation wasdown to the 6 to 6^4 percent range. There was no further improvementduring the early stages of the recovery, despite continued high unemploy-ment and much excess capacity.

Each of the two major episodes of accelerating inflation in the last decadewas fed in part by relatively stimulative fiscal and monetary policies, andeach was followed by a recession stemming in part from more restric-tive policy actions. But in neither case did the increases in unemploymentand excess capacity bring inflation down to the levels that preceded theacceleration.

Once under way, a high rate of inflation generates responses and adap-tations by individuals and institutions that perpetuate the wage-price spiral,even in periods of economic slack. Expectations develop that wages andprices will continue to rise at a rapid rate. In response, an increasing pro-portion of income is adjusted to inflation by indexation arrangements. Em-ployee groups attempt to match the wage gains of other workers in order toavoid declines in their own relative earnings. And multiyear collective bar-gaining agreements, which now cover over 97 percent of the workers in largecollective bargaining units, provide pay increases that are more likely to re-flect past conditions than the actual economic environment prevailing duringthe term of the agreement.

The formal and informal adaptations to a long-standing inflation exert apowerful force tending to sustain inflation even after the originating causeshave disappeared. Braking the momentum of past inflation would therefore

55

have been a serious problem for economic policy makers even without theacceleration of prices and wages during 1978. The price and wage develop-ments of this past year have made the task even more difficult.

INFLATION IN 1978

The rate of price increase rose markedly in 1978. Some of the accelerationwas the result of special factors discussed in the previous chapter: the sharprise in food prices early in the year and the fall in the value of the dollarthat exceeded the depreciation warranted by underlying economic condi-tions. A minor offset to this was the stability of world oil prices after OPECelected not to raise oil prices in the face of the sluggish world economic re-covery and the consequently weak demand for oil.

The larger part of the 1978 acceleration, however, came from an unex-pected increase in the underlying rate of inflation. The rise in consumerprices, excluding food and energy, quickened from 6.4 percent in 1977 to8.6 percent in 1978, as shown in Table 12. This is the development that hasposed the most serious challenge to economic policy.

The behavior of the underlying rate of inflation is related to movementsin costs. In 1978 the increase in unit labor costs in the private nonfarmsector stepped up considerably, from 6.3 percent in 1977 to 8.9 percent

TABLE 12.—Annual rate of change in selected consumer and producer prices andemployment costs, 1960—78

[Percent1]

Item

Relativeimpor-tance,

December1977

(percent)

1960to

1965

1965to

1970

1970to

19751976 1977 1978 2

Consumer prices

All items

FoodEnergyAll items less food and energy.

Producer prices for finished goods

All finished goods

Finished goods less foods

Private nonfarm business, all persons

Compensation per hour

Contribution of:

Wages and salaries and private fringes-Employer contributions to social in-

surance

Output per hour

Unit labor costs

Implicit price deflator

100.0

17.78.6

73.7

100.0

75.1

1.3

1.5.4

1.4

.6

4.0

3.8

.2

3.9

.0

1.1

4.5

3.72.55.0

2.8

6.4

5.9

.5

1.1

5.2

4.2

6.9

9.410.95.7

8.6

7.6

8.2

7.3

.9

1.6

6.5

6.6

4.8

.66.96.1

3.3

5.5

8.5

7.7

.8

2.6

5.8

5.2

6.8

8.07.26.4

6.6

6.6

7.6

6.9

.7

1.3

6.3

5.9

9.0

11.37.08.6

8.7

7.8

9.8

8.7

1.1

8.9

7.9

1 Preliminary.2 Through 1977, changes are measured from December to December for prices and from fourth quarter to fourth quarter

for private nonfarm business data. For 1978, changes are from November to November for prices and from fourthquarter to fourth quarter for private nonfarm business data.

3 Not available.Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers.

56

in 1978. Both of the determination factors of unit labor costs contributedto the acceleration. Compensation per hour went up from a 7.6 percentrate of increase in 1977 to a 9.8 percent rate during 1978. Productivity,which had risen only 1.3 percent for nonfarm business in 1977, advancedeven more slowly—at a 0.8 percent rate in 1978.

The acceleration of cost pressures during 1978 was unevenly distributed.In manufacturing, unit labor costs, which had risen 5.8 percent in 1977,increased at an annual rate of 6.0 percent in 1978. Productivity in manu-facturing rose more rapidly in 1978 than in 1977 (3.5 compared to 3.0percent in 1977). However, the most substantial rise in the rate of increaseof unit labor costs was in nonmanufacturing, where productivity actuallydeclined.

Most econometric analyses of the relation between prices and wages con-clude that fluctuations in productivity growth that are expected tobe temporary are not usually translated into similar fluctuations in prices.For that reason price movements in the nonfarm sector are less volatile thanyear-to-year changes in unit labor costs. And in 1978 the sharp accelerationin unit labor costs, stemming in part from the very poor productivity record,was not fully matched by an acceleration in prices charged by nonfarmproducers. Even so, the rise in unit labor costs was still a major factor in theacceleration of inflation (Chart 2).

Chart 2

Unit Labor Costs and Deflator,Nonfarm Business

PERCENT CHANGE FROM YEAR EARLIER

16

12

8

4

0

-4

-

-

-

V111111 111 1111111111111

UNIT

/

V

111111

A

A -LABOR COSTS / i 1 \ IN/ " *

IMPLICIT PRICE ^ /

DEFLATOR

I I I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978

NOTE: DATA RELATE TO ALL PERSONS.

SOURCE: DEPARTMENT OF LABOR.

57

EXPLAINING THE 1978 INFLATION

The worsening in the underlying rate of inflation during 1978 raises afundamental question for macroeconomic policy: Has the U.S. economyreached full employment of its labor and capital resources? The questioninvolves three issues concerning demand and unit cost pressures that areanalyzed in the remainder of this section. The first is whether capacity utiliza-tion became so tight that there was excess demand in product markets,driving up prices relative to costs. The second has two aspects: How muchdid the wage acceleration that occurred in 1978 reflect excess demand inlabor markets, and do those markets now approximate conditions in whichfurther reductions in aggregate unemployment would raise the inflationrate? The third issue relates to productivity: To what extent is the recentdisappointing behavior an aberration and to what extent does it reflect amore fundamental slowdown in the potential growth of the economy duringthe years immediately ahead ?

How Tight Were Product Markets in 1978?

During the course of the recovery, rates of capacity utilization have in-creased significantly, and they rose still further in 1978. At the end of 1978the 86 percent rate of capacity utilization in manufacturing indicatedby the Federal Reserve index was still well below the highs of theearly 1950s and mid-1960s, and somewhat below the highs of the 1972-74period (Chart 3). In the materials-producing industries, where high ratesof capacity utilization in 1973 were an important source of inflation, cur-rent rates of utilization have remained substantially below the 1973 peaks(Chart 3).

Statistical measures of capacity utilization offer only an imperfect guideto the presence or absence of excess demand in product markets. There isother evidence, however, that industrial capacity was not under severe pres-sure. Typically, periods of capacity strain lead to sharp increases in unfilledorders, especially in the durable goods industries. But ratios of unfilled ordersto shipments have remained far below earlier highs, both for durable goodsindustries as a whole and for the nondefense capital goods industries(Chart 4).

At the same time, excess demand developed in a few industries. Forexample, the building materials industry appeared to be under demandpressure because of capacity limitations. The very high and sustained levelof single-family home building, combined with a rapid growth in homeinstallation of energy-saving measures, led to a sharp increase in demandfor building materials and thus to strained capacity. As a consequence,prices of lumber, wallboard, cement, insulation, and related products rosesteeply.

Moreover, although productive capacity was not generally strained overthe past year, continued growth of industrial production at rates experienced

58

Chart 3

Capacity Utilization Rates

PERCENT-^

MANUFACTURING

0 111 i 1 1 1 1 1 1 11 111 111 1 1 1 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 111 1111 1111 111 11 i 11 11 11 1111 11 11 1 1 1 1 1 11960 1962 1964 1966 1968 1970 1972 1974 1976 1978

90

80

70

MATERIALS

0 1 1 i I 1 1 1 1 1 I i I I i i i 1 1 1 1 I i i 1 1 1 1 i 1 1 i i I i i 1 1 i 1 1 1 1 1 1 I I I I I I i 1 1 i i 1 1 i 1 1 1 i i 1 1 i 1 1 1 1 1

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978

U SEASONALLY ADJUSTED.SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

59

Chart 4

Unfilled Orders-Shipments Ratio,Durable Goods Manufacturing

RATIO (SEASONALLY ADJUSTED)^

8

NONDEFENSE CAPITAL GOODS

TOTAL DURABLE GOODS

0 1 1 i i 1 i i i I i i i 1 i i i 1 i i i 1 i i i I i I I 1 1 I I 1 I I I 1 I I i 1 I I I 1 I 1 1 I I 1 1 I I 1 I I I 1 1 I I

1960 1962 1964 1966 1968 1970 1972 1974y UNFILLED ORDERS-SHIPMENTS RATIO FOR LAST MONTH IN QUARTER.

SOURCE: DEPARTMENT OF COMMERCE.

1976 1978

60

in 1978 would move utilization rates into the range associated with excessdemand pressure on prices.

Pattern of Wage Behavior

Wages began to accelerate early in 1978. The exact quarterly pattern anddegree of acceleration vary according to the measure of the rate of wageincrease, but all broad indicators show a similar pattern of wage accelerationin late 1977 and early 1978 (Table 13). For the second half of the year,wage increases were lower than in the first, but still above the 1976 and1977 experience.

TABLE 13.—Selected measures of the rate of wage increase, private nonfarm economy,1976-78

[Percent change; quarterly data are annual rates]

Measure

Average hourly earnings2

Adjusted hourly earnings index2 3___

Employment cost index4

Union . __ _Nonunion

1976

7.6

7.4

7.2

8.16.8

1977

7.7

7.5

7.0

7.66.6

19781

8.8

8.2

8.0

7.98.0

1978

1

8.4

9.2

7.8

6.69.1

II

10.1

8.4

8.7

8.29.1

III

7.8

7.3

8.2

8.77.8

IV 1

8.9

7.9

(')

(5)(s)

1 Preliminary.2 Annual changes are measured from fourth quarter to fourth quarter; quarterly changes for 1978 are from preceding

quarter. Data are seasonally adjusted.3 This index, unlike the average hourly earnings series above it, excludes overtime pay in manufacturing and is adjusted

o eliminate the effects of interindustry employment shiftshis ndex, un he average hourly eanings se

to eliminate the effects of interindustry employment shifts.4 Changes for 1976 and 1977 are measured from D

S t b 1978 t l h ithi t

oyment shifts.g s from December to December; change for 1978 is from September 1977 to

September 1978; quarterly changes are within quarter. Data are not seasonally adjusted.« Not available.

Source: Department of Labor, Bureau of Labor Statistics.

The pattern of acceleration and subsequent deceleration in the first 3quarters of the year was dominated by the behavior of wages of nonunionworkers. In early 1978, for the first time in several years, nonunion wagerates increased faster than union rates. This development is normal in labormarkets when unemployment falls, and the 15.2 percent increase in theminimum wage for nonfarm workers on January 1, 1978, undoubtedly con-tribute to the high rate of nonunion wage increases in the first half of theyear.

The difference between union and nonunion wage changes in 1978 wasalso influenced by the collective bargaining calendar: comparatively fewmajor contracts (those covering 1,000 or more workers) were scheduled forrenegotiation in 1978. Since increases tend to be largest in the first year of acollective bargaining contract, years of light bargaining generally are yearsof lower average wage increases for union members. Wage adjustments forunion workers may be attributed to three different sources: current settle-ments, past settlements (those that provide for deferred increases), and auto-matic cost-of-living escalators (Table 14). For the first 9 months of 1978,the portion attributable to current settlements was down sharply from its

61

2 7 8 - 2 1 6 O - 7 9 - 5

1977 level, while that attributable to past settlements and automatic cost-of-living escalation was greater than in 1977. The decrease in the currentsettlement portion came about solely because there were fewer new laboragreements, not because the average wage increases granted in new set-tlements were smaller. As the lower part of Table 14 shows, the new settle-ments reached in 1978 in major contracts provided for somewhat largerfirst year increases than settlements in 1977 had done.

TABLE 14.—Mean wage and benefit adjustments in major collective bargainingagreements, 1976-78

[Percent]

Type of change

Effective wage-rate changes:2

Total effective adjustments

Adjustment resulting from:Current settlement3

Prior settlementEscalator provision

Increases in new settlements:4

Wage rate settlements (1,000 or moreworkers):

First-year adjustmentAverage over life of contract . .

Wage and benefit settlements (5,000 ormore workers):

First-year adjustmentAverage over life of contract

1976

8.1

3 ?3 ?1.6

8.46.4

8 «i6.6

1

1.2

.35

.3

7.76.7

9.07.5

II

2.9

1.01 4.6

7 95.9

8 96.0

1977

III

2.7

1.3i n.5

7 85.5

in ?6.2

IV

1.1

53

.3

7 85.8

9 f)6.3

Year

8.0

3.03 ?1.7

7 85.8

9 fi6.2

1

1.3

s6

.3

9 97.3

14 68.5

19781

II

2.6

61 4.5

fi 96.1

fi 75.9

III

2.5

.51.1.9

7.56.3

7.05.7

4 quarters ended

Sept.1977

8.3

3.53.31.7

7.75.6

8.86.0

Sept.19781

7.5

2.13.42.0

7.86.3

9.16.5

1 Preliminary.2 Effective wage rate changes are wage rate changes actually going into effect per worker ynder major contracts in the

respective quarters. Detail may not add to total because of rounding.3 Changes resulting from collective bargaining settlements made that calendar year.* Quarterly data are at annual rates.

Note.—Quarterly data are not seasonally adjusted.

Source: Department of Labor, Bureau of Labor Statistics.

In comparison with 1977 settlements, labor contracts concluded in 1978show an acceleration in wages over the life of the contract. Wage rateadjustments in new settlements averaged 7.8 percent for the first year and6.3 percent annually over the life of the contract during the year ending inthe third quarter of 1978, compared to 7.7 percent for the first year and5.6 percent over the life of the contract for the same period a year earlier.(These measures exclude cost-of-living adjustments tied to the future rate ofprice inflation.)

There is considerable evidence that the responsiveness of wages to over-all changes in economic conditions is significantly greater in nonunion thanin unionized labor markets. Changes in average wage rates paid to unionmembers are not significantly related to the contemporaneous unemploymentrate or alternative measures of labor market pressure, although they are sen-sitive to price changes because of cost-of-living adjustments. Most of theinertia in average union wages is a by-product of multiyear labor agree-

62

ments, in which the size of agreed wage increases is more closely tied toeconomic conditions during and immediately preceding the renegotiationof a contract than to conditions during the term of the agreement.

Wage increases during the first year of a collective bargaining agreementare about as responsive to labor market pressures as nonunion wages. In-creases over the life of the agreement, however, are much less strongly relatedto underlying market pressures prevailing at the time the contract is signed,and deferred increases are essentially independent of prevailing market con-ditions. Consequently new inflationary pressures show up much more grad-ually in union than in nonunion wages. Conversely, when the initial causesof inflation subside, the moderating effect is less evident in union wageincreases than in nonunion. Multiyear collective bargaining agreementscan therefore be an important source of wage inertia.

How Tight Were Labor Markets in 1978?

With unexpectedly slow growth of labor productivity, labor demand wasstrong, and the reduction in the unemployment rate early in the yearexceeded expectations. Nevertheless the 6.2 percent unemployment rateexperienced in the first quarter of 1978 was higher than most estimates ofthe rate of unemployment at which inflation will begin to accelerate. In theremaining quarters of 1978 the rate was lower but relatively stable withina range of 5.8 to 6 percent.

One approach to the question of labor market pressure is to examinehow closely labor markets in late 1978 resemble those of earlier periodsof accelerating wages. During 1978 the overall unemployment rate wasabove the levels associated with accelerating wages in the late 1960s andmid-1970s (Chart 5). Such a comparison could be deceptive, however,because the demographic composition of the labor force has changed. Cer-tain demographic groups have higher rates of turnover and therefore higherrates of unemployment, and these groups now make up a larger proportionof the labor force than in the past.

A better indicator of labor-market pressure is a fixed-weight index, con-structed so that each demographic group has the same amount of influencein each year as it had in a high-employment period like 1956, when theaggregate unemployment rate was 4.1 percent. The fixed-weight unemploy-ment rate has fallen relative to the official rate over the past decade, butin 1978 the fixed-weight rate was still somewhat above the levels of earlierperiods of tight labor markets.

A third measure of labor market pressure is the unemployment rate ofa group of experienced workers with continuous labor force attachment,such as the rate for men between the ages of 25 and 54. That rate, too, isstill somewhat above the levels associated with prior wage accelerations.

Tight conditions in labor markets also affect labor turnover rates. As thenumber of job vacancies rises relative to the number of unemployed, em-ployers first call back former jobholders; but when these are no longer avail-

63

Chart 5

Selected Unemployment Rates

PERCENT (SEASONALLY ADJUSTED)

10

RATE FOR MALES'AGES 25 TO 54

11111111111111 111111111 h M \ n 111n1 it. 1111111111111fiHI ii 11111111111111111

1960 1962 1964 1966 1968 1970 1972 1974i/THE FIXED-WEIGHT UNEMPLOYMENT RATE IS CONSTRUCTED UNDER THEASSUMPTION THAT THE COMPOSITION OF THE LABOR FORCE WITHRESPECT TO SEVEN DEMOGRAPHIC GROUPS REMAINS UNCHANGED OVERTHE PERIOD SINCE 1956.NOTE: SHADING INDICATES PERIODS OF ACCELERATING WAGES.SOURCES: DEPARTMENT OF LABOR AND COUNCIL OF ECONOMIC ADVISERS.

1976 1978

able, vacancies are filled by hiring from the pool of unemployed and bybidding workers away from other employers with offers of higher wages andother benefits. In response to these incentives, a larger number of workersquit their current jobs and take better-paying ones. As a result, both thenew hire and quit rates in manufacturing tend to rise as labor markets tightenand wages accelerate. Both rates have reached postwar peaks in periods ofvery tight labor markets during the past decade. As seen in Chart 6, how-ever, the rate of new hiring in late 1978 was below these levels.

Over the past decade the composition of the work force has shifted towardyoung and inexperienced workers, who tend to quit their jobs more fre-quently in the search for better employment. The quit rate associated with agiven degree of labor market pressure has therefore drifted up over the pastdecade. Although measured quit rates were relatively high in late 1978, theydo not necessarily imply as much labor market pressure as they would havedone at these levels in the mid-1960s.

Although the measures of labor market tightness examined above didnot reach levels associated with accelerating wages in the past, that factalone is not sufficient to determine that excess demand was absent from

64

Chart 6New Hire and Quit Rates In

ManufacturingRATE PER 100 EMPLOYEES^

1 -

Ol i i i I i i i I i i i I i i i I i i i I i i 11 n 11.1 tt I u i I n . .r I i i i I i i i I i i L h n t i i i I i i i I i i i I i i i I i i i I

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978J-/SEASONALLY ADJUSTED.NOTE: SHADING INDICATES PERIODS OF ACCELERATING WAGES.

SOURCE: DEPARTMENT OF LABOR.

labor markets during 1978. There is some evidence, for example, that eventhe fixed-weight and prime-age male unemployment rates associated withaccelerating inflation have moved upward over time (Chart 5). Someanalysts have suggested that increases in the level, duration, and availabilityof unemployment benefits and other transfer payments have raised the unem-ployment rates for some groups in the labor force by facilitating longer andmore frequent periods of job search. These factors, together with changesover time in the structure of labor markets, in rates of productivity growth,and in the reaction of wages to past and expected rates of inflation, make itdifficult to estimate the rate of unemployment below which wage accelera-tion is likely to occur. A number of studies have attempted to determinethat rate, but have produced a wide range of results.

Although it is impossible to estimate the precise rate of unemploymentbelow which wages begin to accelerate, an analysis by the Council ofEconomic Advisers and a review of the available studies do identify a rangeof estimates that encompasses the consensus of most observers. The evidencesuggests that under current labor market conditions the danger of accelerat-ing wages begins to mount as the rate of unemployment falls significantlybelow 6 percent. During 1978 the unemployment rate moved into the topof the range. The economy also underwent an acceleration of wages. Butsince the range itself is uncertain, we cannot automatically conclude thatthe lower unemployment rate caused the acceleration. A more careful lookat developments is necessary.

65

CAUSES OF WAGE ACCELERATION

The pattern of union and nonunion wage increases in 1978 is consistentwith the view that tightening labor markets were a partial source of wageacceleration. But the moderation of the rate of increase in wage rates afterthe first quarter casts doubt on the hypothesis that the unemployment ratehad declined to levels producing a sustained acceleration of wages and prices.It suggests that the acceleration of wages in early 1978 may derive fromother factors.

To explore these issues the Council conducted an econometric analysisof several potential explanations for the 1978 wage acceleration. The anal-ysis examined two aspects of labor market pressure: the general balance be-tween the demand for and supply of labor resources represented by the levelof the unemployment rate, and the more transitory pressures generated bythe rapidity with which unemployment decreases as employment gainsexceed labor force growth.

The rapid drop in unemployment in late 1977 and early 1978 was accom-panied by a sharp growth of employment. It is quite possible that a very rapidrise in the demand for labor relative to the increase in the labor force maycause an acceleration in wages, even though the level to which unemploy-ment falls does not imply excess demand for labor. A large increase in hiring,occurring in a short period and spread across a large number of industries,causes many workers to leave low-wage jobs as high-wage vacancies appear.Employers in low-wage industries face a special difficulty when they mustnot only add to their work force but replace those who have quit toaccept higher-paying jobs. Wage rate increases may therefore be particu-larly large in low-wage industries. While ultimately the pool of unemployedmight be enough to fill the new jobs without putting added pressure on wagerates, the attempt to hire large numbers of workers quickly sets up temporaryimbalances in labor demand and supply that accelerate wage increases.

The Council's analysis confirmed that the level of the unemployment rateearly in the year played a limited role in the 1978 wage acceleration. How-ever, pressures associated with the^ speed of the decline in unemploymentwere an important source of increased wage inflation. The rapidity of thereduction in the unemployment rate added about 0.1 percent to the adjustedhourly earnings index during the fourth quarter of 1977 and another 0.3percent during the first half of 1978, according to estimates made by theCouncil. During the second half the unemployment rate held fairly steady,and the absence of further pressure from this source contributed to decelera-tion of wage increases late in the year.

A second important factor in the wage acceleration was the minimumwage increase in January 1978. According to the Council's analysis, between0.2 percent and 0.4 percent was added to the adjusted hourly earnings indexin the first quarter by the change in the minimum wage. If the minimumhad not been raised, the index would have risen at an annual rate of around

66

7.9 percent in the first quarter instead of the 9.2 percent that actually oc-curred. Thus, over two-thirds of the acceleration of the index in the firsthalf of the year can be explained by the combined effects of the speed withwhich unemployment declined and the increase in the minimum wage.

In summary, in late 1977 and early 1978 a marked but temporary acceler-ation of wages followed a rapid fall in unemployment. The acceleration re-flected the influence of minimum wage increases and the unusual growth ofdemand for labor during late 1977 and early 1978. The acceleration alsooccurred at a time when productivity growth was very low, and the twodevelopments together added strong impetus to cost and price increases.Although the rapidity of the drop in unemployment put some transitorypressure on wage rates, the level of the unemployment rate during thatperiod was still above most estimates of the range associated with a sustainedincrease in inflation. Later in the year, however, the recovery clearly broughtthe unemployment rate into the top of that range. In view of the accelerationin inflation which has occurred, a further reduction of the unemploymentrate during 1979 would run some risk of generating excess demand andcreating inflationary pressures in labor markets.

THE PRODUCTIVITY^ SLOWDOWN

Productivity growth in 1978 showed a very marked slowdown from ac-customed rates, adding substantially to inflationary pressures and raisingfundamental concerns about underlying trends. With real GNP growth ofabout 4 percent over the year, exceeding the normal trend rate of growth,most observers expected that productivity in the private nonf arm sector wouldgrow at least 2 percent. Instead, as seen in Table 15, productivity showedessentially no improvement, increasing only 0.6 percent in the course of theyear. The slowdown was concentrated in the nonfarm, nonmanufacturingsector, where productivity actually declined 0.3 percent during 1978.Productivity growth in manufacturing, on the other hand, was strong.

The slow productivity growth over the past 2 years adds to the ac-cumulating evidence that the underlying trend in productivity growthsince 1973 has been substantially lower than in earlier periods. Between1948 and 1965, productivity growth in the private nonfarm sector averaged2.6 percent per year. In 1965-73 this rate declined to 2.0 percent. Since1973, private nonfarm productivity growth has averaged less than 1 per-cent per year. In the following examination of recent evidence on produc-tivity growth and the discussion of its implications for the growth of poten-tial output, the key questions raised by recent experience are these: Wasthe recent poor performance a nonrecurrent extraordinary event, fromwhich we will soon bounce back? Or does the recent lag in productivity in-dicate that the U.S. economy has entered a period of very slow produc-tivity growth?

67

Productivity Determinants

During most of the postwar period the economy produced productivitygains exceeding 3 percent annually, as shown in Table 15. However, anumber of the factors generating the strong productivity growth betweenWorld War II and the mid-1960s have since been reversed.

TABLE 15.—Labor productivity growth, 1948-78

[Percent change per year]

Sector1948to

1955

3.4

2.7

3.32.4

1955to

1965

3.1

2.6

2.92.4

1965to

1973

2.3

2.0

2.41.7

1973to1977

1.0

.9

1.5.6

1977to

19781

Private business econopiy.

Nonfarm

ManufacturingNonmanufacturing.

0.4

.6

2.5- . 3

i Preliminary.

Note.—Data relate to output per hour paid for, for all persons.

Source: Department of Labor, Bureau of Labor Statistics.

For example, between 1948 and 1973 high rates of private investmentled to a growth in the capital-labor ratio (measured by the ratio of thenet nonresidential capital stock to aggregate hours worked in the private non-farm sector) amounting to almost 3 percent per year. Since 1973, as a resultof low rates of investment, that growth rate has dropped to 1 % percent peryear. Although the precise effect of slower growth in the capital stock is hardto measure empirically, analytical studies estimate that it could well have re-duced productivity growth by up to one-half of a percentage point peryear from earlier trends.

Productivity growth has also been reduced by a dramatic shift in theage-sex composition of employment. Starting about 1965, the children of thepostwar baby boom attained working age, adding many young and inex-perienced workers to the labor force. Rapid increases in the labor forceparticipation of women also added to the supply of less experienced workers.If average earnings of each age-sex group are used as a rough approximationof the relative productivity of its members, losses in productivity growth dueto increases in the proportion of young and inexperienced workers in thelabor force may be calculated. Such demographic shifts in employment canexplain a reduction of 0.4 percentage point in the annual growth rate ofproductivity between 1965 and 1973. Since 1973 this trend has slowed asthe new workers that entered the labor force between 1965 and 1973 havebecome older; and, for the more recent period, the reduction has been closerto one-third of a percentage point.

Increased economic and social regulation has aggravated the productivityslowdown in a number of ways. Productivity is a measure of output pro-duced per unit of resources used in production. Economic regulation, as intransportation, precludes labor and capital from flowing to those uses that

68

have a relatively high value. The effects of social regulation are more com-plicated. The gains from social regulation—in such forms as reduced pol-lution and greater safety—are generally not included in measured output.When an increasing fraction of society's labor and capital resources is di-verted to producing these gains, measured productivity growth is reduced.

In addition, important indirect costs are generated by social regulation.The implementation of new regulatory statutes is often associated withconsiderable litigation and uncertainty which tends to reduce innovationand investment. Moreover, some regulations specify or suggest the tech-nology to be used to meet new standards, rather than prescribing a level ofperformance to be attained. As a consequence, innovations that could meetthe standards at lower cost are not encouraged.

On an aggregate basis one private study estimates that for 1968-73 thedirect costs of compliance with environmental, health, and safety regula-tions may have reduced the annual growth of output relative to total inputsin the private nonfarm sector by 0.1 percentage point. Similar estimatesfor 1973-78 are incomplete, because of lags in the compilation of data,but according to preliminary estimates these restrictions may have sub-tracted an additional 0.3 percentage point from annual growth of outputrelative to inputs since 1973.

Productivity growth has fallen significantly in many industries over thepast several decades. (See Table 16.) The costs of regulations have increasedsubstantially in some of these industries but not in others. For example,from 1950 to 1965 labor productivity in mining grew 4.3 percent per year,but since 1973 it has declined at an annual rate of 6.1 percent. In the late1960s and early 1970s stringent mine safety laws began to take effect. Somepart of the productivity decline in mining can be attributed to other factors,and there have been such measurable benefits as lower accident rates, butregulation has undoubtedly been very costly in terms of real output per hourworked. In the utilities sector, growth in output per hour worked fellsuccessively from 6.1 to 3.5 to 0.2 percent per year in 1950-65, 1965-73,and 1973—77. While a number of influences have been at work to reduceproductivity growth in this industry, the increase in environmental regulationhad an important bearing.

The loss of productivity growth as a consequence of increasing socialregulation does not itself imply that the costs of regulation exceed its benefits.It has already been noted that the output measures generally used to calcu-late productivity do not include environmental improvements and otherbenefits of regulation. Nevertheless, the magnitude of the productivity effectsdoes highlight two facts: regulation is very costly; and benefits should beclosely compared with costs in the design of regulatory legislation andspecific regulations.

Some have suggested that a decline in the intensity of research and devel-opment in the United States may be a significant cause of the productivityslowdown. The evidence for such a view lies in the falling ratio of research

69

and development expenditures to total output; this ratio reached a peak of3.0 percent in 1964, but has since dropped to an estimated 2.2 percent in1978. Most of the reduction can be attributed to a substantial cutbackin military and space-related research—research that may have a somewhatless direct effect in increasing aggregate output per hour worked in theprivate sector than basic research or private research and development. Pri-vate industry has consistently provided about 1 percent of GNP for researchand development since the mid-1960s. In the course of time, however, thedirection of industry's research and development activity may have shiftedaway from basic research and new product development in response tosuch influences as the changed regulatory environment.

Little of the 1965-73 decline in private nonfarm labor productivity or thefurther reduction in 1973-78 seems to stem from shifts in the industrialcomposition of employment. Although movement out of the farm sectoradded a sizable productivity bonus in the early postwar years, this processhad ended by the mid-1960s. Further, even though the proportion of thework force engaged in manufacturing has grown smaller since 1965, thelevel of manufacturing productivity has been about the same as that of theprivate nonfarm sector as a whole; the sectors of the economy employinglarger proportions of the work force include some with higher and some withlower levels of productivity, and hence the shift has left aggregate pro-ductivity more or less unchanged.

Productivity Growth Since 1973

Productivity growth in the nonfarm business sector since 1973 has beenunusually erratic. Although growth during 1976 was in line with the 1965-73trend, there were abnormally low growth and even declines in 1973-74 and1977-78. The productivity decline in 1973-74 was particularly striking.Labor productivity in the nonfarm business sector fell in every quarter fromthe second quarter of 1973 to the fourth quarter of 1974, dropping a totalof 4.2 percent in a 7-quarter period. On the basis of the usual relationshipbetween fluctuations in productivity and fluctuations in output, no morethan 1 percentage point of that decline could be attributed to the sharprecession during the period. The additional drop of 3.2 percentage pointsaccounts for much of the difference between the expected 2 percent annualgrowth rate between 1973 and 1977 and the 0.9 percent rate that actuallyoccurred.

In both 1977 and 1978, productivity growth was again disappointing.Although private nonfarm productivity was expected to increase at least2 percent per year, it grew instead at only 1.3 percent in 1977 and 0.8 per-cent in 1978. This latest deterioration in productivity indicates that theslowdown in 1973-74 was not just a temporary aberration and adds to theaccumulating evidence that the secular trend in productivity growth may beconsiderably less than 2 percent per year.

70

Recent deviations of productivity from its postwar trend have been sopronounced that one is tempted to search for the influence of special factors.Some suggest that the oil embargo of 1973-74 and the subsequent quadrup-ling of oil prices had an adverse impact on productivity growth. However,it is difficult to find a mechanism by which an oil crisis could have such animmediate and severe effect on the economy. Widespread declines in pro-ductivity growth rates would only occur as adjustment of productionmethods to economize on energy took place. Actually, adjustment to the newoil prices has been extremely slow. Moreover other countries in which energyprices rose more than in the United States did not show such large produc-tivity declines. In general, possible productivity-reducing effects occur asfirms substitute labor or cheaper fuels for oil, or as energy-inefficient plantand equipment are replaced, but these effects will be spread very graduallyover a long period.

There is no obvious set of special factors that could explain the poorproductivity record of 1978. Year-to-year variations, however, have alwaysbeen substantial, and deviations from trend of as much as 1 percentage pointare not unusual. If the long-term growth rate of productivity has fallen wellbelow earlier rates, as now seems likely, a year with a very small increase inproduction should occasion little surprise.

Part of the decline in the growth of private nonfarm productivity between1965 and 1973 was attributable to reduced productivity gains in the con-

TABLE 16.—Productivity growth by industry, 1950-77

[Percent change per year]

industry

Agriculture..

Mining

Construction.

Manufacturing:Nondurable...Durable

Transportation..

Communication..

Utilities

Trade:Wholesale.R e t a i l . . . . .

Finance, insurance, and real estate.

Services

Government. _.

All industries:Current weights _Fixed weight (1977 output weights).

1977 outputshare

(percent)1

2.9

1.5

4.3

9.914.4

3.9

3.2

2.3

7.310.0

15.4

12.0

12.5

100.0

1950to

1965

4.9

4.3

3.4

3.22.5

3.0

5.3

6.1

2.62.3

1.6

1.2

.4

2.72.6

1965to

1973

3.6

1.9

-2.1

3.32.2

2.9

4.6

3.5

3.42.1

.2

1.7

.5

2.01.9

1973to

1977

3.0

- 6 . 1

.3

2.2

1.0

6.7

.2

- . 8.8

2.3

- . 3

.1

1.11.1

1 Detail may not add to 100 percent because of rounding.Note.—Growth data relate to output per hour worked for all persons.Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

71

struction and financial sectors. Statistics on productivity in these sectors (andthose in the government sector) are notoriously bad, and so it could beargued that the apparent reduction in productivity growth during this periodwas a statistical artifact. However, the further widespread decline since 1973lends no support to that interpretation.

Table 16 shows the pattern of labor productivity growth (gross productoriginating per hour worked) for 13 major industries. In almost every sectorof the economy the growth of productivity has slowed appreciably. Data for1978 are not yet available; but, given the aggregate productivity perform-ance last year, sectoral averages for 1973-78 will be even lower than for1973-77, except perhaps in manufacturing.

POTENTIAL GNP

Behavior Since 1973

The erratic productivity performance of the last 5 years raises seriousquestions about earlier estimates of the economy's productive potential.Potential GNP is defined as the level of real output that the economy couldproduce at high rates of resource utilization. The level of potential outputis less meaningful than its rate of growth. The latter gives the best estimateof how much the economy can actually grow over the next few years with-out putting additional pressure on labor or product markets. Before makinga judgment of the future trend for potential output, it is useful to reviewthe growth of potential over the last 5 years and to examine recent behaviorof the unemployment rate.

The Council of Economic Advisers has undertaken several reexaminationsof the conceptual as well as the empirical basis of potential output over thelast 3 years. These studies led to a significant reduction in 1977 in the esti-mate of the growth of potential, lowering the estimate to 3J/2 percent annu-ally for the period from the fourth quarter of 1968 onward. Previously, thegrowth rate of potential had been estimated to be 4 percent for the periodfrom the fourth quarter of 1968 to the fourth quarter of 1975 and 3^4percent thereafter. The 1977 revision, discussed in the 1977 and 1978Economic Reports, puts the potential GNP in 1978 at $1,462 billion (1972prices), about 5.6 percent higher than actual GNP.

The 1977 and 1978 estimates were based on a higher benchmark unem-ployment rate and on the optimistic assumption that the productivity declinein 1973-74 was an aberration that would be subsequently corrected. Theunderlying productivity trend was therefore assumed to be equal to thatobserved between 1965 and 1973. For that assumption to prove correct,strong increases in productivity would have had to occur since 1974. Produc-tivity growth in 1975 and 1976 did show substantial improvement, keepingopen the possibility that productivity would return to the level indicatedby the 1965-73 trend; and early in 1978 initial productivity statistics sug-gested a sizable 3 percent gain for 1977. However, the subsequent down-

72

ward revision of the productivity statistics for 1977 and the very poorproductivity performance of 1978 make the earlier view untenable. It nolonger seems reasonable to assume that the exceedingly poor productivitygrowth in 1973-74 and 1977-78 represented statistical aberrations or one-time events, implying no reduction in the long-term trend. Downward re-visions of our estimate of long-term productivity growth and of potentialGNP are clearly necessary.

The uncertainty about the growth of potential output over the 1973-78period requires one to distinguish three factors affecting productivity: itslong-term trend, its cyclical movements, and the erratic declines from trendthat occurred in 1973-74 and to a lesser extent in 1977-78.

It is possible to place rough bounds on the range in which the 1973-78trend of productivity growth must lie by examining two separate views. Theoptimistic view holds that 1973-74 was a period in which productivity andpotential output dropped as a result of nonrecurring factors affecting thelevel of productivity, after which the long-term trend of productivity growthresumed its earlier pace. On this basis we calculate the long-term trend rateof growth in productivity from 1973 to 1978 to be about 2 percent per yearand the growth of potential GNP over this period to be 3.5 percent peryear. Such a view of productivity behavior interprets the 1977—78 perform-ance as another marked aberration, which has temporarily reduced produc-tivity well below its long-term trend.

The pessimistic view holds that the 1973-74 period was not extraordinary.According to this view long-term productivity growth began to slow sub-stantially after the mid-1960s, although unexpectedly favorable develop-ments in late 1972 and in early 1973 disguised the fact. The poor averageperformance of productivity since early 1973 reflects that slowdown, andthe particularly disappointing episodes in 1973-74 and 1977-78 are fluctua-tions around a greatly reduced long-term trend. According to this inter-pretation the estimate of potential should be based on a long-term growthof productivity which follows a much slower pace after 1973. This pessi-mistic version produces an estimated long-term trend rate of productivitygrowth during the past 5 years of around 1 percent a year, and a growthof potential GNP of only 2.5 percent annually over the 1973-78 period.

Placing an exact number on recent potential growth is extremely difficult.The growth of potential from 1973 to 1978 probably falls between the twoextremes. The 1973-74 productivity shock was to some extent nonrecur-rent. But the deceleration in productivity in recent years is too striking toignore in estimating the long-term trend.

Unemployment Forecasts

Another way of analyzing the growth of potential output over the 1973—78 period is to examine the actual behavior of real GNP and unemploy-ment in this same period. Particularly since mid-1977, the behavior of theunemployment rate has been a puzzle. In the economic forecasts underlying

73

the 1979 budget, for example, real GNP was forecast to rise 4.7 percentover the 4 quarters of 1978 and an additional 4.7 percent in 1979. On thebasis of estimates that assumed a potential growth of 3.5 percent per year,the unemployment rate was forecast to reach 5.8 percent in the fourthquarter of 1979. In fact, it reached that level a year earlier, even thoughreal GNP growth in 1978 was less than expected.

The most common method of forecasting the unemployment rate relatesthat rate to the gap between actual and potential GNP—the relationshipknown as Okun's law. Over the postwar period a cyclical coefficient of 2^4has been observed; that is, a reduction of 2% percentage points in the gapbetween potential and actual GNP could be expected to lower the unem-ployment rate by about 1 percentage point. Although aggregate data maybe unreliable, there is some suggestion that the cyclical coefficient was closerto 3 in early years and may have declined to near 2 in the 1970s.

The use of this relationship and previous estimates of potential GNPproduced substantial overestimates of the unemployment rate in 1977 and1978. For example, from the fourth quarter of 1976 to the fourth quarterof 1977, real GNP grew 5.5 percent, reducing the estimated GNP gap by2 percentage points under the old definition of potential. The expectedreduction in the unemployment rate was 0.8 percentage point; the unem-ployment rate actually fell by 1.2 percentage points.

Last year produced a similar surprise: a 4.3 percent increase in real GNPwith a 3.5 percent growth of potential output should have lowered theunemployment rate from 6.6 to 6.3 percent from the fourth quarter of 1977to the fourth quarter of 1978. Instead, the unemployment rate was reducedto 5.8 percent, 0.5 percentage point more than expected. Given theunemployment rate at the end of 1976 and the actual path of output sincethen, unemployment by the end of 1978 was 0.9 percentage point lowerthan was expected, if it is assumed that potential GNP grew at 3.5 percentper year. By revising downward our estimate of the growth of potentialGNP from 3.5 to 3.0 percent per year, about half the unanticipated drop inthe unemployment rate can be explained. The remainder is within histor-ical error margins for the output-unemployment relationship.

Revised Estimates

Weighing recent trends in productivity and labor force growth, as wellas the unemployment-output relation, one can form a rough judgment aboutthe trend in potential output over the 1973-78 period. Clearly, placing anexact number on potential growth is very difficult. On balance the Council'sview is that potential output has grown at an average rate of 3 percent duringthe last 5 years.

The 3 percent overall growth rate of potential between 1973 and 1978can be broken down into the following components: a 2.5 percent annualgrowth in potential employment, a 0.5 percent per year decline in annualhours per employee, and a 1 percent per year growth in productivity. Reflect-

74

ing the large decline in 1973-74, the 1 percent productivity growth duringthe past 5 years was about one-half of 1 percentage point below our estimateof the long-term trend (discussed below). But its effect in depressing poten-tial GNP was offset by an annual growth in the labor force about one-halfof 1 percent above its long-term trend.

Chart 7

Actual and Potential Gross National Product

BILLIONS OF 1972 DOLLARS

1600

1500

1400

1300

1200

1100

1000 -

SEASONALLY ADJUSTED ANNUAL RATES

1976 POTENTIAL

1977-78 POTENTIAL

1979 POTENTIAL

ACTUAL GNP

I I I I I I i I I i

1968 1970 1972 1974 1976SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS-

1978

The latest estimate puts potential GNP at $1,423 billion in 1978. Chart7 shows the latest revision of potential output (labeled 1979 potential)along with the two earlier versions. The revised data are in Table 17.Actual GNP in 1978 was only about 2% percent below its potential level.

TABLE 17.—Potential gross national product and benchmark unemployment rate,1973-78

[Billions of 1972 dollars, except as noted]

Year

1973. . .1974

19751976 . .19771 9 7 8 . . . . _

PotentialGNP

1,227.01,264.2

1,302.11, 341.11,381.41,422.9

ActualGNP

1,235.01,217.8

1,202.31,271.01,332.7

11,385.1

GNP gap(potential

less actual)

- 8 . 046.4

99.870.148.7

137.8

Benchmarkunemploy-ment rate(percent)

4.95.0

5.15.15.15.1

i Preliminary.

Sources: Department of Commerce (Bureau of Economic Analysis) and Council of Economic Advisers.

75

Future Trends

Projecting potential GNP growth into the future is subject to large errors.Growth of the labor force in recent years has varied substantially. In thepast 5 years, the surprisingly low productivity growth has been offset, asnoted above, by higher than expected increases in the labor force, producingmore growth in potential output than would have seemed likely from thelow productivity statistics alone.

The wide variation in productivity growth rates since 1973—and ourinability to determine precisely the underlying trend of such growth duringthese years—make predicting future rises in private nonfarm productivityunusually hazardous. Improved growth in investment during the past 2 yearsshould help to improve productivity growth over the next 5 years. Atthe same time, labor force growth should decline when the young peopleborn in the baby boom have entered the labor force. This demographicreversal should also add to productivity growth, as the drop in the averageage and experience of the labor force tapers off. These positive develop-ments, however, may well be offset to some extent by increased regulatoryburdens.

Studies by the Council of Economic Advisers indicate that the rangeof estimates of productivity growth per hour lies between 1*4 and 2*4percent annually over the next 5 years. These estimates are based on thealternative hypotheses about the 1973-74 period discussed earlier. Takingaccount of recent disappointing productivity developments, our forecast isfor a productivity growth of 1 l/<x percent annually over the next 5 years. Thisprojection is based on the view that some part—less than half—of the 1973—74 drop in productivity represents nonrecurrent events; in addition, it doesnot assume any rebound of productivity growth from recent trends backtoward those experienced in the 1950s or 1960s.

Other components of anticipated potential growth over the next 5 yearsare these: an expected fall in hours per employee of one-half of 1 percentannually; an average rise in the labor force participation rate of three-fourths of 1 percent annually; and a rise in the relevant population averag-ing 1J4 percent annually.

Taken together these components imply a growth in potential outputover the 1978-83 period of 3 percent annually, the same as the revisedestimate for 1973-78. It is recognized that we are in a period of adjust-ment to new trends in energy, regulation, and international competition,that an attempt to estimate the underlying trend is therefore extremelyhazardous, and that estimates of productivity growth are particularly sub-ject to large margins of error.

ECONOMIC POLICY IN AN INFLATIONARY ENVIRONMENT

In recognition of the need for a balanced approach to the problem ofinflation, the Administration announced a three-part anti-inflation program

76

in October 1978. The program sets out the basic objectives for economicpolicy in 1979. As the first element of the program, fiscal and monetarypolicy will be used to achieve and maintain a balance between aggregatedemand and supply that is conducive to a reduction in inflation. The sec-ond element is a set of explicit, voluntary wage and price standards designedto reduce inflation. The third consists of an effort to reduce the direct con-tribution of government to inflation by reducing the cost of regulatory ac-tions. In the remainder of this chapter the policy initiatives associated witheach element of the anti-inflation program are discussed.

AGGREGATE DEMAND POLICY

During the course of an economic recovery, a stage is reached at whichthe emphasis of macroeconomic policy must switch from efforts to strengthengrowth in economic activity to measures that restrain inflation. The U.S.economy passed through that stage during 1978. The disappointing perform-ance of productivity, the related sharp drop in unemployment, and the accel-eration of inflation brought the economy to that position somewhat earlierand more abruptly than had been expected. Reducing inflation must be thetop priority of economic policy in 1979. Unless we bring inflation underbetter control, the progress made during the past several years toward re-covering full employment of our economic resources will be jeopardized.

Since the trough of the recession in early 1975, total real output of goodsand services has grown at an annual rate of 5 percent, or about 2 percent-age points per year faster than the economy's long-term potential. The gapbetween actual economic performance and the level made possible by ourresource base has therefore steadily diminished.

Job creation during this recovery has proceeded at an extraordinarily rapidpace, especially during the past 2 years. Overall unemployment has thereforedeclined substantially despite record increases in the civilian labor force.Nevertheless, unemployment rates remain extremely high for some majorsegments of the population. Both here and abroad, structural unemploymentrepresents an unacceptable waste of economic resources and a severe socialproblem. But the problem cannot be dealt with by an expansive aggregatedemand policy without generating further inflationary pressures. As pointedout in Chapter 3, the task must be addressed with measures such as targetedemployment tax credits and training and jobs programs aimed directlyat those who cannot find jobs even in a relatively fully employed economy.

Earlier in this chapter evidence was cited that excess demand pressuresin most labor and product markets were not a dominant factor in the re-cent acceleration of inflation, except for a period in late 1977 and early1978 when the rapidity of decline in unemployment contributed to anacceleration of wage increases. But the analysis also indicated that the econ-omy has approached the point where the overall margin of unused resourcesis very slim. By late 1978 the cyclical component of unemployment was downto relatively small proportions, as evidenced by various measures of labor

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market tightness, and the gap between the economy's actual and potentialoutput had shrunk from 7.7 percent of potential in 1975 to 1.8 percent inthe fourth quarter of 1978. Moreover, the outlook for growth in produc-tivity is very uncertain. Since we are not yet able to say precisely why pro-ductivity gains were so weak last year, we cannot be confident that ourestimate of the GNP gap and our forecast of growth of potential GNP arecorrect.

For all of these reasons it is essential that economic policies be restrained.Economic growth must slow to a moderate and sustainable pace—one thatavoids adding the effects of excess demand to existing inflationary forces.

As Chapter 3 describes in detail, the Administration is forecasting agrowth rate of real GNP amounting to 2% percent over the 4 quarters of1979 and 3^4 percent in 1980. The average growth rate over the 2 years, 2?4percent, is slightly below the estimated long-term growth potential of 3.0percent. If growth in the labor force and productivity is about in line withlong-term trends, the margin of slack between actual and potentialGNP will increase slightly over the next 2 years, and market forces canwork together with the pay and price standards announced by the Presidenton October 24 to moderate inflation.

Restrained fiscal and monetary policies are an essential ingredient of theAdministration's strategy for combating inflation. Monetary and fiscal re-straints alone, however, are not equal to the task of unwinding an inflationthat has been under way for more than a decade and has becomedeeply embedded in expectations and in the normal way of doing businessby consumers, workers, labor unions, and business establishments. Experi-ence since the late 1960s, reviewed at the beginning of this chapter, amplybears out that conclusion.

The stubborn resistance of inflation to the traditional remedies reflectsthe fact that the rate of wage and price increase is relatively inflexible inthe face of slack demand. As last year's Economic Report discussed in moredetail, there is some evidence that wage rates over the past quarter centuryhave become progressively less responsive to the balance between ag-gregate demand and supply in labor markets. Reductions in output andmajor increases in unemployment are no longer as effective in slowing therate of wage and price increase. The resulting loss of output, of jobs, and ofhuman dignity pays only modest dividends in lower inflation.

A political consensus exists in our country today that inflation is theNation's most serious economic problem, and that fiscal and monetarydiscipline is needed if inflation is to be reduced. The inflationary problemcan be dealt with most successfully by persisting with the discipline of anti-inflation policies for an extended period even if economic growth for a timeshould fall below the path that is now forecast. The chances of maintainingthe necessary consensus long enough to make real gains against inflationwill be much greater if we avoid an overdose of restraint that leads tosharp increases in unemployment, reductions in output, and stagnation ofinvestment.

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The Roles of Fiscal and Monetary Policies

The objective of aggregate demand policies for 1979 and 1980 is thusclear. To avoid creation of excess demand, economic growth needs to slowto a pace at, or somewhat below, the long-term potential rate of expansion.Fiscal and monetary restraint is needed to accomplish that aim. Therestraint, however, must be applied in a measured way, to moderate growthwithout producing a recession.

As Chapter 1 indicated, the course of fiscal policy began to shift towardrestraint during 1978. In fiscal 1979, the year beginning in October 1978, thebudget deficit will decline to about $37 billion, or $11 billion less thanin the prior fiscal year. In fiscal 1980 the deficit will drop an additional $8billion to a level of $29 billion. Further reductions are expected in succeedingfiscal years. To reach these results we must keep a very tight rein on thegrowth of expenditures. In fiscal 1980, Federal outlays will decline to 21percent of GNP from 22 percent in fiscal 1978.

Given the course of fiscal policy being pursued by the Administration, thetask of reducing inflation will not fall on monetary policy alone. Success inthe struggle against inflation will require that monetary and fiscal policieswork together; the objective of slowing economic growth while avoiding arecession will necessitate very careful coordination and balance between fiscaland monetary policies.

The task of mapping the appropriate course of monetary policy will notbe easy. Monetary restraint in 1978 did not affect aggregate demand in theway that past history would have suggested, nor will it do so in 1979 and1980. As discussed in Chapter 3, institutional changes in financial markets,by altering the availability of credit to private borrowers, have reduced thedegree to which changes in monetary policy affect spending. In today'seconomy, monetary and credit policies increasingly influence private invest-ment and consumption through fluctuations in interest rates and associatedmovements in financial asset prices, rather than through changes in nonpriceterms of credit.

This development has both negative and positive aspects from the stand-point of economic stabilization policy. On the negative side, monetary policyis likely to affect aggregate demand with even longer lags than it once did.Since our ability to forecast future developments is very limited, the taskof identifying the appropriate course of monetary policy has become moredifficult. On the positive side, however, monetary policy has been changedfrom a very harsh and selective tool of economic stabilization to one whoseinfluence on aggregate demand is more gradual and evenly distributed.Working together with fiscal policy, monetary restraint, prudently applied,can be used more successfully than before to reduce economic growth toa modest but sustainable pace and thus create a favorable climate for anunwinding of inflation.

The American people and the Administration look forward to a declinein nominal interest rates from their present very high levels. It must be

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clearly recognized, however, that a significant and lasting drop in in-terest rates cannot be expected until inflation begins to recede. When thathappens, interest rates can and should decline. In a less inflationary environ-ment it will also be possible to support adequate real growth with a slowerexpansion in the monetary aggregates than is currently required.

STANDARDS FOR WAGE AND PRICE BEHAVIOR

General macroeconomic policies can create an appropriate market en-vironment for unwinding inflation. However, 10 years of inflation precludeachievement of a given deceleration of prices solely through aggregate de-mand policy without much more demand restraint and loss of growth thanwould have been the case in earlier periods. Unless ways are found to brakethe momentum of self-perpetuating wage and price increases that haveacquired a prominent place in our private behavior, inflation will continueat an unacceptably high rate.

In recognition of this fact the Administration at the beginning of 1978called for a slowing of wage and price increases. Each company was asked tohold its 1978 price and wage increases below the average of the prior 2 years.Although some individuals and groups did make an effort to meet the stand-ard, the program was not generally effective. The deceleration standard wasnot specific enough to provide a clear guide for wage and price decisions.

The Administration therefore incorporated more explicit standards intothe anti-inflation program announced in late October. The voluntary pro-gram now includes an explicit numerical ceiling for wage and fringe benefitincreases as well as a price deceleration standard for individual firms. Thepotential effectiveness of the program is heightened by expanded monitor-ing, by relating Federal procurement actions to the standards, and by aninnovative program of real wage insurance designed to encourage compli-ance. The pay and price standards were published in preliminary form onNovember 7, followed by a 30-day period for public comment. On the basisof the comments offered, and after consultation with business and laborgroups, some modifications in the detailed specifications were announcedon December 13. The final standards were published in the Federal Registeron December 28.

The pay standard limits the increase in hourly wages and private fringebenefit payments to a maximum of 7 percent for each employee group in acompany. Employee groups subject to the pay standard are: (1) individualgroups covered by major collective bargaining agreements; (2) other non-management personnel; and (3) management personnel. This groupingtakes account of the differing institutional arrangements for setting wagerates and prevents an inequitable distribution of wage moderation1. It alsopermits considerable flexibility in distributing wage changes among individ-uals within a group in response to economic circumstances, equity, and otherfactors, so long as the average increase for the employee group meets thestandard.

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In collective bargaining situations a newly negotiated contract in whichwage and fringe benefit increases average no more than 7 percent annuallyover the life of the contract is consistent with the pay standard, providedthat the increase is no greater than 8 percent in any year of a multiyearagreement. In determining compliance with the pay standard, provisionsfor cost-of-living adjustments will be cost out on the assumption of a6 percent annual rate of inflation in the consumer price index over the lifeof the contract. The standard therefore leaves room for complete flexibilityin allocating the pay increase between wage and fringe benefits, and betweenfixed increases and cost-of-living adjustments. Formal collective bargainingagreements signed before the announcement of the anti-inflation programand (for nonunion employee groups) annual pay plans in operation byOctober 1, 1978, are not subject to the pay standard.

In determining compliance with the pay standard, employers' con-tributions that are required to maintain the existing level of health andpension benefits are distinguished from contributions made to improve thelevel of benefits. Increases above 7 percent in the costs of maintaining exist-ing health benefits are not counted in judging compliance. Special provi-sions also apply to pension plans that pay specified benefits at retirement.Changes in employers' costs resulting from changes in funding methods,amortization periods, actuarial assumptions, and plan experience are notincluded as pay-rate changes, but changes in employers' costs resulting fromplan amendments, changes in the benefit structure, or the effect of wageand salary changes on benefit levels are included. Further details on theapplication of the pay standard to various pay plans can be found in theregulations issued by the Council on Wage and Price Stability on December28, 1978.

In the interest of equity and improved productivity, some exemptionsfrom the pay standard are allowed. First, workers who earned an hourlywage below $4.00 on October 1, 1978, are exempt from the standard. Sec-ond, wage increases in excess of the standard are acceptable if they areoffset by explicit changes in work rules and practices that demonstrablyimprove productivity to a matching or greater degree. Third, wage increasesabove the standard are justifiable to preserve a historically close tandemrelationship with another employee group. Finally, where several explicitand tightly defined criteria show that pay rate increases above the pay stand-ard are necessary to attract or retain employees in a particular job categorybecause of an acute labor shortage, the amount of the excess may be ex-empted from the standard.

Rates of price increase tend to vary considerably more from industry toindustry than rates of wage increase. This occurs because rates of produc-tivity growth and the relative importance of nonlabor costs differ acrossindustries. Realistic standards must recognize this inherent variation andits significance as an allocational device in a market-oriented economy. Atthe same time, it is important to avoid a variable price standard based upon

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a simple pass-through of costs, since such rules can weaken the incentive toimprove productivity..

The Administration's approach to the deceleration of inflation avoidsthese pitfalls. The price standard requires that individual firms limit theircumulative price increases over the next year to one-half of a percentagepoint below the firm's average annual rate of price increase during1976-77. Some industries had abnormally high or low rates of price increaseduring this base period. These extremes are taken into account by limit-ing the price increase for an individual firm to no more than 9.5 percent,and by regarding any increases of 1.5 percent or less as complying withthe standard. If increases in hourly labor costs within a firm decelerate bymore than one-half of a percentage point relative to the 1976-77 rateof increase, the deceleration of prices must be commensurately greater to bein compliance with the standard. Certain categories of goods and services,specified in the price standard regulations issued by the Council on Wageand Price Stability, are excluded from the calculation of a company's averageprice change.

A company that is unable to comply with the price deceleration stand-ard because its average price change cannot be calculated, or because ofuncontrollable price increases in the goods and services it buys, is askedto satisfy a two-part profit limitation. The company's profit margin duringthe program year should not exceed the average profit margin for 2 of thecompany's last 3 fiscal years prior to October 2, 1978. Besides this, however,program-year profit should not exceed base-year profit by more than 6.5percent plus any positive percentage growth in physical volume from thebase year to the program year.

Finally, a percentage margin standard is available to companies in thewholesale and retail trade and in food manufacturing and processing indus-tries as an alternative to the price standard. Details on this alternative areprovided in the regulations issued by the Council on Wage and PriceStability.

Real Wage Insurance

One of the obstacles to the success of voluntary wage and pricestandards is fear on the part of each group of workers that their observanceof the wage standard could lead to a loss of real income if others do notcooperate, or if uncontrollable events, such as a serious crop shortage,result in price increases. Faced with such uncertainty, and basing theirprice expectations on recent patterns of inflation, many workers might bereluctant to cooperate with the standards program. To improve the accept-ability of the standards, the Administration is proposing to the Congress aninnovative program of real wage insurance for those who observe them.

Under the real wage insurance proposal, employee groups that meet the7 percent pay limitation would receive a tax credit if the consumer priceindex increased by more than 7 percent over the year. The rate of the tax

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credit would be equal to the difference between the actual increase in the con-sumer price index and 7 percent, up to a limit of 3 percentage points (10percent inflation). This rate will be applied to each employee's wages upto a maximum of $20,000 per job. Employee groups that are exempt fromthe pay standard (low-wage workers and those under existing collective bar-gaining contracts) will qualify for real wage insurance if their average payrate increase is 7 percent or less during the program year.

The most important factors determining the cost of the wage insuranceprogram are the rate at which workers participate in it and the rate ofinflation. Compliance with the standards by firms and employees will reducelabor costs, and price increases should move down correspondingly. But thereare other, less predictable factors that influence the overall rate of inflation,such as changes in the prices of food and fuel, in exchange rates, and inproductivity. The uncertainty surrounding the behavior of these factorsmeans that the cost of the program itself is uncertain.

With reasonable assumptions concerning participation and the likely be-havior of other economic factors influencing inflation, we can arrive at gen-eral estimates of the program's cost. Some 87 million workers are potentiallyeligible for the program, although not all are likely to qualify for the wageinsurance. For example, low-wage workers and those covered by existingcontracts are exempt from the pay standard. Given expected 1979 wage in-creases for these groups, most workers who are exempt from the pay standardare unlikely to qualify for real wage insurance. Estimates of the cost of theprogram thus depend in part on assumptions concerning the likely com-pliance of workers who are not exempt from the standard.

If three-fourths of those workers are in compliance, the real wage insuranceprogram would result in a budget cost of approximately $5 billion for eachpercentage point of inflation in excess of 7 percent. Lower compliance bynonexempt employee groups would raise the expected inflation rate but lowerthe number of workers eligible for the tax credit. In this sense the potentialbudgetary impact of the insurance program is self-limiting.

As noted above, the expected budgetary cost of the program will alsodepend importantly on productivity growth and the behavior of food andenergy prices. Estimates of the budgetary impact, adjusted for the expectedresponse of the consumer price index to the oil price decisions reached by theOPEC cartel in December 1978, appear in Table 18.

With three-fourths compliance by employee groups who are not exempt,the expected budgetary cost of real wage insurance would vary principallywith productivity and food price developments, as shown in Table 18. Withfull compliance, the most likely payout would be zero, since price increasesshould be less than 7 percent under each combination of food price andproductivity assumptions in the table. As a result, even without the incentiveprovided by real wage insurance, substantial compliance with the standardswould yield a significant reduction of inflation and a gain in real wages.

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TABLE 18.—Estimated annual budgetary cost of real wage insurance proposal[Billions of dollars]

Assumed productivity growthAssumed food price increase

0.6 percent 1.1 percent

8 percent..

10 percent.

i2.5

4.5

0

2.0

1 This is the estimate in the fiscal year 1980 budget and is based on the current forecast for food price increases andproductivity growth.

Note.—Calculations assume three-fourths compliance by nonexempt employee groups.Source: Council of Economic Advisers.

Real wage insurance is a novel use of incentives to foster wage and pricerestraint. The tax credits are not designed to compensate, on a straightdollar-and-cents calculation, those who might have received higher wageincreases but chose to observe the standards. Even with real wage insurancein effect, observance of the standards by particular groups of employeesrequires a recognition of the national interest in individual wage andprice decisions and an awareness of the long-run gains that everyone canenjoy if inflation is reduced. Real wage insurance offers to groups of em-ployees not a cash "buy-out" of higher pay increases, but an important pro-tection against the major risks associated with compliance.

Although the proposed program would rely on the tax system to pro-vide refunds if inflation exceeds 7 percent in 1979, it is different in pur-pose, design, and effect from proposals to index the general revenue systemin such a manner that the connection between inflation and tax revenueswould be reduced or eliminated. The overriding purpose of the plan is toreduce inflation directly by inducing cooperation with the pay and pricestandards of the anti-inflation program. Tax indexation proposals, on theother hand, seek to insulate the tax payments of individuals and corporationsfrom the effects of inflation, but they do not reduce inflation.

Sectoral Problems

The pay and price standards are designed to be guides for decision-makingagents who have discretionary power in wage and price determination. Evenwith widespread compliance, however, it will be necessary to supplement thestandards with special programs tailored to unique inflationary problems insome sectors.

Prices of health care, for example, have generally outpaced overall infla-tion, and expenditures for such care constitute a steadily escalating share ofour national output. Yet the health care industry is not one in which marketforces can be expected to provide an adequate restraint on price increases.The Administration has taken measures to strengthen health planning and toencourage growth in Health Maintenance Organization programs, whichembody incentives to promote cost consciousness. The Administration is alsoseeking a substantial deceleration in the growth of hospital charges,

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which are the largest and fastest growing component of medical care costs,through voluntary standards for hospital cost increases. For 1979 the ceilingon such increases is 9.7 percent, which implies a deceleration of over 2percentage points from current rates of hospital cost increases. The Presi-dent will propose to the Congress a legislative initiative on hospital costcontainment that would establish a hospital cost standard in law.

Professional workers in the health industry are also subject to the generalstandards for professional fees, which apply to companies providing pro-fessional services on a fee-for-service basis. A company will be in com-pliance with the standard if the average rate of change in its fees doesnot exceed 6.5 percent and if the increase in the fee for any single servicedoes not exceed 9.5 percent.

Food price changes have accounted for a major part of the recentinflation and in general follow a more erratic year-to-year course than otherprices. At the farm level, price changes are usually the result of weatherconditions and other supply-side shocks beyond the control of individualfarming units. The monitoring of these prices will therefore focus onoverall market trends. Where price increases in particular commoditymarkets exceed the overall inflation rate and are not justified by changesin costs, administrative actions to expand supply will be considered.

At the retail level, individual firms in the food processing and distribu-tion sectors will be expected to adhere to the price standards with respectto increases in margins. The Department of Agriculture and the Councilon Wage and Price Stability will cooperate in a joint effort to monitorcost, price, and marketing margins. Efforts will be made to ensure that lowercommodity prices at the farm level are quickly reflected in retail prices.Moreover, decisions on 1979 support and import levels have been made withcareful attention to their impact on inflation.

REGULATORY POLICY

Most of the regulatory activities of the Federal Government can be classi-fied into two main groups. Social regulation seeks to control threats to theenvironment and to human health and safety that arise as an undesirable by-product in the production and use of goods and services. Economic regula-tion controls the prices, wages, conditions of entry, or other important eco-nomic characteristics of particular industries. While the Administration'sefforts toward regulatory reform cover many areas, their essential aim is tominimize the costs and improve the effectiveness of social regulation andto reduce the scope and rigidity of economic regulation.

Economic Regulation

The 1978 Economic Report discussed in some detail the current problemswith economic regulatory programs, indicating that in many industries theregulatory structure established in the past is no longer suited to presenteconomic conditions.

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The President recognized this difficulty in the case of the airline industry,and the Congress agreed by initiating the first deregulation of a major in-dustry by legislative action in recent history. Under the Airline DeregulationAct of 1978, entry and price regulation of domestic airlines will be phasedout by 1982 and 1983 respectively. During the transition, the act providesmuch greater freedom and flexibility in entry and fares than was previouslythe regulatory norm. The new law strengthens the already substantial impe-tus to competitive forces that the industry was given last year by the CivilAeronautics Board. The board's liberalizing actions on fares and entry pro-duced markedly lower fares along with sharp increases in air travel, loadfactors, and airline earnings. The provisions of the new legislation shouldlower prices even more and broaden the variety of services to consumers.

In the coming year the Administration will support legislation that willextend the principles and benefits of airline deregulation to the surfacetransportation industry. The inefficiencies produced by price and entryregulation of the trucking industry are well known: empty return trips,restrictions on peak-offpeak pricing, anomalous commodity class rates, andlack of price competition. For example, in New Jersey and California,where such restrictions do not apply, trucking rates for unregulated intra-state traffic undercut comparable interstate rates by 10 to 15 percent.

The current problems with rail regulation are different. Rates of returnfor the rail industry fall below the all-industry average, and the number ofbankruptcies in the industry has historically been above normal. At the sametime, the principal rationale for government regulation—protection frommonopoly—has been eroded by competition from trucks and shifts in popula-tion. The financial difficulties thus created have been compounded by In-terstate Commerce Commission regulation that tends to slow or preventrail abandonments and to inhibit railroads from reducing rates to meet com-petition from trucks and water carriers. The adverse effects of competitionfrom other means of transportation and the Interstate Commerce Commis-sion's regulation of railroad earnings have been offset up to now by substan-tial Federal subsidies. Unless regulation of the rail industry is relaxed, theinefficiencies and necessary subsidies are likely to continue to grow.

Social Regulation

In recent years social regulation has greatly extended its scope and in-creased its complexity. Much of this heightened activity has been in re-sponse to growing public concern about an ever-widening range of environ-mental, health, and safety problems. It has also been spurred by our in-creasing ability to detect potentially harmful health effects from chemicalsor chemical reactions. Controlling the harmful side effects of economicactivity produces substantial benefits to society. But it also imposes costs,and these have mounted significantly as the scope and stringency of regula-tion have increased.

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Our measurement of regulatory costs and benefits is highly imperfect.In addition, measures of the benefits from regulatory provisions—such asimprovements in the environment and in health and safety—are generallyexcluded from the current national income and product accounts. The re-sources devoted to producing those benefits are not available for producingother outputs. As a society, we accept a tradeoff of lower measured outputfor increases in unmeasured output in the form of general environmentalquality.

Once incurred, the costs of regulatory actions enter into the wage- andprice-setting mechanisms of the economy. Most of the costs of regulatoryaction show up not as governmental budget expenditures, but as increasedcosts to industry. Acceptance of higher prices relative to wages and othermoney incomes is the way in which society pays for the benefits of social regu-lation. In fact, however, our economic institutions and measures of prices donot distinguish between these sources of price increases and others. Individ-uals and groups try to escape paying the costs of regulation by increasingwages and other forms of income to match the higher prices. The result is anadditional round of price increases. But the costs of regulation cannot beavoided, and widespread attempts to do so simply add to inflation.

Both the large impact of government regulation, measured by its costsand bnefits, and the way in which the costs add to inflation, highlight theresponsibility of all branches of government to make sure that regulationsare both necessary and efficiently designed. This Administration has under-taken a number of steps toward that goal.

Present Efforts

Effectively managing the regulatory functions of government entailstwo tasks. The first is to improve the design of individual regulations.They should be confined to situations where they are necessary; they shouldset standards that will meet statutory objectives without being needlesslystringent; and they should minimize the costs of meeting those standards.The second task is to view the regulatory process comprehensively to judgehow all the regulations being issued will affect costs and prices, the use ofnational resources, and the economic situation of particular industries andsectors.

The effort to improve the cost effectiveness of individual regulationsbegan in 1974 with the requirement that regulatory agencies of the executivebranch analyze the costs and benefits of major new regulatory proposals, aspart of the process of preparing regulations. In 1978 the President broadenedthis requirement and also took steps to ensure that these analyses were re-viewed not only by the regulatory agencies, but by the other economicagencies of the executive branch as well. The Regulatory Analysis ReviewGroup was created, with representatives from both regulatory and economicagencies, to review several of the most important regulatory proposalseach year.

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During its first year, the review group submitted for the public recordanalyses of five major regulatory proposals having substantial economiceffects: the acrylonitrile standard and generic carcinogen policy of the Occu-pational Safety and Health Administration, the ozone standard proposed bythe Environmental Protection Agency, the Department of Transportation'sregulation to provide equal access for the handicapped, and the Departmentof the Interior's surface mining regulations. Analyses of the EnvironmentalProtection Agency's new source performance standards for steam electricplants and the Department of Energy's proposed coal conversion regulationsfor electric utilities and general industry were in progress at year-end.

The task of ensuring that regulations do not impose undue costs extendsbeyond the analysis of newly proposed regulations. On March 23, 1978, thePresident issued an executive order requiring agencies to establish a "sun-set" procedure for regulations previously issued by the regulatory agenciesof the executive branch. Under this executive order, each agency mustperiodically review its existing regulations with a view to eliminating thosethat are unnecessary and improving and simplifying others. Agencies mustpublish a semiannual agenda that sets forth the list of regulations to bereviewed, including at least one regulation whose economic impact issubstantial.

Effective management of the regulatory process must go beyond measuresdealing with individual regulations. Although the scope of social regulationshas been expanding rapidly for over a decade, the Federal Government hashad no process by which the combined social and economic effects of itsregulatory actions could be assessed. Because of the complexity of theproblems involved, development of analytical techniques and proceduresto make such overall assessments and to utilize them constructively will haveto occur gradually. But in 1978 the Administration took several steps in thisdirection.

In March 1978 the President ordered the executive branch agencies topublish semiannual agendas of forthcoming significant regulatory proposalsand actions. In October he created a Regulatory Council charged with im-proving and using those agendas to create a government-wide calendar ofscheduled regulations. The council is composed of all executive departmentsand agencies with regulatory responsibility as well as a large number ofindependent regulatory agencies. The calendar itself will present, for thefirst time, not only a timetable of new regulatory proposals and issuances,but preliminary data on their objectives and potential costs. As procedures,data bases, and analyses are improved, the calendar can provide both theregulatory agencies and the Executive Office of the President with a bodyof information for use in examining and assessing the effects of regulationsand improving overall regulatory management. Using the information andanalyses developed in producing the calendar, the Regulatory Council itselfcan address problems of coordination and thus eliminate conflicts and dupli-

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cation. In addition, it will begin to examine the problems that have arisenin particular industries or sectors from the combined effects of regulationsimposed by different agencies.

The measures to improve the regulatory process outlined above are alreadymaking major contributions, not only increasing the cost effectiveness ofindividual regulations but improving the overall coordination and integra-tion of regulatory programs. Additional progress will depend, however, ondeveloping satisfactory approaches to a number of other complex anddifficult problems.

Balancing Costs Against Benefits

The statutes authorizing the various social regulatory programs varywidely in the degree that they allow the regulatory agencies to balance bene-fits against costs in setting regulatory standards. Some statutes dealing withthe control of damaging health effects from chemicals or other substancesappear to be based on the proposition that effects are harmful above somethreshold of concentration but not below it. These statutes, in effect, requirethe regulatory agency to set standards at or just below the presumed thresh-old without regard to costs. In fact, scientists are increasingly questioning theexistence of the presumed thresholds; many believe that health hazards di-minish continuously down to zero concentration. Since in many cases flatlyprohibiting the substance is far too costly or disruptive, any standards that setthe level of concentration above zero must implicitly take into account a bal-ancing of economic and social costs against the prevention of health risks.

Some regulations are issued under statutes which do not mention balanc-ing economic costs against benefits, but do require that the regulatory stand-ard be "feasible." Still other statutes not only permit but require economiccosts to be taken into account. And fiinally there are cases where regulatorycosts are ignored. For example, the "Delaney Amendment" to the Food,Drug, and Cosmetic Act, flatly bans substances used as food additives if theyhave been found carcinogenic in animal tests, regardless of their potency ascarcinogens or the economic costs that such a ban would impose.

There is obviously no all-purpose formula for reaching sound decisionsabout the stringency of environmental health and safety standards, given theneed to take into account both the prevention of health risks and the costs ofsuch prevention. Uncertainty is always present in determining the specificnature and degree of the health risks from exposure to various substances,though the uncertainties in some cases are substantially greater than in others.The same is true of costs. In each regulation, a decision must be made abouthow to deal with these uncertainties. Regulators sometimes encounter situa-tions where exposure to health risks is very high but occurs among a smallnumber of people; at other times one finds very low exposure among a largenumber of people. Although circumstances thus vary considerably fromcase to case, a generally consistent approach to these and similar problemsby the different regulatory agencies would do much to make the needed

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regulations better and more cost effective. Developing such an approachwill require coordination among regulatory agencies as well as a carefulanalysis and review of the statutory background behind the differentregulatory programs.

Overall Management of the Regulatory Process

Despite many differences, social regulation shares some of the character-istics of the budgetary programs of the Federal Government. Both are de-signed to provide economic and social benefits: such things as educationalservices, highways and dams in the case of the budget; and environmentalimprovements and health protection in the case of social regulation. Both usenational resources that could be diverted to other uses. For the budget theresource costs show up as Federal expenditures, which are paid for by taxes.The costs of regulations are less visible, since they are imposed on industryand paid for by consumers in the form of higher prices.

The Nation has long had a set of procedures to consider the Federalbudget as a whole: Costs of particular programs and of the total budget areestimated in order to make the best possible qualitative judgments aboutbenefits, and priorities among programs are established. Regulatory programshave no such established procedures, and as a consequence there is no goodestimate of the overall cost of regulation. The difficulties of developing such aprocess are formidable. Since program costs in the budget represent moneyactually spent by the government, there is a firm basis for finding out howmuch programs have actually cost, however difficult it is to estimate futurecosts.

Most regulatory costs, however, are not directly borne by the Federal Gov-ernment but by private parties. Moreover, some of these costs, while very real,can only be roughly estimated even after they have actually occurred. What,for example, are the costs of requiring a firm to locate at point M instead ofpoint N, or of requiring that chemical Z no longer be used as a pesticide?Such estimates are necessarily subject to dispute. And, not unnaturally,people who place a high value on the benefits of the particular regulationtend to arrive at low estimates, while those who must pay the costs tend tomake high estimates.

In addition, social regulation is carried out under a large number ofstatutes, many of which state quite specifically the objectives to be reached,the deadlines for reaching them, and the factors that must be considered insetting regulatory standards. The executive branch has much less flexibilityin asserting priorities and deferring or speeding up the issuance of regulationson the basis of economic conditons and social needs than in managing manybudgetary programs.

More generally, the relationship between the Congress and the executivebranch in the case of budget programs is quite different from that in theregulatory process. Although the President has flexibility in determining thepriorities among budget programs and the size of the recommended expendi-

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tures each year, the Congress must pass on the appropriations to carry outthose programs. Once a regulatory statute is passed, the executive branchagencies do not have to come back to the Congress each year, and they mayissue regulations that confer important benefits and impose large costs with-out congressional approval. On the other hand, the statutes under which mostregulation occurs tend to be extremely specific, often limiting the ability ofthe President and the heads of executive agencies to determine priorities andotherwise balance costs against benefits among and within the variousregulatory agencies.

For all of these reasons the development of procedures and techniquesto improve the overall management of the Federal regulatory process, toachieve social gains at minimum cost, and to reduce the inflationary con-sequences of regulatory activities will have to be a long and carefully executedprocess. It should proceed step by step and involve both the Congress and theexecutive branch. Several important gains have already been made. Accord-ing to polls, the public continues to believe that improvements in the environ-ment, in health, and in safety are an important national goal. But recentlythis sentiment has been accompanied by a growing recognition of the verylarge costs and the inflationary effects of regulation. The effort to improveboth the cost effectiveness of individual regulations and the overall manage-ment of the regulatory process will continue to be a top priority of thisAdministration.

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CHAPTER 3

The Economic Outlook

IN 1979 THE ECONOMY will enter its fifth consecutive year ofeconomic growth, making this the second longest recovery in postwar

history. As a recovery matures, sustaining a satisfactory pace of expan-sion becomes more difficult. Housing, in which starts have more thandoubled since early 1975, is only one example. Given current demographictrends, a high level of starts is sustainable, but housing could not be ex-pected to add much to growth even under the most favorable circum-stances in financial markets. The saving rate has fallen to very low levelsby historical standards, and the rise of consumption may consequently dropbehind the growth of disposable income. In addition, business fixed invest-ment in real terms has already regained its prerecession ratio to grossnational product (GNP), and hence a slower growth of business capitalexpenditures is likely. All these factors will combine to check the pace ofeconomic expansion next year.

As Chapter 2 makes clear, a reduction in economic growth from therate of the last 2 years is needed both because idle labor and capital re-sources have been cut considerably and because inflation has accelerated.The task for aggregate demand policies will be to provide a climate in whichinflationary pressures can begin moderating, but to avoid restraint so severeas to generate a recession.

THE ECONOMY IN 1979 AND 1980

Real growth is projected to average about 2*4 percent for the 4 quarters of1979, a lower growth rate than in 1978 but positive throughout the year. Ifthe anti-inflation program succeeds, as is anticipated, the rate of growthof consumer prices should slow to less than 7/2 percent over the 4 quartersof 1979, and to an annual rate of slightly under 7 percent by the end of theyear. According to initial indications, business and labor groups are takingthe President's voluntary standards seriously, but success cannot yet be as-sured. Widespread compliance with the anti-inflation program is essentialto maintenance of a strong and healthy economy.

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In 1980, real growth is expected to rise to a rate of 3^4 percentover the 4 quarters, largely as a result of an upturn in housing, while infla-tion will continue to slow, dropping below 6 5/2 percent. Here also success inthe fight against inflation will contribute materially to sustaining economicgrowth by reducing the pressures on credit markets and strengthening con-fidence among consumers and businesses.

Employment is expected to rise by about 2 million a year in both 1979 and1980. Productivity is expected to grow at about the same rate in 1979 asin 1978, with some improvement in 1980. It is likely to remain well belowits trend rate of increase of about 1 l/i percent. With the labor force expectedto continue growing at a rate above the long-term trend and real growthslowing, the unemployment rate is likely to increase to 6% percent by the endof 1979 and remain near that level in 1980.

FISCAL POLICY FOR 1979 AND 1980

The course of fiscal policy that is appropriate for 1979 and 1980was described generally in Chapter 2. In specific terms, Federal outlays areprojected to be $493 billion in fiscal 1979, an increase of over 9 percent fromthe previous year. In fiscal 1980 the President's budget calls for outlays of$532 billion, an increase of less than 8 percent. This 1980 figure includesa small real increase in defense spending, a constant level of real spendingfor domestic programs, and restraint in or deferrals of new spending ini-tiatives. Because existing legislation mandates continued real growth in someprograms, such as health care and social security, zero real growth in do-mestic spending can be achieved only through reductions in real outlays fora number of other programs. Holding outlays to $532 billion will requirestrenuous efforts by government agencies as well as cooperation from theCongress.

Over a year ago forecasts of economic activity suggested that the currenteconomic expansion would slow too much unless the burden of rising taxeswas eased. Inflation and economic growth were pushing people into highertax brackets, and substantial increases in social security taxes had been legis-lated for 1979 and later years. To prevent too great a check on the ex-pansion, these tax increases would have to be offset by a tax cut. A tax cutwas also needed to encourage the investment that would provide the produc-tive capacity for future economic growth and improve the prospects forgreater growth in productivity.

Last January, the President therefore proposed a tax cut of $25 billion totake effect October 1, 1978. Since inflation was higher than expected, thiswas scaled back in May to a cut of $20 billion to take effect January 1, 1979.The size of the tax bill passed by the Congress is close to this request with astimulus of $18.9 billion in 1979. The bill contains a $14.1-billion cut inpersonal taxes, a $6.5-billion cut in business taxes, and a $0.7-billion increasein outlays for the earned income tax credit, but allows $2.5 billion in jobscredits to expire.

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278-216 O - 79 - 7

The Revenue Act of 1978

The Revenue Act of 1978 achieves cuts in individual income taxes largelyby lowering the schedule of tax rates. It replaces the general tax credit,which was due to expire at the end of 1978, with an increase in thepersonal exemption from $750 to $1,000. The legislation also expands theearned income tax credit for the working poor and lowers the tax rates oncapital gains. Its provisions include some of the tax reform proposals madeby the President in his tax package.

In general the Revenue Act of 1978 will have relatively little effect onthe after-tax distribution of income. Most households will receive a cut intax liability of about 7 percent. Households with incomes above $200,000and those with incomes below $10,000 will receive larger cuts. These distri-butional effects contrast sharply with those of the President's tax proposal,which called for larger tax cuts for those with incomes below $30,000 andsmaller reductions for those with incomes above $30,000. In its effects the1978 legislation will also differ markedly from income tax legislation enactedbetween 1964 and 1978, which increased the progressivity of the tax system.

The business tax cuts in the 1978 Revenue Act are attained primarily bylowering corporate income tax rates. The maximum rate is dropped from48 to 46 percent, and a new tax schedule, with more income brackets andlower tax rates, is introduced. The tax rate on corporate income between$50,000 and $75,000 is cut the most, from 48 percent to 30 percent. The legis-lation also extends and expands the investment tax credit, providing a$500-million tax cut for business in 1979. Both of these cuts were in thepackage proposed by the President. Capital gains tax rates were also loweredin the 1978 legislation, reducing revenues by nearly $2 billion in 1979.

MONETARY POLICY

The combined effects of rising inflation and efforts by the Federal Re-serve to hold down the growth of the monetary aggregates carried interestrates last year to near record levels. More restrained growth of the monetaryand credit aggregates is an appropriate complement to the other parts of theanti-inflation program. It will help to moderate the rate of economic ex-pansion. Additionally, higher U.S. interest rates make dollar-denominatedassets more attractive than those denominated in foreign currencies andthus contribute to sustaining the value of the dollar in exchange markets.

Many private forecasters anticipate a recession in 1979, partly becausethey expect that current high interest rates will substantially depress housingand business investment. High interest rates are likely to dampen aggregatedemand in 1979, but to a lesser degree than one would expect from pastexperience because of institutional changes in financial markets. Our judg-ment that economic growth in 1979 will be sustained reasonably well andthat a recession will be avoided depends in part on our analysis of why theeffect of monetary restraint is different from what it used to be.

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During most of the postwar period, intervals of substantial monetaryrestraint were followed by recessions. Curbing aggregate demand throughthe use of monetary restraint disrupted financial markets because the deposi-tory institutions experienced a large outflow of deposits when interest rates onmarket instruments rose above the rates these institutions were permitted topay to attract consumer savings. This disintermediation sharply reduced theavailability of credit for those borrowers most dependent on commercialbanks and thrift institutions for credit. These included small businesses andsome units of State and local government, but the sector most severely hitwas the mortgage market. As mortgage credit became not merely more ex-pensive but unavailable, residential construction dropped precipitously, andthis sharp drop was often important in tipping the entire economy intorecession.

Table 19 shows periods of such cyclical declines in acquisitions of mort-gages by financial institutions and the associated declines in single-familyand multifamily housing starts. In the 1965-66 period the sharp declinein residential construction contributed to a slowing of overall eco-nomic growth, but the expansion of Federal outlays was sufficientlystrong to maintain economic expansion. The 1959-60, 1969-70, and1972—74 episodes were all followed by recessions. Of course, factors otherthan the decline in housing were also involved in each of these recessions,but the speed with which the decline in housing occurred had a destabilizingeffect for which it was difficult to compensate elsewhere in the economy.

TABLE 19.—Cyclical contractions in mortgage credit and housing starts, 1959-74

(Percent change at seasonally adjusted annual rate, except as noted]

Period

1959 II to 1960 II1965 III to 1966 IV . .1969 1 to 1970 11972 IV to 1974 IV . . .

Interestrate'

1.271.411.353.36

Mortgageacquisitions'-'

-12.7-28 .9-28 .2-24 .8

Housin

Single-family

-17 .3-28 .5- 2 3 . 1-22 .9

I starts

Multifamily

-16 .4- 3 6 . 1- 3 0 . 1-53 .2

1 Percentage point change in the quarterly average market yield en 6-month Treasury bills from the beginning of theperiod to the peak reached during the period.

2 Acquisitions by financial institutions.

Sources: Department of Commerce (Bureau of the Census), Board of Governors of the Federal Reserve System, andFederal Home Loan Bank Board.

The first half of last year was somewhat like earlier periods of creditrestraint. Short-term market interest rates rose well above rates payableon deposits. As shown in Table 20, deposit inflows at thrift institutionsslowed, and so did their mortgage lending. In the second half of the year,however, deposits again began to grow rapidly.

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TABLE 20.—Growth in deposits, 1977-78

[Percent change, seasonally adjusted annual rate1!

Type of deposit

Commercial banks, totalDemand _ _ _ __PassbookOther timeLarge certificates of deposit (CDs)

Nonbank thrift institutions, totalSavings and loan associations

PassbookOther

1

9.57.6

17.38.4

- 3 . 2

14.020.913.825.8

1977

II

8.77.55.6

13.17.3

12.514.88.4

19.3

III

9.88.9

11.311.33.2

17.715.48.5

20.0

IV

12.15.51.5

14.281.0

12.810.73.6

15.4

1978

1

10.03.92.6

12.050.8

8.113.37.3

17.1

II

10.412.61.3

11.925.0

8.210.0

- 4 . 319.3

III

10.59.24.6

18.16.6

14.612.0

- 6 . 924.0

|V2

7.7—3.1- 6 . 920.447.0

11.6

1 Changes are measured from end of quarter to end of quarter.2 Preliminary.

Sources: Board of Governors of the Federal Reserve System and Federal Savings and Loan Insurance Corporation.

As discussed in Chapter 1, the principal reason for this higher growthwas the new regulation that permitted the issuance of money market cer-tificates beginning last June. This change followed upon similar, but muchsmaller, steps taken in 1970 and 1973. In those instances interest ceilingswere raised on longer-term certificates of deposit, thus reducing somewhatthe vulnerability of thrift institutions to deposit outflows. (Passbook andshorter-term certificate ceilings were also raised slightly in 1970 and 1973.)

Other less obvious institutional changes have also modified the responseof the economy to credit restraint. One of these is the expansion of secondarymortgage market activity. The Federal Home Loan Mortgage Corporation,established in 1970, issues its own mortgage-backed securities and purchasesmortgages from the thrift institutions. The Government National MortgageAssociation has developed a procedure whereby it guarantees securities thatare issued by private institutions and backed by pools of mortgages insuredby the Federal Housing Administration or guaranteed by the VeteransAdministration. These securities have been purchased by a broad range ofinvestors, many of whom were not previously in the mortgage market. Somethrift institutions have also begun issuing their own bonds, for whichmortgages serve as collateral.

Institutional changes have also occurred in other financial markets.Commercial banks no longer depend primarily on liquidating U.S. Gov-ernment securities to obtain funds for business lending, as they haddone through the early part of the postwar period. The advent of lia-bility management (exemplified by the issuance of negotiable certificatesof deposit and the use of nondeposit sources of funds) has enabled most banksto obtain the funds they want for lending, provided they are willing to paygoing rates of interest. Moreover, large firms can increasingly shift theirborrowing between commercial banks and open market commercial paper,and between foreign and domestic sources, in response to differences inthe cost and availability of funds. Their direct access to credit markets makesthem less dependent on intermediation by institutional lenders. The expan-

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sion of trade credit provides a mechanism through which large firms extendthis benefit to smaller customers and suppliers.

The result of these institutional changes has been to smooth the responseof the economy to increased restraint in financial markets. In place of sharpchanges in availability of credit, there is now a more gradual response ofcredit users to changes in the cost of credit. Measured application of monetaryrestraint has become more feasible. The degree of restraint required toachieve the desired growth in private demand is difficult to judge, however,because the response of the private sector is likely to occur more slowlyand to be diffused more widely than in the past. Moreover, the indicatorsshowing the degree of restraint have changed, and experience in implement-ing monetary policy under present circumstances will come only gradually.

Over the near future, nominal interest rates are likely to remain relativelyhigh by historical standards. It will take time to reduce the rate of inflationand the inflation premiums contained in interest rates. As inflation recedes,the maintenance of a restrained monetary policy will be consistent with adecline in nominal interest rates.

THE ECONOMIC FORECAST

The economy is entering 1979 with substantial momentum, and economicexpansion will be bolstered by the recently enacted tax bill, which will helpto sustain consumer expenditures during the first half of the year. Laterin the year, as the effect of the tax cut wears off, a slower expansion ofconsumer purchases is foreseen. Partly as a response to current high interestrates, housing starts are expected to decline and the growth of business fixedinvestment to diminish during the year (Table 21).

TABLE 21.—Economic outlook for 1979

ItemForecast

range1979

Growth rates, fourth quarter to fourth quarter (percent):

Real gross national product

Personal consumption expenditures.Nonresidential fixed investmentResidential investment

Federal purchases __.SUte and local purchases.

GNP implicit price deflator..

Compensation per hour 2_.Output per hour2

Level, fourth quarter:3

Unemployment rate (percent)Housing starts (millions of units4)_

2 to iy2

\*A to IK4 to *y2

-W2 to - 9 ^^to IK

1% to IK

IK to 11A

VK to 834

6 to

1 Preliminary.2Private business sector; all persons.3 Seasonally adjusted.4 Annual rate.

Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics),and Council of Economic Advisers.

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Growth is likely to be stronger in the first half of the year than in thesecond half. Housing starts are expected to bottom out during the fourthquarter of 1979 and begin to move up in 1980 as pressures in money andcredit markets ease with the decline in the rate of inflation. The upturn inhousing is a principal reason for the anticipated increase in the rate of eco-nomic growth in 1980.

The rate of increase of the GNP deflator is expected to decline from 8.3percent in 1978 to slightly under 7^4 percent during the 4 quarters of 1979;a further drop to just under Gyi percent is probable during 1980, partly asa result of a tightening of the pay and price standards. Inflation is likely toremain high during the first half of 1979, however, because of the minimumwage increase in January, the delayed effects on import prices of the declinein the value of the dollar, the oil price increases by the Organization ofPetroleum Exporting Countries (OPEC), and the continued rise in foodprices. As the year proceeds, these factors will put less upward pressureon prices, and the effects of the President's anti-inflation program shouldbe increasingly felt. Consequently the increase in consumer prices is expectedto fall to an annual rate of below 7 percent by late in the year.

Consumption

Consumption has been a major source of strength in the current expansion.Consumers have increased their spending by more than the rise in theirafter-tax incomes, reducing the saving rate from almost 8 percent in 1975to under 5 percent in the last quarter of 1978. Some of the possible reasonsfor this low saving rate were discussed in more detail in Chapter 1.

In 1979 the saving rate is expected to rise moderately but remain wellbelow its 6 percent average of the 1950s and 1960s. Much of this increasewill reflect less intensive use of consumer credit, which expanded sharplyduring 1978. Automobile sales in particular are not likely to rise further in1979 and may fall slightly from the high level of the 1978 model year.Purchases of furniture and household equipment may also decline as aresult of the expected reduction in residential construction.

Continued growth in purchases of nondurables and services should allowpersonal consumption expenditures to rise in real terms at a rate of about 2percent, close to the projected rate of growth of real GNP but below therate of increase in real disposable income.

As inflation abates during 1979, consumer confidence in the economyshould improve and thus strengthen consumer markets in 1980. The savingrate is consequently expected to decline in 1980. During that year, however,rising effective tax rates will tend to slow the growth of disposable income;the increase in consumer spending is thus likely to be somewhat less than therise in real GNP.

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Business Fixed Investment

Business fixed investment in 1972 dollars should grow at a rate of about 4percent during 1979, measured from fourth quarter to fourth quarter. Thisestimate represents a slowdown from the 8.3 percent increase for 1978, butthe increase is still above the expected growth in real GNP. Investment isforeseen to remain relatively strong in the first half of 1979 but to slow laterin the year with the rest of the economy. Moderate improvement from theless rapid rate of the second half of 1979 is expected during the course of1980.

Indicators of the probable pace of investment next year are mixed. Higherrates of capacity utilization are encouraging new and replacement invest-ment, and contracts and orders for plant and equipment are rising rapidly.Orders for nondefense capital goods in October and November were 12J/2percent above their third quarter level. Unfilled orders for nondefense capitalgoods at the end of November stood 6 percent above their September level.

Moreover the Revenue Act of 1978 should provide some encouragementfor business fixed investment. Profits seem likely to remain relatively highthroughout the next year, falling only marginally from their current shareof GNP. The confidence of investors with regard to future inflation shouldimprove as the Administration's anti-inflation initiatives take hold.

Not all the forces influencing business investment decisions are positive.Expectations of a slowdown in economic activity next year are widespreadand may already be holding back investment plans. Nominal interest rateshave risen to very high levels, and their effects will be felt increasingly as1979 progresses. Some reduction in investment in motor vehicles may alsofollow the recent large purchases of cars and trucks by businesses. This dropin sales may restrain discretionary capital spending by the auto industry,although the industry will still have to maintain a high level of capital out-lays to meet the requirements of government regulations.

The latest Commerce Department survey of business investment inten-tions found that businesses are planning to increase their outlays for newplant and equipment in 1979 by 11.2 percent in current dollars. This com-pares with an actual rise of 12.7 percent in 1978. If capital goods prices risein 1979 by the 8 percent figure expected by survey respondents, the real in-crease in outlays for plant and equipment in 1979, measured on a year-over-year basis, would be about 3 percent. Measured from fourth quarter tofourth quarter, the increase would be less.

In the past 3 years total outlays for business fixed investment in the na-tional income and product accounts have exceeded the amount included inthe plant and equipment survey by a large and widening margin, even afterallowance has been made for conceptual differences in coverage of the twoseries. This margin may well persist in 1979. The results of the Departmentof Commerce survey thus seem consistent with our forecast, which calls fora moderate slowdown this year in this key element of aggregate demand.

99

Housing

The number of housing starts and the real volume of residential con-struction are likely to decline in 1979 from the high levels of last year, inlarge part because prospective home buyers will be deterred by the high levelof mortgage interest rates. In areas where mortgage rates are limited byusury ceilings, some constraints have developed on the availability of credit.This should not greatly affect the national total of housing starts, but itmay restrain housing sales and residential construction in some parts of thecountry. By the fourth quarter of 1979 housing starts are expected to fallto an annual rate of around 1% million or somewhat less, a decline thatis significant but less steep than in most postwar periods of tight money.

The prospects for housing this year will depend importantly on whetherthrift institutions continue to attract funds through money market certifi-cates and to make the proceeds available to potential home buyers. Marginsbetween mortgage yields and the cost of issuing the certificates have nar-rowed. Some thrift institutions may therefore pay less than the maximumpermissible yield on money market certificates and in other ways marketthem less aggressively. Moreover, there may be some diversion of funds frommortgages to higher-yielding short-term liquid assets. The potential forstrengthening longer-term earnings by issuing money market certificatesand acquiring long-term, high-yield mortgages in such a period is nonethelessattractive.

The effect of these new money market certificates in reducing currentearnings of thrift institutions is a matter of concern. However, the certificatesstill represent a small proportion of total deposits (less than 10 percent atyear-end). Moreover, at least half of the money going into the money marketcertificates appears to be coming from outside the thrift institutions, andsome of the remainder is being converted from high-yielding certificatesrather than from low-yielding passbook accounts. In view of the high levelof earnings on the mortgage portfolio—about 8^4 percent in the second halfof last year—thrift institutions in general are in a favorable position to copewith higher deposit costs for a limited time, although the earnings and costpositions of individual institutions undoubtedly vary considerably.

Given reasonable prospects for the availability of mortgage credit, theprimary determinant of the volume of housing starts will be the response ofhome buyers and builders to the higher level of mortgage interest rates. Therate on new mortgage commitments had risen sharply to nearly 11 percentby the end of last year.

Virtually all of the projected decline in housing starts is likely to be insingle-family units. Following last year's upturn, construction of multifamilyunits will probably level out in 1979 in response to the high costs forbuilding loans, which often have to be carried a long time. But the declinein the rental vacancy rate from a peak of 6.2 percent in 1974 to a historically

100

low level of 5.0 percent late last year implies a strong demand that shouldsustain multifamily construction.

The demand for single-family homes will also be supported by demo-graphic factors. Between 1973 and 1978 the number of people in the 25-29age group grew by 16 percent, and the 30-34 group grew 22 percent. By1983, population in these two age groups is expected to rise nearly 14percent, somewhat below the rate of the last 5 years but far above therates prevailing before 1970. In fact the population in this age group willgrow more in the next 5 years than it did in the 15 years up to 1970. Thelargest number of first-time home buyers is in the 25-34 age bracket. Morethan half of the married couples aged 25 to 29 and nearly three-fourths ofthose between 30 and 34 own their own homes. Although the proportionof married couples in the total number of U.S. households has been declin-ing, this change has been offset by the rise in homeownership among singlepersons.

Given the favorable demographic trends and low vacancy rates, it is quitelikely that housing starts will begin to rise as inflation and nominal interestrates case late next year. The forecast anticipates a rise in housing starts toabout 1.9 million units by the fourth quarter of 1980. Residential construc-tion is expected to add nearly as much to real GNP growth in 1980 as itsubtracted in 1979. This projected turnaround in housing activity is theprincipal reason for expecting somewhat stronger economic growth in 1980.

Inventories

Businesses throughout this recovery have pursued a cautious policy on in-ventory accumulation, as noted in Chapter 1. Ratios of inventories to saleshave been kept relatively low for this stage of the recovery, and there areno major inventory imbalances that would depress economic activity thisyear. Since growth in final sales is expected to moderate in 1979, however,the rate of inventory investment may decline slightly if businesses continueto pursue their conservative inventory policies, as seems likely. Heightenedinventory accumulation may occur in 1980 as final sales again becomestronger.

Net Exports

During 1978, for the first time in this recovery, the foreign sector providedsome support to the expansion of GNP. The volume of exports rose, and thegrowth of import volumes slowed from its rapid pace at the beginning ofthe year. The foreign sector should continue to contribute to growth in 1979.

In many foreign countries, growth of domestic demand began to pick upduring the course of 1978, and this movement should increase somewhatmore this year, chiefly because of a shift toward more expansionary fiscalpolicies in Germany and Japan in late 1978. More rapid growth of foreigndemand will help to raise demands for U.S. exports. At the same time, the

101

deceleration of growth in the United States is acting to reduce the growthof import volumes. In 1979, for the first time since 1975, growth rates inthe major foreign countries are likely, on average, to exceed growth in theUnited States.

The marked depreciation of the dollar from September 1977 throughOctober 1978, which has been only partially reversed since then, will alsohelp to improve our net exports in 1979. Since trade volumes adjust onlyslowly to changes in relative prices, the principal effects of the dollardepreciation on imports and exports are not yet evident.

U.S. exports tend to respond more strongly to relative price shifts thanimports do, but with longer lags. Exports of nonagricultural merchandise in1972 dollars are expected to grow by 7 to 10 percent in 1979; agriculturalexports, on the other hand, are not likely to increase from current highlevels. Slower economic growth in 1979 and last year's depreciation of thedollar should limit the rise in the volume of non-oil imports this year. Despitean expected rise in the volume of oil imports, the merchandise trade bal-ance should improve in 1979.

An important development in the structure of our foreign balance overrecent years has been a marked surplus in net exports of services, especiallyfees, royalties, and earnings of American enterprises abroad. In the earlyyears of this decade the United States was near balance on services, but in1977 the service component of the current account showed a surplus of$16 billion, and the surplus rose to an annual rate of $18 billion in the first 3quarters of 1978. In the near future this trend should continue, since thecomparative advantage of a mature industrial country like the UnitedStates will increasingly lie in exporting capital and technology.

Government Demand

Purchases of goods and services by both the Federal and the State andlocal sector will rise in 1979 and 1980, but the amount of growth will berelatively small in real terms.

The President's budget calls for Federal outlays of $493 billion in fiscal1979 and $532 billion in the next fiscal year. Purchases of goods and serv-ices, comprising roughly one-third of these expenditures, are concentratedin defense outlays, where Federal expenditures are projected to rise in realterms. Total real Federal purchases are expected to increase 1 percent during1979 and to fall slightly during 1980. The 1979 increase follows a smalldecline in real Federal purchases during 1978.

Although State and local purchases will continue to grow in real termsduring 1979 and 1980, two recent developments indicate a slowing in therate of increase from the 3 / 2 percent rate of 1978. First, as Chapter 1 noted,sentiment among voters appears to favor limiting the growth of State andlocal taxes and expenditures, as evidenced by the passage of Proposition 13

102

in California and successful budget-cutting referenda in eight other Statesin 1978. Second, Federal aid to State and local governments, which hadbeen growing rapidly, will level off over the next 2 years.

These developments suggest that the rate of growth in real State and localpurchases may moderate to about a V/2 to 2 percent annual rate over thenext 2 years. The operating balance of the State and local sector, which wasin surplus by about $6.6 billion in 1978, is expected to shift to a smalldeficit in 1979 and 1980.

Labor Force and Employment

Growth in the labor force and in employment cannot be expected tocontinue at the exceptionally rapid rates of the past 3 years. The slowerrate of real economic growth foreseen for 1979 and 1980 and trends inthe age structure of the population make it reasonable to expect growthrates for both labor force and employment to decline toward their long-termtrend.

The civilian labor force has grown at an annual rate of about 2?4 percentover the past 3 years, up from an average around 2}4 percent in the first5 years of the decade. This recent pace is much more rapid than theaverage annual growth of 1.7 percent during the past 30 years. There havebeen two principal reasons for the relatively high growth of the labor forcelately. The number of persons between the ages of 16 and 24, the normalage for entering the labor force, is large because of the peak birth rates inthe late 1950s; and a higher proportion of women and teenagers have joinedthe labor force. Reductions in the size of the Armed Forces were also a factorin the earlier part of the decade. In the past 3 years the labor force partici-pation rate has gone up a full 2 percentage points. The rapid expansion ofemployment opportunities during this period has undoubtedly had an im-portant bearing on this striking increase.

In 1979 and 1980 the factors outlined above are expected to have lesseffect on labor force expansion. The rate of growth in the noninstitutionalpopulation at ages 16 and older will decline from the 1.7 percent per yearaverage of the early and middle 1970s to 1.5 percent in 1979 and 1.4 percentin 1980. Slower growth of real output will cause the participation rate torise less rapidly, but it may remain above its long-term average annual growthof 0.2 percentage point. The growth rate for the civilian labor force isexpected to average about 2/4 percent per year in 1979 and 1980.

The rate of increase in employment will be limited by slower growth inreal aggregate demand. Average employment in the fourth quarter of 1979should be about 2 percent above that in the fourth quarter of 1978. Employ-ment growth during 1980 is expected to be about 2 54 percent, compared toan average annual employment growth in the preceding 3 years of over 3/2percent.

103

These projections concerning employment and the labor force imply asmall rise in the unemployment rate. Unemployment is expected to increaseto about 6*4 percent of the labor force by late 1979 and to remain near thatlevel in 1980. Forecasts of unemployment rates must be regarded as highlyuncertain, however, because of the difficulties inherent in predicting growthin the labor force, in productivity, and in output.

PRICE AND WAGE DEVELOPMENTS

The outlook for prices and wages in 1979 is affected in important waysby the Administration's anti-inflation program. A significant reductionof inflation will require widespread cooperation and compliance with thewage and price standards.

The wage standard limits increases in compensation generally to 7 per-cent, but even with full compliance by groups not exempt the rise in pri-vate compensation is likely to exceed 7 percent. Equity and flexibility re-quire some groups to be exempt from the pay standard, including workerswho are covered by collective bargaining agreements negotiated before theannouncement of the anti-inflation program on October 24, 1978, and thosewho were earning less than $4.00 per hour on October 1, 1978. Manyworkers qualifying for the low-wage exemption received substantial in-creases on January 1, when the minimum hourly wage was raised from$2.65 to $2.90 as a result of the 1977 amendments to the Fair Labor Stand-ards Act. Others in this group may be indirectly affected if wages slightlyabove $2.90 are raised to maintain normal wage differentials. On average,wages and private fringe benefits of those qualifying for the low-wage exemp-tion are expected to increase between 8J/2 and 8% percent.

Deferred increases in compensation due in 1979 under existing collectivebargaining agreements are also exempt. These increases vary considerably,but the average, including allowance for cost-of-living provisions, is likelyto be in the 8!/4 to 8/2 percent range.

New labor contracts will play an important role in wage changes in 1979when a new round in the 3-year collective bargaining cycle begins. For thesecontracts, an employee group is in compliance if the agreement provides forpay increases that do not exceed 7 percent per year over the life of thecontract. But increases in any one year may be as large as 8 percent. Indus-tries where major multiyear agreements will be negotiated in 1979 includepetroleum, trucking, rubber, electrical equipment, meatpacking, and auto-mobiles. In all, the wages of almost 4 million workers in bargaining units with1,000 or more workers, and of a similar number in smaller units, will bedetermined for the next 2 to 3 years. In the previous 1976-77 round of nego-tiations many of these agreements provided for double-digit annual rates ofpay increase. A repetition of such large increases would have serious infla-tionary consequences not only in 1979 but in subsequent years.

Despite the large number of exempt workers, a high rate of complianceby those not exempt—who account for about two-thirds of the entire wage

104

and salary bill—will still produce significant deceleration. Substantial com-pliance would limit the rate of increase of total private wages and fringebenefits to about 8 percent. Total employee compensation per hour, includ-ing employer payroll taxes, would then increase by about 8J/2 percent in1979, a significant deceleration from the 9% percent increase in 1978.

Because of the continued rapid escalation of food prices, increases in theminimum wage and social security taxes, the rise in OPEC oil prices, andthe continued pass-through of higher prices for other imports, inflation islikely to remain relatively high in the first part of 1979. As the year pro-gresses, the rise in consumer prices should fall somewhat below a 7 per-cent annual rate, a rate consistent with the underlying rise in labor costs.

A deceleration of wage and price increases during 1979 will be an impor-tant first step in braking the momentum of inflation. Expectations of continu-ing inflation would then begin to give way to the prospect of smaller increasesin wages and prices. Further progress could be made more certain in 1980 byadjusting the pay and price standards. The special factors boosting inflationin 1978 and 1979—food price increases, payroll taxes, medical costs, depre-ciation, and energy prices—may also have less effect in 1980. We can reason-ably expect further gains in reducing inflation. The rate of increase of con-sumer prices is projected to fall to just under 6^2 percent during 1980.

Food prices over the 4 quarters of 1979 are expected to rise between 7 and8 percent, significantly below last year's 11 percent. During the first half ofthe year, however, food price increases may be larger than during the sec-ond half, as the food processing and marketing system reacts to increasedcosts for labor, energy, packaging, and transportation, as well as to higherprices for wheat, cocoa, and sugar. Prices of dairy products and the cost offood consumed away from home are projected to rise considerably in thefirst half of the year.

An important reason for higher food prices in 1979 is likely to be acontinued reduction in supplies of beef. Because of a decline in the num-ber of cattle, total beef production in 1979 is likely to be lower than in 1978.Production of pork and poultry is expected to rise significantly, however,especially in the second half of the year, and per capita consumption of allmeats is therefore likely to decline by less than 1 percent.

Some encouraging signs for food prices can be discerned. After increas-ing very sharply in the first half of 1978, the index of prices that farmersreceive for crops remained quite stable during the second half of theyear. This suggests that, with normal winter and spring weather, no im-mediate inflationary pressure should appear at the retail level because ofabnormal increases in farm crop prices. The favorable prospects for the grainand soybean crops that will be harvested in the Southern Hemisphere thisspring and the higher level of world stocks of these commodities are alsoreassuring. Hog and poultry producers are geared to expand productionsignificantly, helping to offset lower beef supplies. As the Administration's

105

anti-inflation program begins to show tangible results, pressure on processingand marketing margins is also expected to moderate.

Energy prices will rise substantially in 1979, in large part as a result ofthe 14-J/2 percent increase in oil prices announced by OPEC. This OPEC in-crease will add almost 0.4 percent to the consumer price index by the end of1979 (compared to what would have happened if OPEC oil prices had re-mained stable), and some further effect will be felt in 1980. Domestic energyprices will also increase. The deregulation of natural gas will add to the priceof energy, and further rises in coal prices can also be expected.

Mortgage interest costs are likely to rise less rapidly in 1979 than in1978 as nominal mortgage interest rates level off and as the housing marketweakens. In 1978 mortgage interest costs, which include the effects of risingprices for homes and higher mortgage interest rates, rose about 20 percent.

Import prices have already risen significantly in conjunction with thedecline in the dollar on foreign exchange markets during 1978. To the ex-tent that foreign exporters do not absorb the effects of this depreciation,some further price rises are likely in 1979.

Hospital costs, which for several years have increased at nearly twice therate of overall consumer prices, moderated somewhat in 1978. Furthermoderation is expected in 1979 and 1980 in response to official action attwo levels: hospital cost containment legislation to be proposed by theAdministration, and State cost containment programs.

ECONOMIC OBJECTIVES AND POLICY FOR THE LONGER RUN

During the past 2 years this Administration has developed its economicpolicies within the context of longer-term objectives for the economy.That approach was embedded in law during 1978 by the planning proce-dures incorporated in the newly enacted Humphrey-Hawkins Full Employ-ment and Balanced Growth Act. This act establishes procedures for devel-oping and reviewing economic policies within the government, requires thegovernment to set 5-year goals for the American economy, and challengesit to formulate policies to achieve them.

For the past three decades the Employment Act of 1946 has been thebasic guide for the President and the Congress in the development of eco-nomic policies. The Employment Act charged the government with respon-sibility to promote maximum employment, production, and purchasingpower through the use of the policy tools at its disposal. Since 1946 the instru-ments of fiscal and monetary policies have been used in ways that contributedto economic prosperity. In recent years, however, the view has become wide-spread that amendments to the Employment Act would be an appropriateresponse to the changed economic circumstances and the serious new dif-ficulties that we face in today's economy. The Full Employment and Bal-anced Growth Act of 1978 was designed to address these difficulties.

106

THE HUMPHREY-HAWKINS ACT

The new law strengthens the Employment Act in three essential respects.It explicitly identifies national economic priorities and objectives; itdirects the President to establish, and the Congress to consider, goals basedon those priorities and objectives; and it creates new procedures and re-quirements for the President, the Congress, and the Federal Reserve to im-prove the coordination and development of economic policies.

The priorities and objectives set forth in the new act are varied, reflectingthe nature of today's economy. The act establishes as a national goal"the fulfillment of the right to full opportunities for useful paid em-ployment at fair rates of compensation of all individuals able, willing, andseeking to work." The new act also specifies "reasonable price stability" asa national objective and recognizes the need to improve government policiesfor dealing with inflation. Emphasis is placed on encouraging private andpublic capital formation to promote full employment, growth in productiv-ity, and price stability. The act responds to the widespread desire for re-duced governmental intervention by calling for steady reductions in theshare of the Nation's output accounted for by governmental spending and byrelying primarily on the private sector to meet the act's objectives. It alsospecifies that a balanced Federal budget, consistent with the achievementof other goals, is to be an objective of national policy. Finally, the actstresses the position of our economy in international markets. Those whomake public policy are called on to work to improve the trade balance of theUnited States as well as its competitive position in world trade, whilepromoting fair and free international trade and a sound and stable interna-tional monetary system.

To provide a better focus for the government in its effort to achieve thesegeneral objectives, the Full Employment and Balanced Growth Act requiresthat the Administration set annual numerical goals for key indicators in theeconomy over a 5-year period, including employment and unemployment,production, real income, productivity, and prices. Goals for the first 2 yearsof the 5-year period are considered short-term objectives, and the Presidentis required in his budget to recommend levels of outlays and receipts con-sistent with them. Goals for the final 3 years are known as medium-termgoals, and projections of outlays and receipts consistent with them are tobe included in the President's budget.

The act establishes new procedures for developing economic policies withinthe Federal Government. Each year the President is to present a programfor achieving the economic goals he has set. As a matter of general guidance,the act provides that the government should rely as far as possible on growthin the private sector to meet goals for employment and output. At the sametime, it calls the President's attention to a variety of governmental measuresfor dealing with unemployment, inflation, inadequate capital formation, andother problems. No new programs are specifically required or author-

107

ized in the act, however, and the President would need additional legislationto put new programs into effect.

To improve the coordination of fiscal and monetary policies, the act re-quires the Federal Reserve Board to report to the Congress twice each yearon its objectives and plans with respect to monetary policies. The Board, inits reports, is required to comment on the relation between its plans for mone-tary policy and the short-term economic goals established by the President.

The policies of the President and the Federal Reserve Board will be con-sidered jointly by the Congress. The act directs the Joint Economic Com-mittee of the Congress to review reports from the President and the FederalReserve Board, together with submissions from the committees of the Con-gress, and to offer its findings regarding the economic situation to the BudgetCommittee in each House prior to development of the First ConcurrentResolution on the Budget. Four hours during the debate on that resolution ineach House will be reserved for debate on economic policies and goals andspecific budgetary plans for achieving economic objectives. Through thisprocess of reports and debate, the new act aims to improve economic de-cisions by providing better ways of arriving at them and better informationon which to base them.

The Full Employment and Balanced Growth Act stipulates that in the firstEconomic Report published under the act the goal for unemployment in1983 should be 4 percent for workers aged 16 and over and 3 percent forworkers aged 20 and over. The act also requires that the goal for the rate ofincrease in the consumer price index in 1983 should be 3 percent.

Beginning with the 1980 Economic Report of the President, the Presidentis authorized under the new act to change the timetable for achieving thegoals if he determines that such a change is necessary. If the Presidentchanges the 4 percent and 3 percent unemployment goals, however, hisEconomic Report must state the year that he expects the unemploymentgoals to be reached.

GOALS FOR THE ECONOMY TO 1983

Lower unemployment and inflation rates are basic objectives, but they arenot, of course, the only economic aims of the Administration or the newact. As noted earlier, the Humphrey-Hawkins Act places a high priority onimproving the competitive position of the U.S. economy in the world,encouraging the growth of investment and capital formation, reducing theshare of Federal spending in the Nation's output, and balancing the budget.In formulating economic policies for the next 5 years, these additional con-cerns have been taken into consideration.

Economic goals consistent with those specified in the act are shown inTable 22. The short-term goals for 1970 and 1980 represent a forecast ofhow the economy will respond over the next 2 years not only to the budgetarypolicies proposed by the President for fiscal 1979 and 1980 but to the anti-inflation program announced on October 24. The medium-term goals for

108

1981 to 1983 are not forecasts. They are projections of the economic perform-ance that would be required to reach the 1983 unemployment and inflationgoals specified in the act.

TABLE 22.—Economic goals, 1979-83

Item

Employment (millions)...

Unemployment (percent).

Consumer prices.

RealGNP

Real disposable income..

Productivity1

1979 1980 1981 1982 1983

Level, fourth quarter2

97.5

6.2

99.5

6.2

102.6

5.4

105.5

4.6

108.3

4.0

Percent change, fourth quarter to fourth quarter

7.5

2.2

2.8

.4

6.4

3.2

2.3

1.1

5.2

4.6

4.4

1.8

4.1

4.6

4.4

2.0

3.0

4.2

4.0

2.0

1 Based on total real GNP per hour worked.2 Seasonally adjusted.Source: Council of Economic Advisers.

The rate of GNP growth for the 1981-83 period that will be needed ifunemployment is to be reduced to 4 percent by 1983 will depend on thegrowth rates of the labor force and productivity. Trends in these variablesare hard to predict, as experience in the past 2 years indicates.

Over the next 5 years, growth in the population aged 16 and over willdecline significantly, from about 1.6 percent in 1978 to about 1.0 percent in1983. The rate of increase in the labor force participation rate (the ratio ofpersons in the civilian labor force to the total number within the working-age range) also seems likely to slow. During recent years the participationrate has increased by at least 0.8 percentage point annually, well above thelong-term trend. With slowing growth both in the working-age populationand in the participation rate, increases in the labor force will taper off fromcurrent rates of 2 to 3 percent a year to perhaps 1% to 2 percent 5 yearsfrom now.

This slowing of labor force expansion will reduce the GNP increase thatwill be needed to achieve any given reduction in the unemployment rate. Atthe same time, however, it is reasonable to expect productivity growth toimprove somewhat over that of 1978. The slowing of labor force expansionwill be accompanied by a shift in the age distribution of the labor force to-ward more mature workers, and the average experience of the labor forcewill also be lengthened by a reduction in the number of new entrants. Thesedevelopments will help to stimulate greater productivity growth. Stronggrowth of investment could also improve the outlook for productivity.

These considerations suggest that potential GNP over the next 5 year?might continue to increase at about the 3 percent rate of the past 5-year

109

278-216 O - 78 - 8

period. There may be some slowdown in the growth of potential output dur-ing the next 5-year period as increases in the working-age population taperoff, but information on labor force and productivity trends is not sufficientto permit a forecast of when it will happen.

In developing the projections in Table 22 for 1981 to 1983, a potentialGNP growth of 3 percent was therefore assumed. The trend rate of in-crease in productivity underlying this estimate is 1 l/i percent, while the trendrate of increase in the labor force is 2 percent; these two numbers addto more than the 3 percent increase in potential GNP since average hoursworked are expected to keep declining, as they have done through most ofthe postwar period. The yearly increases in the labor force and productivityshown in the table vary from the long-term trend because they will be influ-enced by the actual growth rate of real GNP in that year.

Jobs and training programs to reduce structural unemployment mightmake it possible to achieve the goal of a 4 percent overall unemployment rate,and 3 percent for adults, with a somewhat lower rate of growth of real output.Although such programs are primarily aimed at reducing the unemploymentrate that is consistent with stable prices, they may, at least in the short run,tend to increase the level of employment and reduce the unemployment ratethat is consistent with any given level of real output.

The increase in real disposable income from 1981 to 1983 is derived fromhistorical relationships between that variable and real GNP, assuming nomajor changes in income shares between personal income and corporateprofits.

REQUIREMENTS TO ACHIEVE THE ECONOMIC GOALS

By any criterion these are very ambitious goals. Achieving all of themsimultaneously would demand not only a performance by the Americaneconomy that is unprecedented in peacetime history, but also governmentprograms that can deal effectively with some of our most intransigent prob-lems, particularly inflation and structural unemployment. The fact that theaims are ambitious makes it all the more important to consider carefully andrealistically the obstacles to achieving them.

The difficulties likely to be encountered in moving the economy along thepath set out in Table 22 follow two broad lines. First, will aggregate demandfor goods and services be great enough to propel the economy along arelatively fast growth track from 1981 to 1983? What kind of budgetarypolicies would be required over the next several years to achieve this kindof economic growth? Second, if real economic growth did proceed at thepace needed to reduce the unemployment rate to 4 percent by 1983, what arethe prospects that the inflation rate would decline to 3 percent by that year,and what are the principal obstacles to such a decline?

Answers to these two groups of questions are related. The likelihood ofachieving rapid and sustained economic growth while inflation remainshigh is very small. Inflation gives rise to forces that raise interest rates and

110

discourage investment. It also increases the uncertainties facing businessesand consumers, and at times in \he past it has severely weakened their pro-pensity to spend. Because inflation reduces confidence abroad as well as athome, it can undermine the value of the dollar, giving rise to furtherinflationary pressures. The new act recognizes that inflation and growth arenot separable concerns, and that public policy must seek ways both to achievelow unemployment and to control inflation.

Adequacy of Aggregate Demand

The growth rates of real GNP that will be needed in 1981-83 to reachthe goal of a 4 percent unemployment rate by the end of that period arequite high by past standards, but they are not unprecedented. The averagerate of growth for those 3 years, 4*4 percent, is actually somewhat lowerthan the average rate of economic expansion from the last quarter of 1975to the last quarter of 1978, which was 4.8 percent. In evaluating the diffi-culties in maintaining a 4/2 percent average yearly growth rate of real GNP,however, one should recall that the current expansion will soon be enteringits fifth year.

The course of economic policies that would ensure sufficient aggregatedemand growth to permit the economy to grow at a 4/2 percent rate from1981 through 1983—and still avoid excess demand that would interferewith the unwinding of inflation—can only be described in very generalterms. Our ability to foresee economic developments and to design appro-priate policies to deal with emerging problems over a 5-year period isextremely limited. The outlook for 1979 is uncertain, the prospects for 1980are much more so, and the probable course of later developments can beforeseen only dimly. The best we can do is to rely on past experience to indi-cate possible future patterns of economic activity and tell us the kinds ofeconomic policies most likely to contribute to a strong economy over the next5 years.

One way to evaluate the prospects for maintaining strong economicgrowth is to consider the distribution of saving and investment by sector.Defined in terms of the national income and product accounts, a sector is anet saver if its income receipts exceed its expenditures. If expenditures exceedreceipts, the sector has engaged in dissaving, that is, in net investment. Forthe economy as a whole, expenditures and receipts are two sides of the samecoin, and hence measured saving and investment must always be equal.What one sector saves, another must invest.

This equality of saving and investment in the aggregate is, of course, anaccounting identity. There is no reason why decisions to save and investshould lead to a balance in each of the various sectors of the economy, andgenerally they will not. But when desired amounts of saving and investmentdo not match, adjustments occur in the economic system—such as changesin interest rates, levels of economic activity, or prices—that force saving andinvestment into balance.

I l l

The relation between saving and investment and the level of economicactivity can be seen by comparing the distribution of net saving by sectorin 2 recent years, 1973 and 1975 (Table 23). In 1973, a year of relativelyfull employment, investment incentives in the private sector were strong.Gross private investment-—including residential construction and businessoutlays for plant, equipment, and additions to inventories—was largeenough that it more than offset gross private saving. The governmentalsector was close to balance: a small deficit in the Federal sector (as meas-ured in the national income and product accounts) was offset by a surplusin State and local governmental budgets. In 1975, a year of recession, in-vestment propensities were comparatively weak. Gross private investmentwas far below the volume of private saving, even though the latter was notmuch larger in relation to GNP than it had been in 1973. The counter-balancing item was a deep governmental deficit mainly due to the fact thatFederal receipts were depressed below the levels that would have occurredin a more fully employed economy.

TABLE 23.—Net saving by sector, 1973 and 1975

[Net saving, or investment (—)]

Sector

Private sector:

PersonalBusiness1 _ _

Government sector:

FederalState and local

Foreign sector2

1973

Billions ofdollars

70.3-77 .2

- 6 . 713.0

.6

Percentof GNP

5.4- 5 . 9

- . 51.0

(3)

1975

Billions ofdollars

83.6- 7 . 4

-70 .66.2

-11 .9

Percentof GNP

5.5- . 5

- 4 . 6.4

- . 8

1 Gross business saving plus the statistical discrepancy minus gross private domestic investment.2 Net capital grants received by the United States less net foreign investment.3 Less than 0.05 percent.

Source: Department of Commerce, Bureau of Economic Analysis.

Maintaining relatively strong growth from 1981 through 1983 will requirethat the excess of private investment over private saving be large enough tooffset the net saving by both the governmental sector and the foreign sectorin a high-employment economy. Large governmental surpluses would tendto make that task more difficult, as would large net saving by the foreignsector.

Prospects for State and Local Budgets

During recent years the aggregate surplus in the State and local sector,as measured in the national income and product accounts, has been fairlylarge, as much as 1.6 percent of GNP in 1977. The magnitude of this sur-plus is mainly the result of net payments into social insurance funds for

112

State and local employees. But in 1976 and 1977 the aggregate operatingand capital budget of State and local governments was also in surplus be-cause of slow growth of capital expenditures and substantial increases inFederal grant programs. During 1978 the operating and capital accountshave returned to approximate balance; given the strong demands by citi-zens to reduce State and local taxes, a return to surpluses seems unlikely overthe next 5 years. The amount of net saving in the State and local sectorbetween now and 1983 is therefore likely to depend mainly on the accumu-lation rate of the social insurance funds.

That accumulation rate has been moving up rapidly in the past decade,from about one-half of 1 percent of GNP in the middle 1960s to about 1percent at present. This buildup derived from the relatively rapid increaseof State and local employment during the period and the effort by State andlocal governments to fund their pension liabilities. The upward trend inthe ratio to GNP is not likely to continue. Growth of employment in Stateand local governments no longer exceeds the national average, and a gooddeal of funding of existing pension liabilities has already been accomplished.Projections by several prominent private forecasting services put the ac-cumulation rate of State and local social insurance funds in 1982 and 1983at around three-fourths of 1 percent of GNP.

Net Foreign Saving

The measure of net saving by the foreign sector in the national incomeand product accounts is conceptually similar to the current account deficit inthe balance of payments. (The principal difference between them is thatthe unrepatriated earnings of U.S. firms abroad are counted as an export ofservices in the current account balance, but not included as part of net sav-ing by the foreign sector.) A projection of net foreign saving or of the currentaccount balance in 1983 or any single year would be extremely hazardous.In the past 2 years, net foreign saving has been about 1 percent of GNP;in 1975, on the other hand, the foreign sector showed net dissaving—thatis, net investment—by an amount equal to 0.8 percent of GNP. Relativegrowth rates in economic activity here and abroad, differences in the rate ofwage and price increases, changes in exchange rates, and other factors cancause large movements from one year to the next in our current account bal-ance and hence in net foreign saving.

Looking at trends over a 5-year period, it would be reasonable to expectmarket forces to bring receipts and payments on current account close tobalance, and the net amount of foreign saving close to zero. A tendency inthat direction is already under way. This year the current account deficit isforecast to decline significantly, and a further reduction in 1980 is expected.By 1982 and 1983, therefore, a reasonable forecast of net saving by the for-eign sector would be zero.

113

The Federal Budget

Prospects for the Federal budget, of course, depend importantly on thefiscal policies pursued in the years from 1981 to 1983. If there wereno further changes in tax laws or Federal expenditure programs other thanthose recommended in the fiscal 1980 budget, and if the economy grew asdescribed in Table 22, Federal receipts would rise much faster than outlays.With such a "current policy" budget (Table 24), Federal outlays would de-cline as a share of GNP to under 20 percent by 1983; but Federal receiptswould rise as a proportion of GNP, reaching nearly 22 percent by 1983. Thisrise in receipts results from inflation and real growth, which push in-dividuals into higher tax brackets, and from the impact of large increases insocial security taxes scheduled under current law, particularly in calendaryears 1981 and 1983. The unified budget would therefore move from a defi-cit of $29 billion in fiscal 1980 to a surplus of $73 billion by fiscal 1983.

TABLE 24.—Federal unified budget receipts and outlays under current policy budget,

fiscal years 1979-83

[Fiscal years]

Item

Billions of dollars:

ReceiptsOutlays

Surplus or deficit (—)

Percent of GNP:

Receipts . . .- . . .Outlays

Surplus or deficit (—) . . -

1979

456.0493.4

- 3 7 . 4

19.921.6

- 1 . 6

1980

502.6531.6

- 2 9 . 0

20.121.2

- 1 . 2

1981

576. 8578.0- 1 . 2

20.921.0

0)

1982

652.6614.937.8

21.620.3

1.2

1983

718.3645.612 J

21.919.72.2

' Less than 0.05 percent.

Sources: Department of the Treasury and Office of Management and Budget.

A 1983 Federal surplus of that size, combined with a State and local sur-plus of three-fourths of 1 percent of GNP, would imply an overall govern-ment surplus equal to 3 percent of GNP, wrhich is much larger than we haveusually seen during periods of high employment. Maintaining a strong growthof economic activity under such circumstances would require a substantiallylarger excess of private investment over private saving than has been typicalof past periods of high employment.

Table 25 shows the balance between investment and saving in the privatesector for selected periods of relatively high employment: 1952-53, 1955-56,1965-66, 1972-73, and the past 2 years. The forecast for 1979-80 is also pre-sented. The difference between private saving and investment in periods ofhigh employment has varied considerably, but the excess of private savingover investment has not been more than 1*4 percent of GNP. A large surplusin the governmental sector would of course provide ample funds for financinginvestment outlays, and thus tend to encourage a high rate of private invest-

114

ment. But past experience suggests that an excess of private investment overprivate saving equal to 3 percent of GNP would not be realized even underthe best circumstances.

TABLE 25.—Private net saving and investment and the unemployment rate, 1952—80

Period

1952-53 average..

1955-56 average..

1965-66 average..

1972-73 average..

1977__1978 *_

1979-80 average 2

Personal saving

Billionsof

dollars

16.5

17.3

31.6

59.8

66.976.7

87

Percentof

GNP

4.6

4.2

4.4

4.8

3.53.6

3.6

Business netinvestment

Billionsof

dollars

12.2

20.7

28.3

66.4

69.299.9

109

Percentof

GNP

3.4

5.1

3.9

5.4

3.74.7

4.4

Excess of businessinvestment overpersonal saving

Billionsof

dollars

- 4 . 3

3.5

- 3 . 3

6.6

2.323.2

22

Percentof

GNP

- 1 . 2

.8

5

.5

.11.1

.9

Unem-ployment

rate(percent)

3.0

4.2

4.2

5.2

7.06.0

6.1

1 Preliminary.* Forecast.

Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics),and Council of Economic Advisers.

Viewing the issue from a somewhat different vantage point, the rise inFederal tax receipts from 20 percent of GNP in fiscal 1980 to nearly 22 per-cent 3 years later would represent a record peacetime increase in the burdenof taxation on the private economy. Maintaining strong growth in privateconsumption and investment in the face of such an increased fiscal drag wouldbe virtually impossible. Adjustments of fiscal policy from the current Admin-istration policy budget would be needed to keep the economy moving for-ward steadily and strongly.

In principle, a lessening of restraint through fiscal policy adjustmentscould be accomplished either by increasing Federal outlays above the cur-rent policy base or by cutting tax rates. Relying mainly on reductions intaxes to promote growth in the private sector would be consistent withthe objectives of the Humphrey-Hawkins Act and with the goals of thisAdministration. It would also prevent tax burdens from reaching an unpre-cedented level.

The appropriate magnitude and timing of such adjustments cannot, how-ever, be determined now. The fiscal policy needed to maintain a smoothlyfunctioning economy from 1981 through 1983 will depend on spendingpropensities of consumers and businesses, the amount of stimulus or dragon the economy from the foreign sector as well as from State and localgovernment budgets in those years, developments affecting wages and prices,the course of monetary policy, and so on. The stronger the autonomousgrowth in the non-Federal sectors of the economy, the smaller the fiscalpolicy adjustments needed to keep the economy growing along the path

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described in Table 22, and the more rapid the progress toward a balancedbudget. Achieving a balanced budget is consistent with the principles ofthe new legislation. But the speed with which that objective can be realizedwill depend on developments that cannot now be foreseen.

Achieving a balanced Federal budget and at the same time maintaining ahigh growth rate of real GNP do not appear to be inherently conflicting aims.If the Federal budget were in balance in 1983, the excess of private invest-ment over saving in 1983 would have to be roughly 1 percent of GNP,about equal to the probable magnitude of the State and local surplus.Such a relationship is within the boundaries of historical precedent. It oc-curred in 1955-56 and again last year. And the forecast for 1979 and1980 implies a continuation of private investment at a rate that wouldexceed private saving by only a little less than 1 percent.

Factors Affecting Investment and Saving

Demographic factors are likely to favor relatively strong investmentgrowth over the next 5 years. As noted earlier in this chapter, the postwarbaby boom will give rise to very large increases during the next 5 years in theprime home-buying age group (25-34 years). The demand for housing istherefore likely to be robust in the years immediately ahead.

Demographic factors will also work somewhat to keep the personal sav-ing rate low compared to the early 1970s. The 1972-73 Consumer Expendi-ture Survey data (Table 26) indicate that personal saving rates are aboutthe same between the ages of 25 and 54, but persons in the 55-64 age groupsave a considerably higher proportion of their income than others. Thenumber of people in this age group will be rising at a much slower rate thanthe 1.5 percent average increase for the group aged 20 and over. Moreover,the group aged 65 and over will be growing somewhat more rapidly thanthe average, and the typical saving rate for this group is comparatively low.It is true that the population under 25 will be declining during the next 5years, and households with heads under 25 tend to be dissavers. But theproportion of total income and saving accounted for by this group is notlarge.

TABLE 26.—Saving rate and population growth, by age of household head

[Percent!

Age of household head (years)

Under 2525-34 . .35-4445-5455-6465 and over

Savingrate,*

1972-73

- 6 . 99.49.79.2

11.26.1

Distributionof disposable

personalincome,1972-73

5.320.421.024.517.011.8

Projectedannual

populationgrowth rate,1980 to 1985

- 0 . 31.84.1

- . 2.5

1.8

i Saving as percent of disposable personal income.

Sources: Department of Commerce (Bureau of the Census) and Department of Labor (Bureau of Labor Statistics).

116

A substantial increase in business investment in the period ahead would berequired to improve productivity. Growth in the ratio of capital to labor in-puts has been declining since the late 1960s; in recent years, in fact, theratio of capital to labor inputs has not increased at all: the labor force hasexpanded rapidly while growth in the capital stock has slowed. This declinein capital intensity has been one cause of the lower rate of productivity growthtypical of this period. Over the next 5 years, business fixed investment willhave to increase rapidly if the aggregate capital-to-labor ratio is not to falleven further.

High investment requirements do not, of course, translate directly intoincentives for businesses to press forward with investment programs to ensuresatisfactory growth in the stock of capital. Making certain that the incentivesto invest in plant and equipment will encourage the needed rate of capitalexpansion must be a fundamental aim of economic policy. Policiestoward this end are discussed more fully later in this chapter.

Perhaps the most important single contribution to this objective wouldbe lower inflation. Expectations that the inflation rate will decline steadilyover the next 5 years would directly attack one of the obstacles to the re-covery in business investment, since the uncertainty faced by business hasbeen an important deterrent to investment planning. Indirectly, reducedinflation would have even larger effects on financial markets. With declininginflation, we could look forward confidently to a marked fall in short- andlong-term interest rates, to strongly rising stock prices, and hence to a reduc-tion in the cost of both debt and equity capital. Thus, if inflation can besteadily reduced over the next 5 years, prospects would be much improvedfor achieving a healthy growth in business investment.

ATTAINING THE GOALS FOR UNEMPLOYMENT AND INFLATIONThe most difficult problem we as a Nation will face in reaching the goals

of the Humphrey-Hawkins legislation is to reduce unemployment to 4 per-cent and simultaneously lower the rate of inflation to 3 percent. Althoughour economy was operating at a level somewhat below potential in 1978,intensified pressures on wage rates and prices have already appeared.

The Humphrey-Hawkins Act recognizes that we cannot reach the goalsfor unemployment and inflation simultaneously by relying solely on mone-tary and fiscal policies. The Administration shares this view. As Chapter 2indicated, the anti-inflation program announced by the President on Octo-ber 24 is based on the premise that braking the momentum of inflation willrequire widespread compliance by business and labor in reducing the rate ofprivate price and wage increases. Success in that endeavor is critical to ourability to attain the unemployment goals of the Humphrey-Hawkins Act aswell as the inflation goal. As noted earlier, continuation of inflation at a highrate could seriously jeopardize the prospects for maintaining a strongeconomy.

117

Unwinding the inflation inherited from the past will not remove the riskthat new inflationary forces might develop in the future. Prudent fiscal andmonetary policies will be needed to avoid an emergence of excess demand.Improved structural policies will also be required. It will be particularlyimportant to find ways to curb the inflationary effects of substantial futurereductions in unemployment from present levels.

The current structure of labor markets in our economy makes it espe-cially hard to reach 4 percent unemployment and reduce inflation substan-tially at the same time. Unemployment varies widely across demographicgroups. Measures to address the structural sources of unemployment havebeen an ingredient of government economic policies for more than a dec-ade, but differential unemployment ratios among groups in the labor forceare greater today than they were 10 years ago. Unless these differentials canbe reduced, the prospects are dim for making substantial further reductionsin the unemployment rate without creating additional inflationary pressures.

The uneven incidence of unemployment among groups in the labor forceis shown in Table 27 for the fourth quarter of 1978 and the fourth quarterof 1972. In the earlier period the unemployment rate for adult white males(aged 20 and over), the most experienced group of workers in the laborforce., was about the same as it was in late 1978. Over the past 6 years theunemployment rate for almost every other group has risen relative to therate for adult white males. This widening of unemployment rate differen-tials has been caused in part by the fact that other groups, which have rela-tively high unemployment rates, are growing faster as a share of the laborforce than adult white males.

TABLE 27.—Selected unemployment rates, fourth quarter 1972 and fourthquarter 1978

[Percent; seasonally adjusted]

Group

All civilian workers

White 20 years and over.

Males.. _Females.

Black and other 20 years and over..

Males. . .Females.

Teenagers (16-19 years)..

W h i t e . . . .Black and other.

Males 20 years and overFemales 20 years and overVeterans 20-34 yearsBoth sexes 55 years and over.

Source: Department of Labor, Bureau of Labor Statistics.

In well-functioning labor markets some differences among the unem-ployment rates of various demographic groups can always be expected.

118

Teenagers and young adults tend to change jobs more frequently thanolder workers as they try new occupations and search for long-term careers.Short spells of unemployment when they first enter the labor market orwhile they look for better jobs keep their overall unemployment rate abovethe average for older workers. Women, particularly during child-bearingyears, tend to move into and out of the labor market more frequently thanmen.

The proportion of women and teenagers in the labor force has grownsubstantially since the earlier postwar years, and both of these groups havehigher unemployment rates than average. In 1956 the overall unemploymentrate was 4.1 percent. If the unemployment rates of each of the various ageand sex groups in the labor force today were the same as in 1956, the overallrate would be 4.6 percent. Changes in the demographic composition of thelabor force since 1956 have thus added about one-half of 1 percentage pointto the unemployment rate. Between now and 1983 the structure of the laborforce is likely to change somewhat, bringing a lower proportion of teenagersand a higher proportion of women. However, the effect of this change on theoverall unemployment rate will not be large. If unemployment rates of eachmajor demographic group in 1983 were the same as in 1956, the overall ratein 1983 would still be 4.6 percent. Achieving an overall unemployment rateof 4 percent at any time within the next 5 years would therefore require thatthe jobless rates of many groups within the labor force be brought well belowthe levels associated with full employment in earlier years.

Although part of the difference in unemployment rates can be explainedby differences in voluntary job turnover and entry and reentry into thelabor market, major structural obstacles also confront many groups ofworkers—especially, but not exclusively, minorities. Many potential im-balances in labor markets disappear as workers move from sectors offeringrelatively poor prospects for employment and earnings to sectors offeringbetter opportunities. But in many instances this process may be blocked bythe difficulty of acquiring skills, wage rigidities that discourage employersfrom hiring less productive workers, and various sorts of discrimination. Aspointed out in Chapter 2, the structural rigidities and uneven incidence ofunemployment make it very hard under current circumstances to reduce theoverall rate of unemployment substantially below the present level withoutencountering labor shortages in some markets. As the overall unemploymentrate declines, demand for skilled, prime-age workers exceeds supply of thoseworkers and puts upward pressure on their wages, even though unemploy-ment among minorities, teenagers, and women may remain unacceptablyhigh. The inflationary pressures in the tight labor markets carry over intothe rest of the economy, contributing to general inflation.

Chapter 2 also noted that improvements in various income maintenanceprograms may have increased the time during which individuals search for

119

better jobs, thus raising the unemployment rate associated with excessdemand in labor markets. The primary focus of labor market policies in theUnited States has been on manpower training programs, public service em-ployment, and the provision of labor market information. This Administra-tion has maintained a strong emphasis on these traditional programs, but ithas also provided resources for new programs aimed specifically at creatingwork and training opportunities for youths and the poor.

Achievement of substantially lower rates of overall unemployment in anoninflationary environment will hinge on whether governmental policiescan effectively reduce the structural sources of unemployment. Toward thatend the Administration is pursuing several strategies.

First, strong efforts are being made to target public service employmentprograms and to reduce the degree of substitution. In the past, the net em-ployment gains attributable to public service employment programs havebeen considerably smaller than the number of available jobs because somegovernment units used funds from that source to pay for work that wouldhave been done in any case. Amendments to the Comprehensive Employ-ment and Training Act (CETA) in late 1976 were designed to direct publicservice jobs more effectively toward the unemployed. As the number of thesejobs was expanded in 1977 and early 1978, the Department of Labor tooksteps to create as many net new jobs as possible with available funds, and toeliminate fraud in the program. In 1978 a new structural employment com-ponent was added under Title II of the act, establishing a category of publicservice jobs specially targeted for the disadvantaged and the long-term un-employed. Under the new Title II program, State and local governmentsare prohibited from supplementing the wages of public service employees.

During 1977 and 1978 the Administration emphasized the use of publicservice jobs to promote recovery. With the economy now closer to high em-ployment, the Federal budget for 1980 provides funds to support 467,000public service jobs under CETA at the end of fiscal 1980. An increased shareof the jobs, however, are being designated for the structurally unemployedunder Title II. The more specific targeting and the prohibition of supple-mentation should improve the net job-creating impact of the program.

Second, in 1979 the Administration will propose a major incrementalwelfare reform plan. If enacted promptly, this plan will be fully effective infiscal 1982. The Administration's plan will reform cash assistance programsand further develop the use of CETA to combat structural unemployment.The plan will expand Title II of CETA and direct more of the jobs to prin-cipal earners in families eligible for cash assistance. The exact number ofnew Title II jobs in 1982 will depend in part on what we learn about CETAin the next 2 years and in part on the budgetary and economic situation in1982.

Third, special employment programs that are established for youths underthe Youth Employment and Demonstration Projects Act and other legisla-

120

tion will continue to pay particular attention to the needs of the disadvan-taged. Total funding for these programs in fiscal 1980 will be held constantat the fiscal 1979 level.

Fourth, the Administration has devoted substantial new resources in1979 and 1980 to promoting employment opportunities for the disadvan-taged in the private sector. As requested by the President, the 1978 CETAlegislation provides authority for a special private sector employmentand training initiative that will finance 10,000 new job training slots in pri-vate business. Under this program, private business will join with the FederalGovernment, State and local CETA programs, and the U.S. EmploymentService to increase permanent private sector jobs for the disadvantaged.In addition, funding is being sought to create about 500,000 opportunities fortraining and work experience that will be available to the disadvantagedunder other parts of CETA. The targeted employment tax credit, whichwas enacted in the Revenue Act of 1978, provides an income tax credit of 50percent of the first $6,000 of wages in the first year of employment and 25percent in the second to encourage the employment of disadvantaged persons,particularly youths between the ages of 18 and 24. Although this approachto structural unemployment is new to the United States, selective employ-ment subsidies have been tried in a number of European countries, includ-ing France, West Germany, Sweden, and the United Kingdom.

In various ways these programs directed toward the problem of structuralunemployment can reduce the labor market shortages and inflationary pres-sures that would otherwise be associated with achieving a low overall rate ofunemployment. To the extent that training programs provide skills for dis-advantaged groups, they increase the supply of workers available to fillsome of the skilled and semiskilled jobs that are* created in a rapidlygrowing economy. Evaluations of the success of Federal training programsfor the disadvantaged provide mixed results. But there is some evidence thattraining programs increase the employability and earning power of traineesby an amount that exceeds the cost of the programs. The extent to whichthese programs could be expanded significantly and still retain their effec-tiveness is uncertain.

Public service employment programs can in principle help theunemployment-inflation tradeoff. If carefully concentrated on the struc-turally unemployed, they can add to total employment without substantiallyincreasing upward wage pressures in the labor market. And to the extentthat they inculcate better working habits and skills among those who wouldotherwise be chronically unemployed, they act as a training program withthe advantages described above. But several limitations restrict the usefulnessof public service employment in dealing with the unemployment-inflationtradeoff. In periods of tight labor markets—when the tradeoff problem ismost serious—a public service jobs program that pays relatively attractivewages may encourage workers who would otherwise be available for private

121

employment to take public service jobs, thereby adding to upward wagepressures. On the other hand, if public service jobs paid relatively low wagesthey might attract very few workers during periods of tight labor markets.While carefully designed public service employment programs can help pro-vide jobs to the disadvantaged, reduction of structural unemployment byenough to achieve the Humphrey-Hawkins unemployment and inflationgoals will require the use of other programs as well.

The more recent additions to our armory of weapons against structuralunemployment are the special private sector employment initiative and thetargeted tax credit. These have the advantage of directing the structurallyunemployed to the private sector where the bulk of new jobs will be forth-coming. They may make an important contribution to improving the trade-off between unemployment and inflation, but they are too new to have beenfully evaluated.

Industrial Capacity and Sectoral Problems

At the present time the utilization of industrial capacity is below, but notfar below, the peak levels reached in 1973. At that time pressure oncapacity, especially in raw materials industries, began to develop, addingto inflationary pressures. To avoid similar problems in the future, industrialcapacity over the next 5 years would have to expand about as fast as output.

Last year the Council of Economic Advisers investigated the relationbetween output, investment, and capacity expansion. The conclusion wasthat a fairly rapid expansion of output—4.8 percent a year between 1977and 1981—would raise the capacity utilization rate. The rate would remain,however, below inflationary levels if there were a substantial expansion ofinvestment similar to that in 1962-66, when both capacity and output grewrapidly. In 1979 and 1980, the growth of output is forecast to be slowerthan in 1978. Capacity utilization over the next 2 years is thereforeunlikely to rise, and it might fall somewhat. As a consequence, thereappears to be little risk of widespread major capacity shortages in this period.But in the subsequent 3 years, achievement of the Humphrey-Hawkins goalsfor unemployment would require growth in output averaging about 4%percent a year, or only slightly below the 4.8 percent growth rate analyzedin last year's capacity utilization study.

In general, therefore, the conclusions reached in last year's study areapplicable to the 1981-83 period. If real GNP grew at a 4*4 percent averagerate, a rapid growth in investment would be necessary to hold the capacityutilization ratio to levels that did not threaten inflation.

An earlier section of this chapter discussed the relationships betweensaving, investment, and the government budget that would be needed toachieve the Humphrey-Hawkins goals for output and employment and stillmove toward a balanced Federal budget. The analysis showed that asubstantial expansion in private investment relative to private saving wouldbe needed. Investment would have to grow at rates approximating those of

122

the 1962-66 period—a difficult but not unattainable goal. If that occurs, therequisite capacity expansion would be forthcoming.

There are other ways in which aggregate demand could expandrapidly in the 1981-83 period. Large consumption-oriented tax cuts, forexample, would result in a faster expansion of consumer outlays but aslower growth in private investment than if tax cuts were oriented moretoward stimulating capital formation. Consumption-led growth would createa danger that capacity would not expand fast enough to avoid inflationarypressures. Such an outcome would not only defeat the Humphrey-Hawkinsgoal of reducing inflation, but also threaten the possibility of maintainingsatisfactory economic growth and achieving a substantial reduction in therate of unemployment.

SUMMARY

The aspects of economic performance that are critical for the achieve-ment of our longer-run economic objectives were discussed above.Growth in aggregate demand sufficient to reduce unemployment to thelevels set forth in the act would require fiscal policy adjustments after 1980,which could be accomplished within the framework of balancing the budgetand reducing Federal outlays as a share of GNP by reducing taxes. A stronggrowth in private investment would be needed. Business investment wouldhave to be particularly strong, but not out of line with performanceduring other times in the postwar period. Without progress in reducinginflation, however, this outcome is unlikely to be realized.

The most difficult obstacle to achieving the 1983 goals arises from thepotential inconsistency between the objectives for growth and unemploymentand the need to reduce inflation. Aggregate demand policies must be framedto take this problem into account. Economic policies for the next 2 yearsare designed to avoid any acceleration of inflation from the demand side,and to use macroeconomic instruments together with the pay and price stand-ards to unwind the inflation inherited from the past. It is clear, however,that the task of reducing inflation to an acceptable pace will not be com-pleted by 1980. We should not commit ourselves now to highly stimulativemacroeconomic policies in the years after 1980; to do so might result in anacceleration of inflation, thereby threatening the maintenance of stableeconomic growth.

Our prospects for achieving the 1983 goals depend upon finding ways toreduce the divergence of unemployment rates among various demographicgroups. With the current structure of labor markets, reducing the overallunemployment rate to 4 percent, and the unemployment rate for adults to3 percent, would require that unemployment rates for experienced adultworkers be brought down to extremely low levels. There would be a very sub-stantial excess demand for those workers, giving rise to inflationary wage andprice increases. The Federal Government has a number of programs in place,

123

and is inaugurating several new ones, aimed at reducing structural unem-ployment. At the present time, however, we cannot be sure that continuingor even rapidly expanding these programs would make possible an overall4 percent unemployment rate without accelerating inflation. Much workneeds to be done to improve existing employment programs and discover newapproaches to structural problems if the goals of the act are to be realized.

INVESTMENT POLICY REPORT

The Humphrey-Hawkins Act puts considerable emphasis on the impor-tance of capital formation in achieving our national economic goals. Oneof its requirements is the inclusion of an Investment Policy Report in thisEconomic Report.

Private investment during the coming years will play two important rolesin shaping economic developments. A strong rise in business fixed invest-ment will be required to achieve sustained economic growth and decliningunemployment. Substantial growth in the capital stock will also be neededto expand our capacity to produce. Only by devoting a significant shareof current production to replace, modernize, and expand the capital stockcan we hope to maintain adequate growth in productivity.

Growth in the capital stock will be of strategic importance in particularsectors of the economy. If growth of productive capacity were to lagin sectors producing supplies that were of critical importance in other in-dustries, bottlenecks would develop, restricting overall growth and addingsignificantly to inflationary pressures in periods of high demand. This isparticularly true of the basic materials and energy-producing industrieswhere substitutes, exclusive of imports, may be difficult to find.

Our competitive position in world markets will also depend heavily onwhether or not business fixed investment grows at an adequate pace. Mostother industrial countries devote a larger share of output to investmentthan the United States does, and their growth rates of productivity have alsobeen higher than ours. Increasing the growth of productivity in the UnitedStates would help significantly to improve the outlook for our foreign tradebalance and to strengthen the dollar in foreign exchange markets.

POSTWAR TRENDS IN INVESTMENT AND CAPITAL FORMATION

Business fixed investment has been quite volatile historically—fluctuatingin absolute level and as a percentage of GNP in response to a number offactors: prospects for future output growth and profits, the degree of un-certainty about the future, growth rates of population and the labor force,relative costs of capital and labor, and the speed of innovation. As shown inChart 8, business fixed investment since 1946 has ranged between 8/2 and11 percent of real GNP. Although there is no obvious sustained trend in thisratio, it tended to hover close to 9 percent in the 1950s and early 1960s, andthen moved somewhat above 10 percent from 1965 to 1974.

124

Chart 8

Real Nonresidential Fixed Investment asPercent of Real GNP

PERCENT

11.5

11.0

10.5

10.0

8.5 -

o i * i i i i • i i i i i • i i i i i • i i i i i • i i i i i • i i i i i * i i i I

1946 1950 1955 1960 1965 1970 1975SOURCE: DEPARTMENT OF COMMERCE.

The recovery of investment from the 1974—75 recession was slow. The9.7 percent investment share for 1977, the third year of recovery, was onlymidway between the low of 8.7 percent registered in 1952, 1958, 1959, and1961 (all but 1952 being recession years), and the high of 10.8 percent scoredin 1966. Last year investment regained a 10 percent share of GNP.

If a rough estimate of the investment contributed by the public sector isadded to private investment, the investment share of GNP is increased. Al-though differences in statistical measurement and in industry structuremake international comparisons imprecise, the evidence (Table 28)suggests that the share of investment in gross domestic product is lower in theUnited States than in other industrial countries. In the years followingWorld War II such differences were explainable by the need in Japanand in European countries to replace productive capital destroyed in the war.More than 30 years after the war, this explanation can no longer be valid.

International comparisons are not the only, or even the most important,indicator of the adequacy of investment. Achieving the objectives of theHumphrey-Hawkins Act over the next 5 years would require strong invest-ment to support the expansion of private demand, to equip an increasingnumber of workers, to improve productivity growth, and to meet environ-mental and social goals. The precise amount of capital required to equip a

125

278-216 O - 79 - 9

TABLE 28.—Real nonresidential fixed investment as percent of real gross domesticproduct, 1966-76

United States

Canada

France'

West Germany _ _

Japan

United Kingdom-

Country Percent of GDP

13.5

17.2

16.7

17.4

26.4

14.9

i1970-75.

Note.—Data are on an OECD basis.Source: Organization for Economic Cooperation and Development.

worker is, of course, variable. Alternative technologies exist or can be devisedto produce the same output with differing ratios of capital to labor, and shiftsbetween industries can also change the overall ratio, since capital-laborratios differ across industries. Because growth in the civilian labor forceover the past decade has been more rapid than in the preceding 10 years(28 percent compared to 16 percent), an acceleration in investment wouldhave been needed to maintain the rise in the capital-labor ratio achievedearlier. More rapid growth of employment in less capital-intensive sectors(government, trade, finance, insurance and real estate, and some services)

than in manufacturing, utilities, communication, and transportation, how-ever, has perhaps reduced the need for this acceleration.

The capital-labor ratio has typically shown a long secular upward trendin all the major industrial countries. This has coincided with improvementsin the health and education of the work force and substantial technologicalchange. The precise roles and interactions between these forces in contribut-ing to the secular growth in productivity remain subject to considerabledebate and are difficult to verify quantitatively. It is worth noting, however,that the U.S. capital-labor ratio grew at an average annual rate of nearly 3percent between 1948 and 1973. Since then the growth of this ratio hasdeclined more than 1 percentage point. These developments coincided with adecline in the trend rate of growth of productivity in the private nonfarmeconomy from 3 percent between 1948 and 1973 to under V/2 percent overthe past 5 years. Restoring the earlier trend in the ratio of capital to laborinput would make an important contribution to greater productivity growth,but such an increase will require devoting a larger share of our nationaloutput to business investment than has been characteristic of recent years.

A number of other considerations suggest that society would benefit fromstronger investment than has occurred in much of the recent past. To expandour production of domestic energy, at least in part from new sources, willrequire large outlays at some future time. In addition, society is demandingprotection from environmental pollution, occupational hazards, and product

126

deficiencies. Achieving these social goals, which are not part of output asconventionally measured, entails additional investment. Business expendi-tures for pollution abatement have risen to a significant fraction of total busi-ness fixed investment in recent years, an estimated 5 percent in 1977 and 4.7percent of total planned investment in 1978. Table 29 illustrates the sub-stantial variation among industries in these outlays. For some, the percent-age of total investment is more than twice the national average. Investmentsfor pollution abatement and other social objectives may, to some degree,displace investment that would expand capacity. Consequently higher totalinvestment will be needed if we are to meet both output goals and socialobjectives.

TABLE 29.—Capital expenditures by business for pollution abatement, by industry,

1976-78[Percent of total capital outlays by business!

Industry

All industries

Manufacturing

Durable goods.

Primary metalsElectrical machineryMachinery, except electricalTransportation equipmentStone, clay, and glassOther durables

Nondurable goods..

Food, including beverage..TextilesPaperChemicalsPetroleumRubberOther nondurables

Nonmanufacturing..

MiningRailroadAir transportationOther transportationPublic utilitiesCommunication, commercial, and

other i

1976

5.6

8.3

6.6

15.75.61.63.46.13.9

9.6

4.54.4

14.711.410.93.41.4

3.5

2.21.11.21.19.1

1977

5.1

7.0

5.9

lb.73.41.83.17.33.6

8.0

4.23.8

13.810.28.23.31.2

3.5

2.21.0.8

1.0

1978 planned

Total

4.7

6.2

5.5

14.43.41.84.07.32.9

6.8

4.73.59.69.27.03.01.0

3.6

3.11.4.9.9

8.7

Air

2.4

2.9

3.0

9.41.1.7

1.54.91.3

2.7

1.71.03.63.53.01.9.6

2.1

1.1.0.6.2

5.4

Water

1.9

2.8

2.1

4.61.91.01.92.11.4

3.4

2.51.95.35.13.31.0.3

1.2

1.01.3.2.6

2.8

.2

Solidwaste

0.4

.5

.3

1 Consists of communication, trade, service, construction, finance, and insurance.

Note.—Excludes agricultural business; real estate; medical, legal, educational and cultural services; and nonprofitorganizations. Pollution abatement operating costs are also excluded.

Data for 1976 are based on the survey conducted in November and December 1976. Data for 1977 and 1978 are based onthe survey conducted in November and December 1977.

Source: Department of Commerce, Bureau of Econcmic Analysis.

INVESTMENT INCENTIVES

The most important inducement for investors is the prospect of futureprofits from future sales. These profits may come from increased sales activ-ity, reductions in production costs, or improvements that allow a higherprice for the product or attract more buyers of the product. The principal

127

indicators of the profitability of investment are the rate of growth of output,the percentage of current capacity that is utilized, and the rate of return onthe existing capital stock. Costs of investment are also important, of course.These include the price of physical units of capital and the costs of financinginvestments. Financing costs depend on the after-tax real rate of returnrequired in capital markets by those who provide funds for investment. Var-ious measures are used for this required rate of return. One is the long-termcorporate bond rate, adjusted for inflation. The required rate of returncould, alternatively, be captured by the earnings-price ratio in the stock mar-ket. The price of physical capital and the effective rate of return requiredby investors can be combined into a single measure, the ratio of the stockmarket value to the replacement cost of corporate net assets. When inves-tors' required rate of return rises relative to firms' current earnings, themarket value of corporate stock declines relative to its replacement cost.Some of the major measures of the profitability and cost of investment aresummarized in Table 30.

TABLE 30.—-Determinants of business fixed investment, 1955-78

[Percent]

Year

19551956 . _ . .1957 _.19581959

19601961196219631964

19651966196719681969 _

19701971197219731974

1975197619771978« _.

1962-66 average1955-70 average

Ratio of realinvestment to

realGNP

9.39.79.78.78.7

9.08.78.98.89.3

10.310.810.310.310.6

10.29.8

10.010.610.7

9.49.49.7

10.1

9.69.6

Capacity utili-zztion rate in

manufacturing1

87.086.183.675.081.6

80.177.381.483.585.7

89 591.186.987 086.2

79.278 083.187.584.2

73.680.282.484.2

86.283.8

Nonfinancial corporations

Cash flowas percentofGNPJ

9.38.98.98.69.2

8.98.89.49.6

10.0

10 410.39.99 48.6

7.98 28.68.06.9

8.79.19.09.9

9.99.3

Rate of returnon depreciable

assets3

15.013.211.69.5

12.2

11.111.012.713.614.8

16.316.214.214.212.8

10.110.311.512.311.4

9.310.410.610.6

14.713.0

Rate of returnon stockholders'

equity *

6.05.24.93.84.8

5.04.45.86.37.5

9.08.87.77 66.9

4.45.26.48.78.4

5.24.86.28.9

7.56.1

Ratio of marketvalue to re-

placement costof net assets'

0.932.921.853.874

1.044

1.0191.1471.0921.2041.295

1.3601.205L. 217

?S7L 124

.911000

1.076016

.756

.725

.825

1]

.768

.703

[.231L.091

1 Federal Reserve Board index.2 Cash flow calculated as after-tax profits plus capital consumption allowance plus inventory valuation adjustment.1 Profits before taxes plus capital consumption adjustment plus net interest paid divided by the stock of depreciable

assets valued at current replacement cost.* After-tax profits corrected for inflation effects divided by net worth (physical capital component valued at current

replacement cost).* Equity plus interest-bearing debt divided by current replacement cost of net assets.* Preliminary.

Sources: Department of Commerce (Bureau of Economic Analysis), Board of Governors of the Federal Reserve System,and Council of Economic Advisers.

128

A year a^o the Economic Report noted that the 1974-75 recession andthe period of price controls in 1971-73 had severely depressed investmentincentives. As was also noted, measures of investment incentives were re-covering, and continued expansion and rising utilization rates held thepromise of further improvement.

Table 30 presents preliminary data for 1978 indicating substantial furthergains in capacity utilization and in the rate of return on stockholders' equity.The latter measure, the ratio of after-tax economic profits to net worth, wasboosted by the effect of inflation in reducing the real burden of corporatedebt. Furthermore, the improvement in the rate of return on stockholders'equity relative to earlier periods partly reflects a shift in the structure ofcorporate financing of investment from equity to debt issues.

The rate of return on all depreciable assets (profits before tax plus capitalconsumption adjustments and interest paid) maintained the level it hadachieved in 1977 but did not increase further. The rate of corporate cashflow was slightly depressed because profit growth slowed somewhat; althoughprofits measured in book value terms were strong, a significant part of thisstrength was attributable to capital gains on inventories and to underestima-tion of depreciation, both resulting from the increase in inflation.

The weakest of the determinants of investment in 1978 was the ratio ofmarket value to replacement cost of capital, which fell in response to theweakness in stock prices. Equity values have risen relatively little during thiscyclical recovery for many reasons: uncertainties engendered by the depthof the 1974-75 recession, the sharp disruption caused by higher energy costs,fluctuations in the exchange value of the dollar, and a volatile inflation rate.

Of the four measures of profitability shown in Table 30, only one, therate of return on stockholders' equity, has regained the 1955-70 average.The other three are well below the 1955-70 average and still further belowthe average for 1962-66, when investment outlays rose very strongly.

In view of the possible increase in the perceived risks of investment sincethe early 1970s, one might surmise that businesses have begun to respond dif-ferently to the usual measures of investment incentives. During the pastyear the Council of Economic Advisers extended its earlier analysis of thissubject. Economists have suggested several alternative formulations, or mod-els, of the determination of investment, which emphasize to various degreesthe influence on investment of growth of output, variations in capacityutilization, changes in cash flow and in the rental price of capital, and theratio between the market value of capital and its replacement cost. All in-volve substantial margins of error.

The Council has not attempted to choose between these different formula-tions. It has tested, for each model, whether the statistical relation betweeninvestment and those factors that determine investment in the model differsignificantly in the various periods covered by the examination.

This analysis suggests that the behavior of investment in equipment hasnot changed significantly during the years since 1973 in comparison with

129

earlier years. Variations from year to year in the strength of investment inequipment, relative to the forces expected to determine it, have remainedwithin the normal margin of error. Indeed, if there has been any point inrecent years at which the pattern of investment in equipment seems tohave changed, the most likely time would have been in 1968-69. This periodalso marked the beginning of a slowdown in the growth of the capital-labor ratio.

Most formulations indicate that investment in structures was unusuallyslow following the 1974-75 recession and that the substantial recovery lastyear was not explained by reference to previous relationships. Quite possibly,special factors affecting particular industries may underlie this structuralchange. For example, early in the recovery the impact of environmentalregulations on the steel industry was very heavy at a time when capacityutilization and profits were exceptionally low both here and abroad, andforeign competition was particularly severe. Similarly, uncertainties aboutenergy prices may have had a perverse effect on investment by utilitiesbefore the enactment of the energy bill.

This analysis suggests tentatively that some weakening of the demand forequipment may have occurred at the end of the 1960s or early in the 1970sin response to greater perceived risks, and that a variety of special factorsmay have disrupted the normal pattern of investment in structures. More-over, as noted above, the profitability of investment has not yet regained thehigh level prevailing in the early 1960s. If the investment needed to reachour economic goals in 1983 is to be realized, policy actions are required thatwill strengthen investment incentives and reduce investment costs and risks.

Tax policy is one instrument that can encourage investment by loweringthe rental cost of capital, or raising its after-tax rate of return. The RevenueAct of 1978 contained important measures toward achieving this end.The corporate tax rate was reduced by lowering the top rate from 48percent to 46 percent and by scaling the rate up more gradually, acrossfour brackets instead of two, so that the top rate is paid on earnings over$100,000 rather than $50,000. The act also made the investment tax creditpermanent. The limitation on the amount of tax liability that could be off-set by the credit is to be raised from 50 to 90 percent by 10 percentage pointincrements from 1980 to 1982; the credit is extended to cover rehabilitationof nonresidential structures and single-purpose agricultural and horticul-tural structures; and it is liberalized for certain pollution control facilities.Selected tax treatment of small businesses was also liberalized. Finally,taxes on capital gains were reduced. The proportion of net long-term capitalgains that can be excluded from an individual's taxable income was raisedfrom 50 percent to 60 percent. The alternative tax of 25 percent wasdropped, and the excluded portion of capital gains will no longer be countedas a preference item subject to the minimum tax. A new alternative mini-mum tax was introduced, however, with a maximum rate of 25 percent.These changes reduce the effective tax rate on capital gains by aboutone-third.

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All of these tax changes result in a lower rate of taxation on returns tocorporate capital—the key sector for productivity-raising investment, sinceit produces 75 percent of total private output. The corporate rate reductionand the investment tax credit will have the greatest effect because they areconcentrated directly on the corporate sector and on the relatively heavilytaxed, capital-intensive industries in that sector. The reduction in the capitalgains tax may also be helpful in encouraging the supply of risk capital, butlowering capital gains taxes is not an efficient means of promoting investment.Only one-third of taxable capital gains accrue on corporate stock or onassets owned by corporations. Only two-thirds of capital gains accrue onreproducible long-lived assets used in production. The part of the tax advan-tage that accrues to other sectors (for example, capital gains on land) mayhave no investment effect. Furthermore, a significant fraction of gainsaccrue in already lightly taxed industries. As a result, this tax change con-flicts with the objective of equalizing taxation across industries and thus dis-torts the efficiency with which markets allocate resources.

Further tax reductions designed to strengthen investment incentives maywell be needed in the years ahead to encourage a high rate of investment innew plant and equipment. Given the budgetary constraints required in thenear future to reduce inflation, there is no room for additional tax cutsnow. Over the longer term, however, opportunities for further general taxreduction will emerge. As they do, reductions carefully designed to strengthenincentives for business investment should be given high priority.

Other public policies have a substantial influence on investment incentives.Pollution abatement requirements and other forms of social regulation per-taining to health and safety impose costs on private industry—both currentoperating costs (for example, by requiring extra workers for waste treatmentprocesses) and capital costs (covering such items as extra equipment forsafety and pollution control). Industries like steel, coal, chemicals, and elec-tric utilities have been especially affected.

As discussed in Chapter 2, the Administration is working to make theregulatory process more rational. A strong and successful effort in thisdirection offers promise of reducing significantly the costs of regulationrelative to its social benefits. In turn, this should reduce the effective capitalcosts of investment projects and thereby strengthen investment incentives.Furthermore, removing some of the uncertainty regarding future regulationswill facilitate business investment decisions.

Other policy measures should also help to reduce the risks faced by thoseresponsible for making investments. The energy legislation enacted last yearwill make the relative prices of various types of fuels more predictable. Co-ordination of Federal efforts to improve productivity is being undertaken bythe National Productivity Council, a cabinet-level group. A major effort isalso under way to promote more rapid innovation through increased em-phasis on research and development.

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RESEARCH AND DEVELOPMENT

Research and development expenditures are a form of investment onwhich the returns are very uncertain, especially in the case of basic research.In some instances society as a whole may benefit from research that addsnothing to an individual investor's profits: for example,, when it is dis-covered that a theory does not work. Moreover the investor is usually unableto capture all of the returns from research even when the results are di-rectly useful. The limited life of a patent and uncertainties about patentrights and the enforcement of patents have deterred investment in researchand innovation.

The slow growth of research and development expenditures in thiscountry in recent years may account for a part of the low productivitygrowth of the 1970s. After correction for inflation, expenditures for researchand development in 1975 were only 2.6 percent above their level in 1965.This slow growth was largely due to the decline in space-related research;private expenditures for research and development grew at roughly thesame pace as the economy. In contrast to the trend over the past decade,real Federal support for research and development rose by 4.2 percent in1977 and by 2.6 percent in 1978, while total spending for this purposeincreased to 4.4 and 2.8 percent respectively in these 2 years. This amountsto a 2-year gain almost three times as great as the rise in the previous 10years.

Recognizing the importance of basic research to innovation and the highrisks of conducting such research in the private sector, the Administrationinitiated a significant expansion of obligating authority and outlays for basicresearch and development in the fiscal 1979 budget. Outlays this year in cur-rent dollar terms will rise by almost 18 percent from fiscal 1978 levels, andthey are scheduled to increase by an additional 10 percent in fiscal 1980.

The President has also begun a comprehensive interagency review, underthe leadership of the Secretary of Commerce, of all Federal policies bearingon the process of industrial innovation. This review will rely on assistancefrom relevant Federal agencies, representatives from business and labor,and other interested parties. Its scope is not limited to the influence the Fed-eral Government exerts through direct expenditures and grants for research;it will also consider the effect of patent, antitrust, procurement, and othergovernmental polices that bear indirectly on research and innovation.

THE SUPPLY OF INVESTMENT CAPITAL

The supply of resources available for business fixed investment is limited bythe capacity of the economy to produce goods and by the amounts of thosegoods that are preempted for other public and private uses. When sub-stantial slack remains in the economy, expansion of public spending orprivate consumption has little or no adverse impact on the supply of invest-ment goods. In fact, an expansion of public spending or consumer demand

132

is likely under those circumstances to increase investment by improving theperceived profitability of investment.

When the economy is operating close to capacity, however, increases inpublic demand or private consumption will adversely affect business fixedinvestment, because prices of capital goods are bid up and the cost of bor-rowing rises. One aim of Federal policy must be to avoid excess aggregatedemand and the inflation and credit market tightness that it generates. Asecond aim must be to analyze carefully the social costs and benefits of Fed-eral programs, in order to control the share of the Nation's output absorbedby the government. Achieving this goal in the context of favorable tax andmonetary policies will help provide the real resources, credit market condi-tions, and incentives needed for rapid growth of the capital stock.

As the Federal budget is moved toward balance in the context of con-tinued economic expansion, and as growth in the government share of totaloutput is curbed in the years ahead, more resources will be available for busi-ness fixed investment. The combination of this fiscal policy with successfulsteps to reduce inflation will create the environment in which monetarypolicy can offer more encouragement to investment.

Financial capital in recent years has been available at attractive real in-terest rates, although nominal rates have remained high. Nonfinancial cor-porations have raised substantial amounts of funds in credit markets. Theratio of funds raised in credit markets to total capital expenditures began torise rapidly in late 1976 and reached a peak in the first quarter of last year,after which it tapered off. The 1978 first quarter peak was surpassed his-torically only in 2 isolated quarters during the 1972-73 investment boom.

A similar pattern appears in the nonfarm, noncorporate sector. For farmbusiness, on the other hand, growth of credit use was more modest than inother sectors during 1977, but it accelerated sharply in the second and thirdquarters of last year to a pace more than 25 percent above the 1977 average.

These relatively high rates of business credit expansion were facilitated bythe steady flows of funds to those financial intermediaries that are importantfor business lending, particularly life insurance companies and pensionfunds. Growth in pension fund reserves—a means by which households indi-rectly provide loans to businesses and governments—rose by a dramatic 46percent between 1975 and 1977. In the second and third quarters of last yearthe average growth in these reserves was 8.6 percent above the 1977 pace.

The cost and availability of equity capital are more volatile than is true ofdebt capital, since they depend on the expectations of the public as reflectedin stock prices and on the willingness of private and institutional investors toaccept equity market risks. In periods when credit markets are weak, firmsmay thus be forced to accept a higher debt-equity ratio than they wouldprefer. This is particularly likely in periods when the flow of internal fundsis small relative to desired investment. It probably happens also to firms incyclically sensitive industries that do not have exceptionally strong growthtrends, and to newer businesses that have not yet established strong earnings

133

records. In 1977 and the first half of 1978, new issues of common and pre-ferred stock accounted for only 23 percent of the gross proceeds of stock andbond issues. The lagging recovery of the stock market during the currentexpansion is undoubtedly a major reason why this ratio is lower than in themid-1960s, when stock prices were high.

SMALL BUSINESSES

The availability of capital, and particularly equity capital, to small busi-nesses is a fundamental concern. The data at hand suggest persistently higherdebt-equity ratios for small corporations (those with assets under $5 million)manufacturing nondurable goods than for larger ones. For small manufac-turers of durable goods the ratio of debt to equity has been higher than forlarge corporations in all years since 1959, except in the period from 1967to 1971, when borrowing by large corporations rose sharply.

These higher debt-equity ratios and a corresponding heavier relianceon bank credit are partly due to the fact that small businesses tend to havea higher proportion of assets invested in inventories and a lower proportionin plant and equipment. This, in turn, may be caused by a differing distribu-tion of large and small firms within various industries. It may also, how-ever, be a symptom of imperfections in capital markets that limit the avail-ability of equity capital.

Programs of the Small Business Administration (SBA) are designed toincrease the financial capital available to small firms. In 1977 the number ofdirect loans approved by the SBA rose 25 percent, and the dollar value ofnew loans rose 70 percent. In addition to the direct loan program, the SBAalso licenses, regulates, and provides financial assistance to small businessinvestment companies (SBICs). The privately owned SBICs pool public andprivate funds in order to provide equity and long-term debt capital to newersmall businesses. These latter firms, in contrast to those financed by otherSBA programs, tend to operate in new markets or with new technology. Atthe end of 1977 there were 273 SBICs, making use of $428 million of privatecapital and $537 million of funds from the SBA. The volume of new fi-nancing arranged during fiscal 1977 was $197 million, a 68 percent increasefrom the preceding year. In order to provide special attention to the needsof businesses owned by socially or economically disadvantaged persons, theSBA administers a parallel program of SBICs for minority enterprises. Thevolume of loans under this program grew 72 percent in fiscal 1977.

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CHAPTER 4

The World Economy—ManagingInterdependence

FROM THE EARLY 1950s THROUGH THE LATE 1960s, growingeconomic interdependence provided the major impetus toward sus-

tained, rapid growth in the world economy. Just 10 years ago, in his lastEconomic Report, President Johnson wrote:

In the past two decades, enormous progress has been made in buildinga closely knit international economy. Remarkable growth in the volumeof international commerce has gone hand in hand with sustained worldprosperity; each has contributed to the other. At times, deep and obviousstrains in the international monetary system have imperiled this progress,but these financial difficulties have been weathered without a serious set-back in economic growth or world trade.

Much has changed throughout the last decade. In some areas the momen-tum of the 1960s has continued: an ever-growing share of world produc-tion is devoted to international trade. Financial markets have become moreintegrated internationally and have adapted to the task of recyclingunprecedented flows of funds from surplus to deficit countries. For a fewcountries of the Third World and the southern tier of Europe, rapid exportgrowth—and particularly the shift in the composition of exports towardmanufactured goods—have occasioned rapid rises in income growth andproduction.

There have also been fundamental changes in the international economicsystem. The most dramatic change, of course, was the breakdown of theBretton Woods system of pegged exchange rates, and its replacement by asystem of market-determined flexible exchange rates. This change has, by andlarge, helped the world economy to adjust to the severe problems confrontingit in the past 5 years—the rise in oil prices and the poor harvests of 1973-74,the subsequent serious recession, persistently high and divergent rates ofinflation in most industrial countries, and the hesitant economic recoveryoutside the United States.

The evolution of the floating rate regime has given individual countriesmore elbow room for steering their economies in different directions. Theextent of independence, however, is limited and the need for some coordina-

135

tion of economic policies remains. Indeed, to some extent the major lessonof 1977 and 1978 is that policy divergences produce severe strains: the rapidexpansion in the United States relative to other major industrial countriestriggered a large and potentially destabilizing depreciation of the dollarduring 1978. The rise in U.S. inflation and the depreciation of the dollarled the United States to implement a policy of monetary and fiscal restraint,in coordination with a cooperative action to deal with exchange-marketdisturbances.

A second major change from the picture 10 years ago—and one whichhas been appreciated only slowly—is the pronounced decline in growthdynamism of the industrial world. Growth of potential output has beenretarded, but growth of actual output has fallen even further. Aggregatedemand has been sluggish throughout the industrial world outside of theUnited States since 1973. Weak investment and cautious consumers gen-erally slowed private demand. Yet the need to reduce inflation and the largeexternal and public deficits made policy makers cautious. As a result, theoverall growth in the countries making up the Organization for EconomicCooperation and Development (OECD) slowed to an average of 3.0 per-cent over the 1973-78 period, compared to 4.9 percent in the precedingdecade.

The reasons for the slowdown of potential output are not fully evident.The slowing of investment virtually everywhere has resulted in an agingcapital stock. The growth of trade has slowed, and the earlier economic gainsfrom economic integration have not been repeated. In many countries thehidden unemployment in agriculture has largely disappeared, leaving littleof the productivity bonus that accompanies a declining primary sector.Clearly the sharp rise in the cost of energy has led to some costly substitution.To a lesser extent, generally higher and more volatile commodity prices mayhave retarded some productive sectors.

Finally, both actual and potential output growth has probably been re-strained because of new views concerning the value of change and economicgrowth. Occasionally, a new spirit of "preservationism" has created pressuresto protect the existing structure of jobs and wages and bolster weak sectors.In part, this spirit is a reaction to acute problems in key industries: excesscapacity in steel, shipbuilding, and textiles, for example, burdens manyeconomies. But a more cautious attitude has also increased the difficulties ofshifting resources from declining to expanding sectors. Preservationist pres-sures encourage protectionist trade measures or internal subsidies that couldmake the world economy even less dynamic and more prone to inflation.The adventurous spirit that once characterized much industrial activity andis vital to rapid structural and economic change may have been suppressedat least temporarily by the uncertainties of the recent past.

Managing interdependence today is a major challenge. We have beenthrough a period in which—in contrast to the robust postwar expansion—growth potential has declined and inflationary pressures have increased. To

136

some extent these conditions may prevail for a number of years. In the past,numerous structural factors favored rapid expansion and rising productivity:relative commodity and energy prices fell, trade barriers were lowered, newtechnologies came in quickly, and economies of scale were realized. Thesefavorable factors have been weakened or reversed. The challenge to policy—at home and abroad—is twofold: to steer our economies safely throughthese more hazardous waters and to create conditions that favor sustainedeconomic growth. Improved international coordination of domestic policieswill be essential to accomplish both of these tasks.

THE GLOBAL ECONOMY: DEVELOPMENTS AND PROSPECTS

In many ways 1978 can be seen as a year of transition for industrial coun-tries. Here in the United States economic growth began to slow after astrong recovery earlier. In the other major industrial countries, where re-covery had been hesitant, growth accelerated somewhat, though not enoughto reduce excess capacity substantially or to prevent a continued upwarddrift in unemployment (Chart 9).

The inflation rate accelerated in the United States. In most other indus-trial countries, inflation rates, which on average exceeded those in theUnited States during 1974-77, continued to decline. As a result, the rate

Chart 9

PERCENT

12

Unemployment in the U.S. and FiveMajor Industrial Countries

SEASONALLY ADJUSTED

10

UNITED STATES

IG FIVE1'

l i l l i I 1 I I i I 1 I I I I I I I I I I I I I I I I I I I I 1 I I I I I I 1 I I I I I I I I 1 I 1 I I I I I I I I I I

1973 1974 1975 1976 1977y JAPAN. GERMANY, FRANCE, UNITED KINGDOM, AND CANADA. DATA AREGNP-WEIGHTED AVERAGE.SOURCES: DEPARTMENT OF LABOR AND COUNCIL OF ECONOMIC ADVISERS.

137

1978

of inflation in the United States in 1978 was higher than the average levelfor the major foreign countries (Chart 10).

External positions also changed markedly during 1978. For the OECDcountries as a group the combined current account deficit declined sharply.The deficit of the United States widened somewhat, but this was more thanoffset by the large rise in the combined surplus of the other major countries,especially Japan, and a marked decline in the combined deficit of the smallerOECD members. Nevertheless as the year progressed there were increasingindications that the major imbalance between the positions of the UnitedStates and Japan was beginning to be reversed. Both the Japanese surplusand the U.S. deficit were smaller in the second half of 1978 than in the firsthalf.

The year 1979 should see some correction in the cyclical divergence thathas arisen since the oil crisis. As shown in Table 31, the anticipated slowingof growth in the United States is matched by an expected slight rise ofgrowth abroad. For the first time since 1975, growth abroad is likely toexceed growth in the United States. (It should be noted that the growth ratespresented here are year over year, rather than fourth quarter over fourthquarter as generally presented elsewhere in this Report.)

Chart 10

Consumer Price Inflation Rate in theU.S. and Six Major Industrial Countries

PERCENT-^

20

10

ANNUAL RATES

UNITED STATES

i1973 1974 1975 1976 1977 1978

^PERCENT CHANGE FROM PRECEDING QUARTER AT ANNUAL RATE.i /JAPAN, GERMANY, FRANCE, UNITED KINGDOM, CANADA, AND ITALY. DATA BASED ON1977 GNP/GDP WEIGHTS AND EXCHANGE RATES.

SOURCES: DEPARTMENT OF LABOR AND NATIONAL SOURCES.

138

TABLE 31.—Annual growth in real GNP in the United States and other majorindustrial countries, 1960-79

[Percent change]

Country

United States

Big Six3

1960-74average

3.6

5.8

1975

CO

CO

1976

5.7

5.4

1977

4.9

3.3

19781

3.9

3.8

1979 2

3.3

3.9

1 Preliminary.2 Forecast.3 Japan, Germany, France, United Kingdom, Canada, and Italy; OECD estimates. For 1960-74 average, based on 1970

GNP/GDP weights and exchange rates; for 1975-79 based on 1977 GNP/GDP weights and exchange rates.Sources: Organization for Economic Cooperation and Development and Council of Economic Advisers.

Inflation rate differentials are also expected to narrow somewhat during1979, in line with the anticipated slowing of inflation in the United Statesand a possible increase in inflation in some foreign countries. Trade andcurrent account imbalances are expected to diminish further as a result ofthe shift in relative growth and of the large exchange rate movementsduring 1978.

GROWTH AND INFLATION

In the major foreign countries there was a modest rise in the growth ofgross national product (GNP) in 1978. Table 32 records the growth rates ofGNP during 1977 and 1978 for each of the major foreign countries and theUnited States. Also included are two columns showing the average annualgrowth of GNP prior to 1974 as well as the average rate of growth since then.

TABLE 32.—Annual growth in real GNP in major industrial countries, 1960-78[Percent change, except as noted]

Country

United States....JapanGermanyFranceUnited Kingdom_CanadaItaly

1977

4.95.22.63.01.62.71.7

19781

3.95.83.03.03.03.52.0

1960-73average

3.910.54.85.73.25.45.2

1974-78average'

2.33.71.72.81.03.41.9

GNPshortfall in 1978

(percent)2

8.137.316.014.711.510.217.1

* Preliminary.2 Difference between actual GNP and the level that would have been reached if growth since 1973 had equaled its

1960-73 trend rate, expressed as a percent of actual GNP.Sources: Organization for Economic Cooperation and Development and Council of Economic Advisers.

The final column shows the percentage difference between the actualGNP in 1978 and the level of GNP that would have existed in 1978 if growthhad proceeded after 1973 at its 1960-73 trend rate. The gap recorded in thelast column is not meant to indicate the precise difference between actualand potential output. Few deny that potential output growth has slowedeverywhere in recent years, and in some cases sharply, although considerableuncertainty remains about the current underlying trend for potential output.What the gap does indicate is that, for whatever reasons, the major indus-

139

trial countries outside the United States have witnessed a dramatic reductionin growth since the oil crisis.

Evidence that at least part of the slower growth is due to a slowdown inpotential growth is shown in Table 33. Each of the large industrial coun-tries has shown significantly lower productivity growth in the last 5 yearscompared to the earlier period. Clearly, part of the poor productivity per-formance is due to low utilization rates. Even after correcting for utilization

TABLE 33.—Annual growth in GNP per employed worker in major industrialcountries, 1964-78

(Percent change)

United StatesJapan..GermanyFranceUnited Kingdom. __ _ _CanadaItaly

Country

Average

1964-73

1.88.94.74.53.22.45.4

1974-78

n i3,?3 n3 n.86

1.1

i Estimate.

Source: Organization for Economic Cooperation and Development.

and recognizing analytical shortcomings in the productivity measure, how-ever, some slowdown is evident. The largest absolute decrease occurred inJapan, where growth in GNP per worker slowed from 8.9 to 3.4 percentannually.

Whatever the new rates of potential growth may be, the actual GNPgrowth outside the United States was apparently not above the underlyingpotential growth in 1977 and 1978. In the fifth year after the onset of reces-sion, recovery toward a fuller utilization of potential among countries outsidethe United States continues to be extremely hesitant and incomplete.

To some extent the slowing of potential growth and the weakness ofactual growth relative to potential since 1975 are tied together. In Japan,for instance, the sharp fall in potential growth reduced capital requirementsand hence reduced required investment as a share of output. Because thisfall was not matched by a decline in the personal saving rate, a problem ofexcess saving emerged. This imbalance was absorbed partly by the rise inthe external surpluses and government budget deficits and partly by thedecline in income and production relative to potential output. In Japan, asin other countries, low rates of actual investment constitute a major reasonfor the hesitant recovery of demand. At the same time, as mentionedearlier, sluggish investment has led to a marked aging in the capital stockand has further checked the growth of potential output by limiting produc-tivity increases.

The principal factors constraining more expansionary policies during thecurrent recovery have been persistently high rates of inflation in most coun-tries and the resulting judgment that relatively cautious fiscal and monetary

140

policies were needed. Even in those countries making notable progress inreducing inflation by 1977—particularly Germany and Japan—fear of re-newing inflation continued to dampen enthusiasm for more expansionaryfiscal and monetary policies.

In 1978 constraints on policies eased somewhat outside the United Statesas rates of inflation declined almost everywhere (Table 34). For the UnitedKingdom and Italy, where the rates had been highest, the decline was im-pressive. As a result of relaxed constraint, fiscal policies also tended to

TABLE 34.—Changes in consumer prices in major industrial countries, 1976-78

[Percent i]

Country 1976

5.89.34.69.6

16.67.5

16.8

1977

6.58.03.99.5

15.88.0

17.0

19782

United States.. . .JapanGermanyFranceUnited Kingdom.CanadaItaly

7.63.92.79.28.39.0

12.2

1 Changes measured from year average to year average.»Estimate.Sources: Department of Labor, Board of Governors of the Federal Reserve System, and Council of Economic Advisers.

become significantly more expansionary in the major foreign countries:according to OECD estimates, the direct impact of fiscal policy shifts in1978 amounted to over one-half of 1 percent of GNP for the major for-eign countries, excluding Japan, and to over 2 percent for Japan.

The 1978 pattern of changes in growth and inflation rates was heavily in-fluenced by the marked decline of the dollar and the consequent appreciationof most other major currencies. In countries where exchange rates appreci-ated, it is broadly true that GNP growth lagged behind the growth of domes-tic demand and that inflation rates declined. In this environment fiscalpolicy became more expansionary during the course of the year. These shiftsin fiscal policy were both necessary and appropriate. They were necessarybecause extra stimulus was required to offset the negative effect on GNP ofthe adverse shift in real net exports. And they were appropriate because thereduction in inflation due to currency appreciation gave policy makersbreathing room to shift toward more expansionary policies. Moreover inGermany, and even more in Japan, a reduction in the current accountsurplus required a shift in policy to make sure that shifts in export andimport volume would eventually become large enough to offset the effectsof the currency appreciation on terms of trade.

For the United States the opposite set of circumstances prevailed. A weakexternal sector, accelerating inflation, rapidly declining unemployment, anda depreciating currency made it necessary to shift toward a more restrictivefiscal and monetary policy. Indeed, this shift occurred during the year.

The need to realign and coordinate economic policies, both in the UnitedStates and abroad, so as to promote external adjustment and reduce diver-

141

278-216 O - 79 - 10

gences in economic performance across countries was increasingly recognizedduring 1978. In the course of meetings that culminated in the EconomicSummit at Bonn in July 1978, a significant degree of coordination wasrealized. At the Bonn meeting the leaders of the seven largest industrialcountries discussed the major goals and problems in the world economy, anda Concerted Action Program was devised in which each country madeappropriate specific commitments.

The Bonn Summit marked a turning point, particularly for the UnitedStates. The United States noted that curbing inflation has become the toppriority of economic policy. The President therefore pledged to take specifiedactions to reduce the U.S. inflation rate, obtain a more rapid reduction inour current account deficit, and adopt an energy policy which would, by1985, cut our imports of petroleum by 2.5 million barrels per day.

In addition, Germany and Japan proposed steps to increase growth andthus reduce external surpluses: Germany to provide additional fiscal stimu-lus totaling 1 percent of GNP; Japan to achieve a 7 percent growth in realGNP between March 1978 and March 1979. The other participating coun-tries (France, Italy, the United Kingdom, and Canada), whose high rates ofinflation provided less scope for specific action, made broadly complementarycommitments. At the same time, each country recognized the overridingimportance of not allowing sluggish growth, sectoral difficulties, or tradeimbalances to serve as pretexts for actions that would undermine the frame-work of free trade among nations. A joint commitment, covered more fullylater in this chapter, was adopted to secure a rapid and successful outcomefor the Multilateral Trade Negotiations.

Considerable progress has been made in meeting these commitments. Asdiscussed earlier in this Report, the United States has in place a majoranti-inflation program and has shifted both fiscal and monetary policiestoward restraint. The 1978 National Energy Act, signed at year's end,establishes a comprehensive framework for rationalizing energy policy andreducing oil imports along the lines discussed at Bonn. Germany completedlegislation in December 1978 that fully implements its own commitment.Although Japan began in September to carry out a supplementary fiscalprogram to stimulate growth, it now seems likely to fall well below the 7percent growth target.

The Concerted Action Program adopted at Bonn marks an importantstep in international economic cooperation. On a substantive plane, themeasures taken helped put the major economies onto more balanced andsustainable paths. More important is the symbolic significance: it is nowclearly recognized at home and abroad that, in a world where countriesare interdependent, policy choices by one nation directly affect economicperformance in others. If some countries grow very slowly, their tradingpartners will be forced to abandon dynamic export industries; if onecountry attempts to protect its industries, at the border or by domestic

142

subsidies, others will have to retrench; if one nation pursues extremelyrapid growth or inflationary policies, the resulting exchange rate deprecia-tion may lead to uncertainties and market disorders. Increasing awarenessof these linkages and acceptance of the responsibilities they imply representthe goal of policy coordination exemplified by the Summit.

PROSPECTS

Although the shift toward more rapid growth abroad is a welcome devel-opment, the world economy continues to face difficult challenges. GNPgrowth, while expected to maintain the 1978 rates, will remain low by thestandards of the 1960s, and it will be hard to generate enough jobs toredyce unemployment. In some countries more extensive use of specific jobprograms and special incentives to reduce structural unemployment of youngworkers must effectively supplement demand management policies if furtherincreases in unemployment are to be avoided.

Most economies also face excess capacity in basic industries such as steel,textiles, and shipbuilding. The consolidation of these sectors by reducingcapacity, and the resulting loss of jobs, aggravate labor market problems.Ways must therefore be found to smooth the transfer of workers from declin-ing to expanding sectors. Securing a more rapid rate of job creation is madeharder by continued low rates of investment in plant and equipment. Whilesome growth in investment occurred in 1978, the basic circumstances havenot changed substantially. Excess capacity remains large and prospects indi-cate only a moderate growth in demand. In this environment a sharp accel-eration of investment during 1979 is not foreseen.

While faster growth would greatly benefit most foreign economies, infla-tion rates in all but a few OEGD countries remain too high for governmentsto pursue policies that are significantly more expansionary. Even relativelyrestrictive macroeconomic policies will bring only a gradual decline in in-flation. In some countries inflation may accelerate again as the favorableeffects of exchange rate appreciation and commodity price declines wearoff.

Thus, despite some easing of constraints on policy in countries outside theUnited States, the economic environment presents difficulties. Few easy solu-tions are available; and according to an increasing number of observers, itwill take a continued effort to bring about conditions more favorable tosustained economic growth.

CURRENT ACCOUNT DEVELOPMENTS AND PROSPECTS

In 1978 there were marked changes in global payments positions (Table35). First, the large current account surplus of the countries making up theOrganization of Petroleum Exporting Countries (OPEC) diminished sharplyand unexpectedly from about $32 billion in 1977 to an estimated $11 billionin 1978.

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TABLE 35.—World current account balance,11975-78[Billions of dollars]

Country

OECD countries

United StatesBig Six3 and SwitzerlandOtherOECD

OPEC countries . . . . .

Non-oil developing countries . . . .

Other *

1975

0.3

18.4- 3 . 8

- 1 4 . 3

27.3

- 3 8 . 5

10.9

1976

- 1 9 . 0

4.3- 3 . 7

- 1 9 . 4

37.0

- 2 6 . 0

8.0

1977

- 2 7 . 5

- 1 5 . 313.5

- 2 5 . 7

31.5

- 2 4 . 0

20.0

1978 2

0.5

- 1 7 . 033.5

- 1 6 . 0

11.0

- 3 4 . 0

22.5

1 OECD basis.2 Estimate.3 Japan, Germany, France, United Kingdom, Canada, and Italy.4 Reflects errors and asymmetries, as well as balances with omitted country groups.

Sources: Organization for Economic Cooperation and Development and Council of Economic Advisers.

This remarkable decline resulted from volume and price effects in aboutequal measure. The volume of OPEC oil exports actually fell somewhat in1978; a consequence of the slackened pace of growth in energy demand inthe industrial countries and the rapid 1978 expansion of other sources ofoil. North Sea, Alaskan, and increased Mexican production, accountedtogether for a rise in production of 1.2 million barrels per day, or roughly4 percent of total OPEC production.

At the same time, the volume of imports into OPEC countries continuedto grow at a significant though slowing rate, a result of the momentum of on-going development plans in a number of OPEC countries. Price move-ments have also been important in reducing the OPEC surplus. The dollarprice of oil remained roughly constant, while import prices rose.

Second, in the so-called non-oil developing countries (that is, the poorercountries outside of OPEC and the OECD) the combined deficit expandedconsiderably last year. The terms of trade, which had been generally fav-orable in 1977, turned against such countries in late 1977 and early 1978.Late last year, however, the terms of trade again strengthened appreci-ably. Borrowing conditions for most of these developing countries remainedfavorable, and many of them borrowed substantial amounts to service out-standing debt, maintain the growth of their imports, and increase their grossreserves for the third consecutive year.

The most striking change in 1978, however, was the disappearance of theOECD deficit. The aggregate deficit of the OECD countries, $28 billion in1977, gave way to a small surplus in 1978. This turnaround was the secondlargest recorded year-to-year change in the OECD external position; it wasexceeded only by the large shift from surplus to deficit which followed theOPEC price rise. It was surprising that the decline passed virtually unno-ticed and had little effect on developments during the year compared tothose occurring in the 1974-75 period.

The OECD can be usefully divided into three groups. The first comprisescountries in surplus; the second contains small countries, chiefly in deficit;

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and the United States is the third. Starting with the surplus countries, oneshould note that the largest part of the decline in the OECD deficit is ac-counted for by the rise in the combined surpluses of Japan, Germany, France,Italy, and Switzerland. These countries, along with the United Kingdom,experienced strong gains in their terms of trade—that is, the prices receivedfor exports rose more rapidly than prices paid for imports, principally be-cause of appreciation in their exchange rates.

A gain in the terms of trade affects the favored country in two ways. First,it increases income and thus tends to have a stimulating effect on aggregatedemand similar to that of a tax cut. Second, after some time, however, thehigher export prices tend to depress the volume of exports, while the lowerimport prices tend to raise the volume of imports, thereby reducing aggre-gate demand. Table 36 records the movement in current account balancesfor each of the countries named above, except Switzerland, and shows therelative size of the two different effects in 1978: the ratio between the gainin terms of trade and domestic demand, and the ratio between the changein the volume of net exports and GNP.

TABLE 36.—Current account balances for selected major industrial countries, 1976-78

CountryCurrent account balance *

1976 1977 1978 2

Gain in termsof trade aspercent ofdomesticdemand,

1978 2 3

Change involume of net

exports aspercent ofreal GNP,

1978 2

Billions of dollars Percent

JapanGermanyFranceUnited Kingdom.Italy

3.73.8

-6 .1-2 .0-2 .8

10.93.7

-3 .3.5

2.3

20.06.02.0

- . 55.5

1.9.6.8

1.2.4

-0.32. 3

- 1 . 0

1 OECD basis.2 Estimate.3 The gain in terms of trade is the percent change in export prices times 1977 export value minus the percent change

in import prices times 1977 import value.

Sources: Organization for Economic Cooperation and Development and Council of Economic Advisers.

Even though estimation of gains in terms of trade is subject to a consider-able margin of error because of serious measurement difficulties, the resultsare striking. These five countries experienced very large gains in income fromthe terms of trade in 1978 and, excepting the United Kingdom, had littleor no offset from the declining volume of net exports. The income gains, how-ever, do not appear to have been matched by a corresponding rise in thegrowth of real output, especially when allowance is also made for the expan-sionary shifts in fiscal policy. A possible explanation for this relatively weakmultiplier effect is that, because these income gains were perceived to betransitory, they were largely absorbed in increased household and corporatesaving, rather than in increased expenditures.

The second group of OECD countries, comprising the smaller nations,in the aggregate reduced their deficits in 1978 by about $10 billion. This

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reduction was especially welcome in view of the very large deficits thesecountries had run from 1974 to 1978, when their net indebtedness grewby close to $80 billion. Indeed, external positions had become unsustainablefor a number of countries in this group and severe retrenchment was neces-sary. Stabilization programs were developed in connection with upper credit-tranche drawings from the International Monetary Fund for Portugal andTurkey. Governments in the Scandinavian countries acted to forestall fur-ther accumulation of debt that might well have become a source of dif-ficulty in a few years. For still others, the extent of improvement in theircurrent account was limited by adverse shifts in the terms of trade stemmingfrom the fall in a number of raw materials prices. For the group as a whole,the decline in current account deficits can be explained almost entirelyby the reduction in import volumes relative to export volumes.

The United States stands alone in the third category. Throughout thepostwar period the growth of U.S. imports tended to be greater in relation todomestic growth than the growth of exports in relation to growth abroad.Until 1975 a rough balance between import and export growth was main-tained by the fact that growth abroad tended to exceed U.S. growth. From1975 through 1978, however, growth in the United States surpassed the aver-age growth abroad. As a result, the current account of the United Statesshifted sharply. In 1977, a year in which U.S. economic growth exceededthat of its trading partners by about V/2 percentage points, the U.S. currentaccount shifted by almost $20 billion, from a surplus of $4.3 billion to adeficit of $15.3 billion. Roughly three-fourths of this shift is accounted for bythe more rapid growth of merchandise import volumes compared to exportvolumes. The remainder of this shift reflected changes in the terms of tradeand in the composition of trade, only partly offset by gains in service trans-actions.

On the basis of preliminary estimates the current account shifted towarddeficit in 1978 by a further $1.7 billion. There was, however, substantialimprovement from the first half of the year to the second, when growthin export volume picked up and import growth began to moderate. Despitethe depreciation of the dollar during this period, the expected adverse shiftin the terms of trade was restrained to a significant degree by the constancyof the price of oil imports'and by the general increase in the prices of manu-factured goods relative to the prices of primary commodities.

The shifts that occurred in 1978 in current account positions amongthe countries of OPEC, the non-oil developing countries, and the OECDcountries are not likely to be reversed in 1979. The large oil price increaseannounced by OPEC last December will seriously complicate the task ofeconomic management in the industrial and non-oil developing countries.This price increase is not expected to result in a substantial widening ofthe OPEC surplus from 1978 levels, however, since imports by OPEC willalso continue to rise. It can be said that the industrial countries are now pay-ing the "OPEC oil tax" largely in current goods and services rather than

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I O Us. As a result, the so-called recycling problem has become much lesstroublesome—though the surpluses of a few individual OPEC countries willcontinue for years to come. More generally, the traditional pattern of re-source flows between countries, in which the major industrial countries arenet capital exporters to the developing countries and to other poorer coun-tries within the OEGD, appears to have been firmly reestablished.

Barring a substantial run-up in commodity prices, the deficits of the non-oil developing countries are likely to rise somewhat in 1979. Such a rise indeficits would appear to be consistent with the strong liquidity positions ofmany countries in this group, the ability of a growing number of countries toborrow successfully on international financial markets at lower interestspreads and longer maturities, and the apparent willingness of banks toincrease their lending to developing countries despite a few isolated debtrescheduling problems during 1978.

Among industrial countries of the OEGD, a more balanced distributionof surpluses and deficits is likely to emerge in 1979. The U.S. current accountdeficit is expected to decline considerably from the levels at the end of 1978,dropping to about an annual rate of $2-$8 billion by the end of 1979. Thisreduction will result from two conditions: first, the effects of slower U.S.economic growth on imports; and second, a steady and vigorous growth inexports as markets continue to adjust to the improved price competi-tiveness of American goods and services that resulted from last year's de-preciation of the dollar.

Some decline, too, is anticipated in the surpluses of Japan and Germany.Expectations for the decline of the Japanese surplus are grounded primarilyin the anticipation of a further fall in the volume of Japanese exports. Im-port volumes rose only moderately in 1978 after allowance for large account-ing transactions made under the emergency import program. They are un-likely to accelerate strongly this year, despite the appreciation of the yen,because of the relatively closed structure of many Japanese import markets.This one-sidedness in adjustment by Japan is likely to intensify the difficultyof reducing the Japanese surplus to a sustainable level over a longer period.The need for a sustained reduction of barriers in Japanese import markets iswell recognized by Japanese officials, and extensive discussion betweenJapan and the United States during 1978 has laid the groundwork forprogress toward this end.

INTERNATIONAL FINANCIAL DEVELOPMENTS

For the international financial markets 1978 was a year of unusual in-stability. Serious questions were raised at home and abroad about the func-tioning of foreign exchange markets, culminating at year-end with thecharter of the new European Monetary System and with the dollar supportmeasures of the United States. These developments were responses to in-creased volatility and to disorderly conditions in the foreign exchange mar-

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kets. In the case of the European Monetary System they arose also fromconcern about the undesirable side effects of a system of floating exchangerates for closely integrated economies and from the need to foster closereconomic integration in Europe.

THE OPERATION OF FLEXIBLE EXCHANGE RATES

The developments of 1978 must be seen as a part of the continued evolu-tion of international financial arrangements. It is therefore appropriate tobegin this discussion by reviewing the role of floating exchange rates inmacroeconomic adjustment over the 1973-78 period.

Floating Rates in Principle

The role of floating exchange rates can best be seen in the need for adjust-ment among national economies. All countries are continually subjected toshocks that lead both to internal imbalances (excessive or deficient utiliza-tion of domestic resources) and to external imbalances (foreign trade orcapital flows at unsustainable levels). A system of flexible, market-deter-mined exchange rates (or, in short, "floating" rates) allows more automaticexternal adjustment than a system of fixed parities, and thus leaves morescope for domestic macroeconomic policies to adapt to the changing re-quirements for internal balance.

External adjustment occurs as exchange rates move to equilibrate tradeand net capital flows. More precisely, for a given change in official holdings,the rate will move to a level that either brings the value of goods and serv-ices exported and imported into balance or induces changes in private assetholdings to finance the discrepancy.

The equilibrating mechanism works on both the capital and current ac-counts. For a country incurring a large current account deficit, the currencydepreciates to reduce the current account deficit by increasing the country'sprice competitiveness. That process, however, takes time. In the interim,currency movements will induce private holders of wealth to accumulatethe country's assets to the extent necessary to finance the deficit.

The second feature of an idealized system of floating exchange rates canbe seen as a consequence of the first. Because floating rates tend to assureexternal equilibrium, countries can enjoy greater independence of macro-economic policies and performance. Under a regime of fixed exchange rates,the extent to which a country's macroeconomic policies could diverge fromthose of its trading partners was limited in important ways. Divergentpolicies would lead to trade imbalances, with expansionary countries movingtoward deficit and restrictive countries toward surplus. There was no auto-matic mechanism to generate the needed capital movements to support theimbalances. Indeed, outflows of capital from countries pursuing relativelyexpansionary policies to countries pursuing restrictive policies sometimesexacerbated disequilibria in overall balance of payments positions. A coun-

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try's freedom to engage in independent macroeconomic policies was thusconstrained by its capacity to absorb or lose reserves.

Under a floating rate regime, however, wide divergences of macro-economic policies would, in principle, be possible. For those countriespursuing rapid growth through expansionary macroeconomic policies orthose accepting high inflation, the presence of a depreciating currency wouldallow the balance of payments to remain close to equilibrium.

Critiques of Floating Rates

For more than 5 years the major economies have functioned under afloating rate regime. The new regime has been successful in permitting theindustrial economies to absorb shocks that were unprecedented in the post-war period. At the same time, overall economic performance and exchangemarket behavior have been much less satisfactory than was expected, leadingmany to wonder whether the exchange rate regime was at least partlyresponsible for the poor performance.

Critics have argued that floating rates have had four failings: they havenot eliminated balance of payments disequilibria; they have not allowedthe degree of policy independence that had been anticipated; they haveproved inflationary; and they have introduced major new elements ofinstability and uncertainty to financial markets.

First, floating rates clearly have not eliminated current account surplusesand deficits. These deficits and surpluses have not, in general, fallen fromthe levels of the late 1960s and early 1970s and, on many occasions, somehave been even higher.

Such an observation, however, does not imply a failure of floating ratesto perform their adjustment function. The imbalances that have occurredhave not usually resulted from floating per se, but from the greater divergenceof macroeconomic performances and from the exceptionally large shocks tothe international system, such as OPEC price rises and large increases inagricultural and commodity prices. Exchange rate changes have generallyresponded well to these deficits and surpluses and have helped to moveeconomies back toward external equilibrium, even if not as quickly or assmoothly as originally hoped. A balance of payments equilibrium, more-over, does not necessarily require that the current (or trade) account shouldbe balanced, only that the current or trade account deficit or surplus bewillingly financed. In fact, deficits or surpluses on current account may wellrepresent the equilibrating counterpart to structural or "autonomous"capital inflows or outflows.

In contrast, during the final years of the Bretton Woods system, balanceof payments disequilibria that resulted at least partly from divergent macro-economic performances led to several serious and protracted balance ofpayments crises. Normal trade and investment patterns were disrupted asgovernments responded to these disequilibrium situations by imposing trade

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and capital controls and other emergency measures before they were finallyforced to change their exchange rate parities.

A second cause of concern exists because floating has led to less policyindependence than had been anticipated. To be sure, countries have beensignificantly more independent than in prior years, especially in the realmof monetary policies. A good example lies in the ability of Germany, duringthe early phase of the current expansion, to pursue a relatively restrictivemonetary policy, while that of the United States was relatively expansionary.

Although independence has been greater than with fixed rates, ithas by no means been complete under floating. There have been obviouslimitations to policy flexibility, partly because exchange rate changes cannotinsulate national economies from their partners' performance or from inter-national economic shocks. We have learned that in an increasingly inter-dependent international economic system floating exchange rates do not freecountries from the effects of their neighbors' economic policies and per-formances. Similarly, countries must recognize their responsibility to act inways that do not inflict excessive adjustment costs on others.

The third major criticism of the floating rate system has been that itcontains an inflationary bias. Two lines of argument have been presentedto support this view: first, that floating generates inflation because it failsto impose needed discipline on the conduct of fiscal and monetary policies;second, that because of asymmetries and ratchets the increased inflationarypressures associated with depreciation are not matched by commensuratedownward price pressures in countries whose exchange rates are appreciat-ing. Thus, it is argued, the net effect of exchange rate changes is inflationaryfor the world as a whole.

Neither of these arguments is entirely convincing. Regarding the firstargument—presumed lack of discipline—it is important to note that evenwithout external pressures there are clearly powerful internal forces whichoppose inflation. Recent experience in the United States and some countriesof Europe, where large current account deficits and currency depreciationshave led to quite restrictive economic policies, indicates the extent to whichdifficult stabilization policies will be undertaken even in a flexible exchangerate system.

Moreover, a regime of fixed rates allows inflation to spill over the borders.Price rises originating in one country spill over into other countries directlyif exchange rates cannot shift. Indeed, to the extent that inflation originat-ing in one country is shared by others when exchange rates are fixed, disci-pline in the conduct of fiscal and monetary policies may be weaker thanunder floating rates, where the full inflationary impact of inappropriate pol-icies is felt domestically.

The evidence to support the second argument—that there are asym-metries in the effects of exchange rate changes on inflation—is mixed. Whileit is true that there exists considerable evidence of increasing downwardrigidity in the levels of prices and wages in a number of countries, there is

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no comparable evidence that rates of inflation are less responsive to currencyappreciation than to depreciation.

Finally, factors other than floating exchange rates provide a more com-pelling explanation for the high and persistent inflation in the industrialcountries: slower productivity growth, excessive demand pressures, externalshocks such as those created by OPEC, and structural changes and rigiditiesin domestic labor and product markets.

A final criticism of floating has been that it induces excessive volatilityin exchange rate movements. Chart 11 presents the path of the trade-weighted dollar since 1970, using an index of dollar movements against the10 major currencies, and 1972-76 total multilateral trade shares as weights.In addition to these longer-run swings in rates, it is certainly true that day-to-day movements in exchange rates have been larger in the float than in thepreceding Bretton Woods era. It is difficult to determine whether thesemovements have been excessive. In a fixed rate system such asBretton Woods, day-to-day variability is sharply reduced by the activeintervention of central banks to keep the rate within a narrow range. Fur-thermore, for as long as the range remains credible, private actions tend tokeep the rate within the range whenever transient factors lead to a ratemovement to the upper or lower limit. Day-to-day variability is thus largelyeliminated. On the other hand, the fixing of exchange rates while economicconditions are changing makes it likely that exchange rates will increasingly

Chart 11

Weighted-Average Exchange Valueof the U.S. Dollar

INDEX. MARCH 1973=100

90

80 1111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111 11111111111

1970 1971 1972 1973 1974 1975 1976 1977 1978SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

151

diverge from levels that would be consistent with underlying economicfactors. Eventually the credibility of the range is challenged by market par-ticipants, and potentially disruptive speculative attacks can then occur untilrates are forced to new, more appropriate levels.

In a floating rate system, day-to-day variability of exchange rates is inevi-table as market participants respond to new information about economicdevelopments that alters their perceptions about appropriate exchangerate patterns. Indeed, these day-to-day movements in principle constitutethe means of accomplishing longer-run adjustment of exchange rates tochanging economic circumstances. This fundamental role of exchange ratemovements raises the question whether the observed short-run variability ofexchange rates has been larger than was required to allow the necessarymedium-term flexibility. This question is complex and has not been thor-oughly addressed. A preliminary examination of recent experience andrelated studies by the Council of Economic Advisers has uncovered mixedevidence. In some cases, short-run variability over the last 5 years has beenbroadly commensurate with longer-run changes, while in other cases short-run changes have been less than might be consistent with the longer run. Nocases of persistent, excessive volatility were found.

There is a sense in which the floating rate system itself may have led toexcessive volatility—through the relaxed constraints on macroeconomicbehavior. As noted above, a floating rate system allows greater divergencein macroeconomic experience. Unfortunately, when greater scope fordivergent policies and performance is allowed, market uncertainty aboutappropriate exchange rates is also increased. The uncertainty, in turn, cancause market exchange rates to move in an erratic and disorderly fashionas market participants react, and overreact, to transitory bits of informationand rumors.

Greater exchange rate noise and uncertainty are among the costs of afloating rate system. Achievement of greater stability in exchange ratemarkets is dependent on the closer and more effective coordination of macro-economic policies among countries and on the continuing efforts of eachcountry to sustain macroeconomic policies that are consistent with internaland external adjustment.

In general, however, the evidence, although not conclusive, does indi-cate that floating has worked well over the long run, especially consider-ing the magnitude of the shocks to the international financial system. Infact, given these shocks, it is not clear that any system other than generalizedfloating would have been viable during the period. Exchange rate move-ments, while large, have broadly responded to economic fundamentals,have facilitated adjustment, and have tended to move the system towardrather than away from greater stability. If exchange rates are at present toovolatile for some countries, steps to increase the coordination of macro-

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economic policies could be helpful. Recognition of the current level ofinterdependence through improved coordination across countries may helpto bring greater stability to the foreign exchange markets as well as to pro-vide an international environment that is favorable to domestic policy goals.

IMPORTANT 1978 DEVELOPMENTS

The summer and fall of 1977 marked the beginning of a protracted fallin the value of the dollar and an increase in the day-to-day volatility ofexchange rates in general. Both of these trends continued through the first3 quarters of 1978.

The Variability of Exchange Rates and Depreciation of the Dollar

The extent of exchange rate variability can be seen in the average day-to-day change of major currencies. In general the daily variation in exchangerates decreased between 1973 and 1975, remained comparatively small from1975 to about the middle of 1977, and then increased markedly in the sec-ond half of 1977 and in 1978 (Chart 12).

The decline in variability from 1974 to the 1975-77 period is probably dueto a lessening of shocks to the world economy and the gradually growingability of market participants to work with a regime of floating rates. The

Chart 12

Monthly Average of Daily Exchange Rate Changes

PERCENT CHANGE

0 I i i i i 11 I~WI I ' I i i i i i I 11 i 11 11 11 i i 1 11 i i i I i 11 11 1 i ) i i 11 i i i i i 11 i i i i I 11 i i i 1 i i i i i

1973 1974 1975 1976 1977 1978SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

153

source of the sudden increase since late 1977 is less clear. Only to a small ex-tent can it be explained by the fact that the computed variability is somewhatamplified when the level of the exchange rate is moving sharply in one direc-tion rather than fluctuating around a steady trend. A more plausible explana-tion was the heightened uncertainty about the dollar's future equilibriumlevel in view of the growing current account deficit, a subsequent accelera-tion in inflation in the United States, and, for a time, uncertainty about theresponse of U.S. economic policies to these developments.

The value of the dollar also began to change dramatically in late 1977.Chart 11 shows the trade-weighted value of the dollar against the majorcurrencies for 1970-78. Two distinct periods can be identified during therecent experience. From September 1977 through March 1978 the dollarfell by 8.7 percent on a weighted average basis against other currencies.During this period the markets tended to focus on the rapid widening of theU.S. trade and current account deficits and their expected persistence. Eventhough a substantial portion of the deficits could be accounted for by thecyclical position of the United States relative to its major trading partners,growth forecasts suggested that this cyclical divergence would not soon beeliminated.

After a brief period of leveling off in April and May 1978, a second dollardecline began in early June and carried through until the end of October.Some part of this renewed decline can be accounted for by the accelerationand persistence of inflation in the United States, which aroused much con-cern in international financial circles. From a purely technical point of view,this is not a sufficient explanation, however, since the inflation rate in theUnited States, while substantially higher than that in Germany, Switzerland,and Japan, was not much higher than the average level among all our majortrading partners. And the parallel shift in interest rate differentials in favorof the dollar was more than sufficient to offset the change in underlying in-flation in the United States. Finally, the dollar's fall came in the face ofincreasing evidence that the U.S. current account position was improvingmarkedly.

By the end of October, then, there was considerable evidence that theprimary reason for the dollar's fall was the uncertainty in foreign exchangemarkets. Little attention was paid to the anti-inflation message on Octo-ber 24. Market participants continued to shift out of dollars despite an appar-ent consensus of market expectations that the dollar was undervalued from along-run point of view. Almost all market participants commenting in thepress or in discussions during the fall of 1978 expected an eventual turn-around of the dollar. Only the timing and the duration of the expectedrecovery were uncertain. Market participants, however, were highly uncer-tain about the future course of U.S. macroeconomic policy, and this uncer-tainty encouraged shifts out of dollars because it made the dollar a riskier,and hence less attractive, asset.

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THE NOVEMBER 1 INITIATIVE

On November 1 the Administration and the Federal Reserve imple-mented a strong dollar support program. Its basis was the judgment that,whereas some of the earlier 1977-78 dollar decline had been necessary tocorrect the external disequilibrium, the continued decline of the dollar hadbecome disorderly and was not justified by fundamental economic condi-tions. On the contrary, all the econometric evidence, the government fore-casts, and the private forecasts indicated that the U.S. current accountdeficit was likely to narrow sharply in 1979. Indeed, it had already fallenfrom the levels reached in the first half of 1978.

The dollar depreciation from September 1977 through the summer of1978, combined with U.S. economic policies recently put in place—theNational Energy Act, a new national export policy, the shift toward morerestrictive monetary and fiscal policies, and the other elements of the anti-inflation program—was thought likely to be effective in slowing inflationat home and bringing about a more appropriate external balance. Furtherdollar depreciation, especially that induced not by fundamental economicfactors but by uncertainty about future exchange rates or policies, wastherefore unnecessary for adjustment and would have led to a misalloca-tion of resources at home and abroad, possibly even to serious instability inthe financial system. Such movements would have added further to U.S.inflationary pressures and thus harmed the prospects for the anti-inflationprogram. They could also create the kind of instabilities in exchange mar-kets that could threaten economic prospects in other countries.

In the light of these considerations, the United States announced a dollarsupport package that contained two parts. First, the United States mobilized$30 billion in resources as its share of a joint intervention program with Ger-many, Japan, and Switzerland. Second, the Federal Reserve tighteneddomestic monetary policy by raising the discount rate from 8J/2 to 9^2 per-cent and by imposing a 2 percent supplementary reserve requirement on largetime deposits. The Federal funds rate also rose from 9% to 9% percent onNovember 1.

The $30-billion intervention package comprised several different items:(1) the Treasury's drawings on our International Monetary Fund reserveposition of $2 billion and $1 billion in Deutschemarks and yen respectively;(2) the Treasury's sales of a total of $2 billion of special drawing rights toGermany, Japan, and Switzerland; (3) a doubling of the Federal Reserveswap lines with Germany, Japan, and Switzerland—to $6 billion, $5 billion,and $4 billion respectively; and (4) the Treasury's commitment to issueup to $10 billion in foreign currency denominated securities in foreign privatemarkets.

The markets responded favorably to the dollar support policy. By the endof the first week of the program, the trade-weighted dollar was 7.7 percenthigher than it had been at its low point at the close of business on October30. By November 30 it had risen an additional 2.4 percent; and, while some

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declines occurred in December and early January—principally with thenews of the OPEC price increases and the instabilities in Iran—by the mid-dle of January it was again roughly 7.7 percent above its October low. Thusthe foreign exchange markets at the beginning of 1979 were clearly in a dif-ferent condition from what they were in the summer and fall of 1978. Theone-way speculation had largely ended, and economic fundamentals ap-peared to be much more important market factors than they had been 2 or3 months before. Market participants, who had been primarily concernedabout preventing further foreign exchange losses and uncertain about thespecific timing of an expected dollar upturn, were now taking a morehealthy wait-and-see attitude about the future course of market funda-mentals. The November 1 action, bolstered by the greater certainty that itgenerated, appears to have achieved its basic purpose. In the period aheadthe value of the dollar should depend on sustained progress in the U.S.trade and current accounts and on the success of the new anti-inflation pro-gram, rather than on the level of market uncertainty.

While the dollar's decline in the fall of 1978 was an instance of a mal-functioning of exchange markets, the overall history of exchange rates inrecent years does not suggest that such malfunctions are chronic. Rather,they are temporary but acute symptoms that are most likely to develop whengeneral macroeconomic conditions are diverging, or in transition, therebygenerating greater uncertainty about future economic conditions and poli-cies and an increased dispersion in expectations about future exchange rates.Conversely, as general macroeconomic conditions and policy directionsbecome better established, exchange markets can be expected to performmore smoothly their function of adjusting rate levels to such economicdivergences as remain between countries. Such a calming of exchangemarkets may take time and may require considerable further efforts towardcoordinating macroeconomic policies across countries. Excessive marketsensitivity, built up during periods of disorderly movement, is likely to inducecontinued higher than normal variability in rate movements until accumu-lated evidence of greater underlying stability becomes firmly established.

THE EUROPEAN MONETARY SYSTEM

The members of the European Economic Community reached agreementon a new European Monetary System expected to be implemented in1979. The development of this system is consistent with the Community'scontinued efforts to work toward economic and political unification and withits members' concern about the negative effects on economic activity andinvestment of what they consider increasingly excessive and unnecessaryvolatility in exchange rates.

In the short run this new agreement amounts to adding France, Ireland,and Italy to the Snake arrangement of the Benelux nations, Denmark, andWest Germany, with Norway dropping out. There will be expanded creditarrangements and increased margins around parity changes (up to 6 percent

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for new members) as well as greater flexibility for parity changes. TheUnited Kingdom, which initially will participate in only part of the system,may become a full member later in 1979. The European Monetary Systemis considered by many participants to be an important step toward a full-fledged monetary union of the European Community countries, with fixedexchange rates, a European Currency Unit for use as a numeraire as well asfor intra-Community central bank settlements, and a European MonetaryFund with comprehensive credit facilities.

In the early part of its existence, any system of fixed exchange rates mustconcern itself with the establishment of consistent rate patterns and adjust-ment mechanisms. Otherwise, whenever rate patterns or fundamentaleconomic conditions appear unsustainable, market participants are likelyto test the weakest and strongest currencies. Judging from past efforts, gov-ernments can sometimes forestall such attacks by judiciously adjusting cen-tral rates when economic conditions warrant such action. The adjustment ofcentral rates, however, cannot be too frequent, for then future changeswould tend to become anticipated by the market, and the self-stabilizingproperty of the system—which is its major benefit—would be dissipated.On the other hand, if rate adjustments become too infrequent, funda-mental disequilibria will become so large as to attract massive, and success-ful, speculative attacks.

To maintain a fixed-margin arrangement, therefore, it is necessary toforestall situations in which central rates cease to be credible and to do thisby working actively toward convergence of macroeconomic conditions andpolicies. For the countries of the European Monetary System, this necessityis clearly recognized. Indeed, to some extent the European Monetary Systemwas regarded as an instrument for achieving precisely this sort of conver-gence. Its success will depend in the shorter run on its flexibility, the viabilityof its credit arrangements, and the eventual full-time membership of allCommunity members, and in the longer run on the convergence of membercountries' macroeconomic policies and economic conditions.

THE CHANGING ENVIRONMENT OF WORLD TRADE

Until recently, the postwar period has been one of very high growth ofnational economies and improved living standards. One of the major sourcesof this vitality has been the progressive dismantling of trade barriers. Each ofthe three major industrial regions (North America, Europe, and Japan) hasexperienced increased trade flows. This increase is due in large part to thevision of those who built the Common Market, progressively opened up theJapanese economy, and sustained the Kennedy Round of multilateral tariffreductions.

During the last decade, however, movement toward increased competi-tion in international markets has flagged. Indeed since 1974 there has beensome regression in trade policies. In response, the United States, along withgovernments of other major industrial countries, has committed itself to pro-

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278-216 O - 79 - 11

moting free trade and reducing protectionist pressures around the world.The aims of U.S. trade policy are to enable the United States and othereconomies to benefit from the most efficient allocation of worldwide re-sources and to channel U.S. resources into sectors of comparative advantage.In 1978 the major activities of U.S. policy makers in this area involved theMultilateral Trade Negotiations in Geneva, the determination of domestictrade policy, and the development of the President's National Export Policy.

In recent years the growing economic interdependence in the internationalcommunity, along with an increasing incidence of shocks and resulting ad-justment policies, has led to an increasing number of trade problems aroundthe world and consequently to more cases of overt or indirect protection andreaction. These trade problems and increasing protectionist pressures haveseveral causes: the emergence of newly industrialized nations who are com-peting to gain an increasing proportion of the export market for industrialgoods; the development of long-term structural problems in several sectors,resulting from shifts in the pattern of world consumption and production;the appearance of significant current account deficits after the oil price in-crease in 1973; greater skepticism about the functioning of the internationaltrading system; and, above all, the recession, stagnant domestic markets, andassociated high levels of unemployment since 1974. Accordingly, individualnations have taken several measures—including safeguard actions (protect-ing domestic industry against injury from imports), antidumping proceed-ings, and actions to offset export subsidies. These policies have been con-centrated in certain industrial sectors, particularly textiles, automobiles, steel,and shipbuilding.

THE MULTILATERAL TRADE NEGOTIATIONS

The Administration, in conjunction with its major trading partners andnumerous developing nations, is committed to resolving these trade problemsthrough the Tokyo Round of the Multilateral Trade Negotiations. The goalsof these multilateral negotiations have been to relax tariff and nontariffbarriers to trade, to formulate rules for trade and codes of fair conduct, todevelop effective mechanisms for settling disputes, and to allow nations tobenefit from specialization without unduly losing control over the growthpatterns of their own economies.

By the end of 1978 these goals seemed close to achievement when signifi-cant agreement was reached on the reduction of most of the tariff andnontariff barriers to trade. The trade package (still subject to final agree-ment in early 1979 and to legislative approval later in the year) includescodes on subsidies, government procurement, standards, customs valuation,and licensing. It also includes a package of tariff cuts by the United States,with reciprocal cuts from our trading partners. The U.S. cuts are projectedto average about 30 percent. In addition, negotiators agreed to remove sev-eral particularly burdensome industrial and agricultural nontariff barriers.And finally, the trade package provides measures to improve the General

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Agreement on Tariffs and Trade (GATT) framework for dealing with agri-cultural trade issues, trade with developing countries, balance of paymentsmeasures, export restrictions, and the general management of trade disputes.

Among the most significant areas of agreement for U.S. trade interestsare the codes on safeguards, on subsidies and countervailing duties, and ongovernment procurement. The safeguards code ensures that countries willobserve international trading rules as set forth in the revised GATT ArticleXIX when they restrict imports of particular products in order to affordtemporary relief to domestic producers from injurious foreign competition.This revised article provides for a broad coverage of trade policies, improvedcriteria and conditions for taking safeguard action, more openness and dueprocess in domestic safeguard procedures, and better international surveil-lance. There is also likely to be some scope for selective action when aninjury can be ascribed to imports from particular countries. Such selectivitywould be subject to consultation and negotiation with the affected countriesand to surveillance by a GATT committee of representatives from each ofthe signatories.

The agreement on subsidies and countervailing duties will limit trade-distorting subsidies, and will enunciate more clearly a country's right totake counteractions against such practices. Export subsidies will be definedmore broadly than they have been in the past (for example, they can existeven if the domestic price and export price are the same); they must beimposed and regulated with greater "transparency" (that is, so that theyare more visible to the domestic and foreign public) ; they will be prohibitedon primary mineral products and nonprimary products; and their use foragricultural products will require greater discipline. In addition, signatorieswill agree to consider the impact on their trading partners when usingeconomic subsidies in general. Countermeasures can be imposed if a subsidycauses injury to domestic producers, the impairment of benefits from GATTconcessions, or serious prejudice to other signatories (if, for example, itreduces a nation's expected benefits from international agreements). Thisparticular code will be enforced through a tightly controlled process forsettling disputes (the recommendations of the international committee mustbe reported within 120 days of a complaint).

The government procurement code is intended to reduce the scope fordiscrimination against foreign suppliers when governments purchase articlesfor their own use. It entails agreement on greater transparency in the bid-ding and awarding of government contracts for purchases of goods; and,since the elimination of all discrimination is unlikely, it also requires agree-ment about the official entities that would be covered by the code. The latterproblem is particularly difficult since many of the entities which are privatein the United States are governmental in many foreign countries.Nevertheless significant reduction of discrimination in government procure-ment, subject to settlement of disputes by an international panel, shouldbe achieved.

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Taken together, the tentative agreements reached in the Tokyo Round ofthe Multilateral Trade Negotiations represent significant progress in ourcontinuing efforts to reduce barriers to international commerce and tostrengthen and expand international trading rules, and they should con-tribute to an increase in trade and investment around the world. This agree-ment represents the first time since the 1960s that the international com-munity has reduced the barriers to trade across such a broad spectrum oftariff and nontariff measures. For the United States in particular, the lower-ing of our own import barriers should help reduce inflationary pressures byincreasing the competitiveness of imports and of import-competing prod-ucts. At the same time, our export capabilities will receive a boost throughthe lowering of both tariff and nontariff barriers in our major exportmarkets.

U.S. DOMESTIC TRADE POLICY

Despite increasing trade problems and pressures for protectionist tradepolicies around the world, the Administration remains committed to a freeand open trading system. In many highly concentrated domestic industries,foreign competition helps prevent market power from becoming excessive.Nevertheless cases occur from time to time where, under U.S. law, importrelief is necessary: where injury exists, where imports are the major causeof injury, and where such temporary actions can contribute to adjustment.

In 1978 the International Trade Commission investigated petitions forimport relief by over 30 industries, covering imports valued at over $2 billion.The International Trade Commission recommended increased protection inthe form of tariffs or quantitative restrictions on more than $1.3 billion oftrade in such goods as stainless steel flatware, high-carbon ferrochrome,CB radios, refined copper, industrial fasteners, and bicycle tires and tubes.Relief was granted in escape clause cases involving approximately $750 mil-lion in imports (for example, CB radios, high-carbon ferrochrome, andindustrial fasteners). In these cases the Administration decided in favor ofimport relief because it would aid substantially in the development of moreefficient industries, and because the direct benefits of relief were sufficientlyhigh to outweigh the costs to consumers and other sectors of the economy.

THE NATIONAL EXPORT POLICY

Faced with the large external deficit and the need for action, the Admin-istration felt that increasing U.S. exports could be a valuable way to movetoward adjustment. In the light of the weak dollar, the deteriorating posi-tion of U.S. manufactured exports, and the low profile accorded exportefforts in the United States, the Administration announced the NationalExport Policy on September 26, 1978. This National Export Policy, in con-junction with the successful conclusion of the Multilateral Trade Negotia-tions, will ensure a strong export industry and an environment for faircompetition from imports for the period ahead.

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Before 1976 the largest U.S. trade deficits for a full year were the $5.3-billion deficit in 1974 and the $6.4-billion deficit in 1972. In comparison, thetrade deficits in 1976, 1977, and 1978 were $9 billion, $31 billion, and anestimated $35 billion respectively. The U.S. share of total manufacturedexports of 15 industrial countries fell from almost 30 percent in the late1950s to 19.2 percent in 1972. It rose to 21.1 percent in 1975 but has de-clined steadily since then, falling to 18.9 percent by the first quarter of 1978,the lowest since mid-1972 (Chart 13).

The outlook for 1979 and the early 1980s is much brighter. U.S. exportsof manufactured goods have already shown a strong turnaround in 1978.This improvement, and the favorable outlook, derive from several factors.First, some of the trade deficit can be explained by our faster growth com-pared to that of our major trading partners. As their growth rates abroadincrease in relation to ours, in accord with recent trends and commitmentsmade at the Bonn Summit, our exports should increase relative to our im-ports. Second, the depreciation of the dollar over the last 18 months willprovide a continuing spur to exports in the coming years. Third, by reduc-ing inflationary pressures, the Administration's anti-inflation program willimprove our international competitiveness, increasing our exports and re-ducing our imports. Fourth, the successful conclusion of the Multilateral

Chart 13

U.S. Share of Fifteen IndustrialCountries' Exports of Manufactured Goods

PERCENT^

30

28

26

24

22

20

18

n l i i i i i i i i i i i i i i i i i i i I

1958 1960 1962 1964 1966 1968 1970 1972 1974 1976:/U.S. EXPORTS OF MANUFACTURES AS PERCENT OF TOTALINDUSTRIAL COUNTRIES' EXPORTS OF MANUFACTURED GOODS.SOURCE: DEPARTMENT OF COMMERCE.

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Trade Negotiations in Geneva will reduce tariff and nontariff barriers in ourexport markets and should improve our export capabilities.

Finally, the Administration has committed itself to a stronger emphasison foreign markets for U.S. goods by developing the National Export Policy.This policy includes the following major provisions: an increase in the sizeand the flexibility of the Eximbank's activities; a commitment from theSmall Business Administration to channel up to $100 million of its loanguarantees to small export businesses; an earmarking of $20 million of theCommerce and State Departments' budgets to assist small- and medium-sized businesses in their marketing efforts abroad; an increase in the levelof short-term agricultural export credits by almost $1 billion; and a de-cision to ask the Justice Department to clarify ambiguities about the en-forcement of the Foreign Corrupt Practices Act and the international appli-cation of our antitrust laws.

Perhaps the most important contribution the Federal Government canmake to improving our trade position is to assure a more sensible regulatoryenvironment. Too frequently, obstacles to production or investment haveraised domestic costs or encouraged imports. If agencies are required to takeinto account the effects on trade and other costs of regulations, greater scopecan exist for competitive forces, thereby allowing domestic producers to gaina greater share of domestic and foreign markets.

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Appendix A

REPORT TO THE PRESIDENT ON THE ACTIVITIES

OF THE

COUNCIL OF ECONOMIC ADVISERS DURING 1978

163

LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS.,

Washington, D.C., December 29, 1978.MR. PRESIDENT:

The Council of Economic Advisers submits this report on its activitiesduring the calendar year 1978 in accordance with the requirements of theCongress, as set forth in section 10(d) of the Employment Act of 1946 asamended by the Full Employment and Balanced Growth Act of 1978.

Cordially,CHARLES L. SCHULTZE, Chairman

LYLE E. GRAM LEY

WILLIAM D. NORDHAUS

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Report to the President on the Activities of theCouncil of Economic Advisers During 1978

With the enactment of the Full Employment and Balanced Growth Act of1978, the chartering legislation of the Council of Economic Advisers wassubstantially revised for the first time since the Council was created by theEmployment Act of 1946. The new act, which was signed by the President onOctober 27, 1978, is better known as the Humphrey-Hawkins Act, after theprimary sponsors of the law, Senators Hubert and Muriel Humphrey andCongressman Augustus Hawkins.

Under the Full Employment and Balanced Growth Act, the basic missionof the Council of Economic Advisers is unchanged. The Council is to con-tinue to advise and assist the President in the formulation of national eco-nomic policies and in Presidential decisions on other matters that affect theeconomic life of the Nation. However, the Humphrey-Hawkins Act createsan important new framework within which the government is to pursuepolicies designed to reach our economic objectives.

The act reaffirms and enlarges upon the commitment of the EmploymentAct of 1946 by declaring that it is a national objective to provide fullopportunities for useful employment to all Americans willing and able towork. The Humphrey-Hawkins Act also legislates for the first time a na-tional commitment to reduce the rate of inflation. The act recognizes as wellthe need for better coordination of monetary and fiscal policies, and to thatend establishes new procedures and requirements for the President, theCongress, and the Federal Reserve System.

The new law requires that the President each year set forth in the Eco-nomic Report of the President numerical goals for employment, unemploy-ment, production, real income, productivity, and prices during the next 5years. Short-term goals for these key indicators of the economy's health areto be established for 2 years, and medium-term goals for the subsequent 3years.

The Full Employment and Balanced Growth Act sets forth specificnumerical goals for unemployment and inflation for the 5-year period nowahead. The act states that the goal for unemployment in 1983 should be4 percent overall and 3 percent for workers aged 20 and over. For inflation,the act sets a goal of 3 percent by 1983 and, after that goal is achieved, zeropercent by 1988. These are highly ambitious goals that cannot be realized

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solely through fiscal and monetary measures. The act recognizes this in twoways.

First, it recommends to the President a wide range of policies that mightserve to attack the problems of unemployment and inflation. The act doesnot require him to pursue any specific policies, nor does it authorize spend-ing on any new programs. If the President wishes to adopt policies mentionedin the act, he must seek congressional authorization to fund the newprograms.

Second, the act authorizes the President, beginning with the second Eco-nomic Report published after passage of the act, to recommend goals forunemployment and inflation in 1983 that differ from those provided for inthe act, if economic circumstances make such changes necessary. The actprovides, however, for continued commitment by the Congress and thePresident to the objective of reducing unemployment to 4 percent as soon asfeasible.

If the President recommends a change in the 1983 goal for reducingunemployment, his Economic Report must designate the year in which hebelieves that the 4 percent goal can be achieved. The Congress may theninclude in its first concurrent budget resolution its own timetable forattaining the 4 percent unemployment goal. The budget resolution may alsocontain such a statement if the President should, in subsequent years,recommend a year for reaching 4 percent unemployment other than thatset in a future congressional budget resolution.

Each year the President is required by the new act to present budgetrecommendations for the 2 years immediately ahead that are consistentwith the short-term goals set forth in his Economic Report. He is also re-quired to present projections for the budget in the subsequent 3years that are consistent with the medium-term goals set out in theEconomic Report. Similarly, the act calls upon the Congress, in its con-sideration of the budget, to take into account the economic goals recom-mended by the President. Every year, when debate on the first concurrentbudget resolution is begun in each House of Congress, up to 4 hours ofdebate are to be reserved for discussion of the economic situation and itsimplications for budgetary policy.

The Federal Reserve Board is required by the act to review the President'sbudget and Economic Report and to report to the Congress regarding thePresident's recommendations and the manner in which monetary policiesare related to his goals. The Congress, in its yearly deliberations on thebudget, is to take into account not only the President's program but theviews and policies of the Federal Reserve Board as well. Through thisprocess, the act should promote a better coordination of the Nation'seconomic policies.

The Council of Economic Advisers played an active role in the develop-ment of the Full Employment and Balanced Growth Act. During 1977 the

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Council joined sponsors of the act in discussions that led to the legislationintroduced in mid-1977 with the President's full support and passed by theCongress in 1978. During congressional consideration of the act, the Coun-cil worked closely with members of Congress, their staffs, and other govern-ment agencies to achieve passage of the legislation.

The Economic Report of the President and the Budget of the UnitedStates, published in January 1979, will be the first issued under the newact, and the first to set forth economic goals in the fashion required bythe new act. They will also carry out the requirement of the Humphrey-Hawkins Act that each year the Office of Management and Budget re-view selectively a number of national priority programs and policies that canfurther the purposes of the act. The act particularly directs the Office ofManagement and Budget to study such significant issues as governmentpolicies affecting energy and agriculture, the problems of urban areas,and the expansion of exports. Similarly, the act requires that the EconomicReport of the President include a report on investment policy that discussesboth the needs of businesses for investment capital and the government'spolicies to support adequate rates of capital formation.

FUNCTIONS OF THE COUNCIL OF ECONOMIC ADVISERS

The Employment Act of 1946 challenged the government to pursue poli-cies that would achieve maximum employment, production, and purchas-ing power. Recognizing the evolution of the economy since 1946, and theincreasing importance of the inflation problem in today's economy, the FullEmployment and Balanced Growth Act adds to that mandate. The FederalGovernment still is to promote high levels of employment and production.Now, however, the government is also called upon to pursue prudentbudgetary policies, to seek an improved international trading position for theUnited States, and to take steps to assure reasonable price stability.

These new legislative objectives are fully consistent with the Councilof Economic Advisers' current role in the Administration, a role thathas grown steadily since 1946 as new economic problems placed new de-mands on the Council and its staff. Today the Council is responsible foradvising the President on such widely differing matters as Federal fiscal poli-cies, efforts to reform the Federal regulatory system, and the internationaleconomic policies of the U.S. Government.

MACROECONOMIC POLICIES

From the outset the Council's fundamental role has been to advise thePresident on comprehensive economic policies designed to achieve the gov-ernment's objectives for employment, output, and price stability. To fulfillthis responsibility the Council develops economic forecasts several timeseach year with the assistance of an interagency forecasting committee. Themembers of this committee include, in addition to the Council, representa-

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tives from the Office of Management and Budget and the Departments ofthe Treasury, Commerce, and Labor. This group, which is chaired by aMember of the Council, meets to analyze the outlook for individual sectorsof the economy and to develop detailed economic forecasts for the periodimmediately ahead. The Chairman of the Council presents these fore-casts to the Economic Policy Group (EPG), made up of the President'sprincipal economic advisers, which meets each week to discuss and developthe Administration's economic policy proposals. The Chairman of the Coun-cil of Economic Advisers is a member of the EPG and of its steering group.

In the final months of each year, during the preparation of the Presi-dent's annual budget, the Council also presents to the Economic PolicyGroup, and later to the President, proposals for Federal fiscal policies duringthe coming fiscal year. The development of advice to the Presi-dent on macroeconomic policy thus remains one of the Council's majorresponsibilities.

The Council also worked actively during 1978 with the Council on Wageand Price Stability to develop and apply measures to combat inflation, in-cluding the program that the President announced to the Nation on Octo-ber 24, 1978. The Council on Wage and Price Stability was chaired by theChairman of the Council of Economic Advisers, Charles L. Schultze, untilOctober 1978, when Alfred E. Kahn was named Advisor to the President onInflation, and Chairman of the Council on Wage and Price Stability.

MICROECONOMIC POLICIES

In addition to its work on overall economic policies, the Councilof Economic Advisers is increasingly involved in the analysis of micro-economic issues—those policy actions and economic developments that af-fect individual sectors of the economy, or even individual industries andmarkets. During 1978 the Council helped form the Administration's poli-cies regarding agriculture, energy, financial institutions, health insurance,welfare reform, and other major issues. The Council and its staff werealso actively involved in developing the tax program that the President sub-mitted to the Congress in January 1978.

During 1978 the Council continued to chair the interagency RegulatoryAnalysis Review Group (RARG), created late in 1977 to review selectedanalyses of the economic effects of major regulatory proposals. The Presidenthas ordered that each major regulatory proposal must be accompanied by aregulatory analysis. The analysis is to be developed by the regulatory agencyoriginating the proposal and submitted for public comment before the finalregulation takes effect. During the period for public comment the Regula-tory Analysis Review Group evaluates the regulatory analysis, and its ap-praisal is filed in the agency's record of public commentary. In 1978 fivemajor regulations were reviewed by the RARG: the Occupational Safetyand Health Administration's standard on workers' exposure to acrylonitrile,and its generic carcinogen policy; the Environmental Protection Agency's

170

ambient air quality standard for ozone; the Department of Transportation'sregulation on access to mass transit facilities for the handicapped; and theDepartment of the Interior's surface coal mining and reclamation regula-tions. At year's end, reviews were under way of the Environmental ProtectionAgency's new source performance standards for steam-powered electricgenerating plants and the Department of Energy's coal conversion regula-tions. The Council's staff took an active part in preparing several of thereview group's comments on these regulations and in coordinating theactivities of the RARG.

The Council of Economic Advisers continued during 1978 to participatein developing the Administration's international economic policies. TheChairman of the Council also served during the year as the Chairman ofthe Economic Policy Committee of the Organization for Economic Co-operation and Development (OECD). In that capacity he chaired threemeetings of the committee, which consists of senior economic officials fromOECD member governments.

The Council also participates in the working parties of the OECDEconomic Policy Committee on inflation, balance of payments adjustment,and medium-term growth, as well as the ad hoc group on positive adjust-ment policies. Council Members or staff economists, representing the U.S.Government, attend periodic meetings of these working parties during theyear.

PUBLIC INFORMATION

The Full Employment and Balanced Growth Act retained the require-ment, originally set forth by the Employment Act of 1946, that the Presi-dent submit a report to the Congress each year on the state of the economy.As noted earlier, however, the Humphrey-Hawkins Act requires new infor-mation to be included in the Economic Report of the President.

The Council assumes major responsibility for the preparation of the Eco-nomic Report of the President, which also contains the annual report of theCouncil. This publication is the principal channel through which the publicis informed of the Council's work and views, and it is of further importancein presenting and explaining the Administration's domestic and internationaleconomic policies. In recent years about 50,000 copies of the Report havebeen distributed annually.

The Council prepares a monthly publication, Economic Indicators, whichis a compendium of statistical information developed by the Council's Statis-tical Office for the Joint Economic Committee of the Congress. Each monthabout 10,000 copies of Economic Indicators are distributed.

Information is also provided to members of the public through speechesand other public appearances by the Chairman, Members, and staff econ-omists of the Council. In 1978 the Chairman and Members made 23 ap-pearances before committees of the Congress to testify on the Administra-tion's economic policies. Among its publications this year the Council in-

171

eluded a Staff Paper on the taxation of capital gains, prepared by JohnYinger, a senior staff economist, with the help of other members of the Coun-cil's staff. Less formally, the Council answered numerous requests from thepress in 1978 and provided information on a wide range of economic topicsin response to inquiries from individual citizens.

ORGANIZATION AND STAFF OF THE COUNCIL

OFFICE OF THE CHAIRMAN

Charles L. Schultze, appointed Chairman of the Council in 1977, com-municates the Council's views to the President through direct consultationas well as through written reports dealing with particular economic develop-ments, programs, and proposals. The Chairman represents the Council atmeetings of the Cabinet and other official events.

COUNCIL MEMBERS

The two Council Members supervise the work of the Council's profes-sional staff. Members also represent the Council at meetings of public andprivate groups concerned with economic affairs, and they assume majorresponsibility for the Council's involvement in the activities of the govern-ment that affect the economy. Lyle E. Gramley and William D. Nordhauscontinued to serve as Council Members during 1978.

Past Council Members and their dates of service are listed

Name

Edwin G. Nourse.Leon H. Keyserling_.

John D. Clark

Roy BloughRobert C. TurnerArthur F. Burns.Neil H. Jacoby.Walter W. StewartRaymond J. Saulnier...

Joseph S. DavisPaul W. McCrackenKarl BrandtHenry C. Wallich.Walter W. HellerJames TobinKermit Gordon _Gardner Ackley

John P. LewisOtto EcksteinArthur M. Okun

James S. DuesenberryMerton J. Peck _Warren L. SmithPaul W. McCrackenHendrik S. HouthakkerHerbert Stein _.

Ezra SolomonMarina v.N. Whitman _Gary L. Seevers..William J. FellnerAlan GreenspanPaul W. MacAvoyBurton G. Malkiel

Position

ChairmanVice ChairmanActing ChairmanChairmanMemberVice ChairmanMember.. _MemberChairman _MemberMember _Member...._ChairmanMemberMemberMemberMemberChairmanMember..Member..MemberChairmanMember..Member. _MemberChairmanMember.Member...MemberChairmanMember..MemberChairmanMember _MemberMemberMemberChairmanMember _Member

Oath of office date

August 9, 1946August 9, 1946November 2, 1949..May 10, 1950August 9, 1946May 10, 1950June 29,1950 . . .September8,1952March 19,1953Septembers, 1953December 2,1953April 4, 1955..December 3,1956May 2, 1955December 3,1956November 1, 1958May 7, 1959January 29,1961January 29,1961January 29, 1961Augusts 1962November 16,1964May 17,1963September 2.1964....November \&, 1964Februarys, 1963.. . .February 2,1966February 15,1968July 1, 1968February 4, 1969February 4,1969February 4,1969January 1,1972September 9,1971March 13,1972July 23,1973.October 31, 1973September 4,1974June 13, 1975July 22,1975

below

Separation date

November 1, 1949.

January 20,1953.

February 11,1953.August 20, 1952.January 20,1953.December 1,1956.February 9,1955.April 29,1955.

January 20,1961.October 31, 1958.January 31,1959.January 20, 1961.January 20,1961.November 15, 1964.July 31, 1962.December 27,1962.

February 15, 1968.August 31,1964.February 1,1966.

January 20,1969June 30,1968.January 20,1969.January 20,1969.December 31, 1971.July 15, 1971.

August 31, 1974.March 26,1973.August 15, 1973.April 15,1975.February 25, 1975.January 20, 1977.November 15, 1976.January 20,1977.

172

The Council staff is small enough to permit the Chairman and Membersto work together as a team on most major policy issues. To facilitate coordi-nation of the staff's work, however, responsibility for the major economictopics of concern to the Council has been informally divided between thetwo Members. Mr. Gramley has continued to take primary responsibility in1978 for macroeconomic analysis, including the preparation of economicforecasts, and for labor market policies. Mr. Nordhaus has supervised inter-national economic analysis and microeconomic analysis, including analysis ofpolicies in such areas as energy, agriculture, social welfare, and oversight ofregulatory reform activities.

PROFESSIONAL STAFF

At the end of 1978 the professional staff consisted of the Special As-sistant to the Chairman, 10 senior staff economists, 2 staff economists, 1statistician, and 5 junior staff economists.

The professional staff and their special fields at the end of the year were:

Peter G. Gould Special Assistant to the Chairman

Senior Staff Economists

Thomas C. Earley Agriculture and Food PolicyRobert J. Flanagan Labor Market and Anti-Inflation PoliciesSteven W. Kohlhagen International Financial Developments and

TradeVal L. Koromzay International Financial and Economic De-

velopments, and TradeSusan J. Lepper Monetary and Financial Policies, Housing,

State and Local Finance, and GeneralMacroeconomic Analysis

David C. Munro Business Conditions Analysis and ForecastingDavid S. Sibley RegulationLawrence J. White RegulationDavid A. Wyss Business Conditions Analysis and Forecasting,

and Health PolicyJohn M. Yinger Public Finance and Income Maintenance

Policy

Statistician

Catherine H. Furlong Senior Statistician

Staff Economists

Robert E. Litan Regulation and Energy

Michael J. McKee Business Conditions Analysis and Forecasting

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Junior Economists

James P. Luckett Labor Market PoliciesRobert S. Lurie Regulation and EnergyFrederick W. McKinney. . . Public Finance, Income Maintenance, and

Health PolicyElizabeth A. Savoca Business Conditions Analysis and ForecastingWanda S. Tseng International Economic Developments and

Trade

Catherine H. Furlong, Senior Statistician, is in charge of the Council'sStatistical Office. Mrs. Furlong has primary responsibility for managing theCouncil's statistical information system. She supervises the publication ofEconomic Indicators and the preparation of the statistical appendix to theEconomic Report. She also oversees the verification of statistics in memo-randa, testimony, and speeches. Natalie V. Rentfro, Earnestine Reid, andElizabeth A. Kaminski assist Mrs. Furlong.

From time to time during the year, the Council calls upon outside econo-mists to provide special assistance on projects relating to their particularspecialty. During 1978 consultants to the Council included Peter K. Clark(Stanford University), Donald H. Fullerton (Stanford University), FrankS. Levy (The Urban Institute), and John B. Shoven (Stanford University).

During the summer James R. Golden (U. S. Military Academy) was amember of the professional staff.

In preparing the Economic Report the Council relied upon the editorialassistance of Rosannah C. Steinhoff. Also called on for special assistance inconnection with the Report were Dorothy L. Reid and Dorothy Bagovich,former members of the Council staff.

SUPPORTING STAFF

The Administrative Office of the Council of Economic Advisers providesgeneral support for the Council's activities. Nancy F. Skidmore, Adminis-trative Officer, prepares and analyzes the Council budget and provides gen-eral administrative services.

Elizabeth A. Kaminski, Staff Assistant to the Council, handles generalpersonnel management, serves as Executive Secretary to the RegulatoryAnalysis Review Group, and provides general assistance to the Council andto the Special Assistant in the management of the Council's activities.

Members of the secretarial staff for the Chairman and Council Membersduring 1978 were Patricia A. Lee, Linda A. Reilly, Florence T. Torrison,and Alice H. Williams. Secretaries for the professional staff were M. Cather-ine Fibich, Bessie M. Lafakis, Joyce A. Pilkerton, Bettye T. Siegel, MargaretL. Snyder, and Lillie M. Sturniolo.

Marie G. Boccucci provided secretarial assistance during the summermonths.

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DEPARTURES

The Council's professional staff members most often are on leave to theCouncil from universities, other government agencies, or research institutions.Their tenure with the Council is usually limited to 1 or 2 years. Senior staffeconomists who completed their appointments with the Council during theyear were Roger E. Brinner (Data Resources, Inc.), Peter K. Clark (Stan-ford University), Nina W. Cornell (Federal Communications Commission),George E. Johnson (University of Michigan), J. B. Penn (Department ofAgriculture), Jeffrey R. Shafer (Federal Reserve Board), and William L.Springer (Data Resources, Inc.). Arthur E. Blakemore, staff economist,resigned to accept a position with the Council on Wage and Price Stability.

Junior economists who resigned in 1978 were Michael S. Golden (Con-gressional Budget Office), Howard K. Gruenspecht (Domestic Policy Staff),Richard I. Kolsky (Yale University), Richard A. Koss (Wharton Econo-metric Forecasting Associates, Inc.), Julianne M. Malveaux (RockefellerFoundation), and Martha M. Parry (Stanford University).

James W. Gatling and Frank C. Norman joined the new Office of Admin-istration created in the Executive Office of the President as part of thePresident's 1977 reorganization of his own staff offices.

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Appendix B

STATISTICAL TABLES RELATING TO INCOME,EMPLOYMENT, AND PRODUCTION

177

CONTENTS

NATIONAL INCOME OR EXPENDITURE: P a g e

B-l. Gross national product, 1929-78 183B-2. Gross national product in 1972 dollars, 1929-78 184B-3. Implicit price deflators for gross national product, 1929-78 186B-4. Implicit price deflators and alternative price measures for gross

national product and gross domestic product, 1929-78 188B-5. Gross national product by industry in 1972 dollars, 1947-77 189B-6. Gross national product by major type of product, 1929-78 190B-7. Gross national product by major type of product in 1972 dollars,

1929-78 191B-8. Gross national product: Receipts and expenditures by major eco-

nomic groups, 1929-78 192B-9. Gross national product by sector, 1929-78 194B-10. Gross national product by sector in 1972 dollars, 1929-78 195B-ll . Gross domestic product of nonfinancial corporate business, 1929-78.. 196B-l2. Output, costs, and profits of nonfinancial corporate business, 1948-78. 197B-l3. Personal consumption expenditures, 1929-78 198B-14. Gross private domestic investment, 1929-78 199B-l5. Inventories and final sales of business, 1946-78 200B-16. Inventories and final sales of business in 1972 dollars, 1947-78 201B-l 7. Relation of gross national product and national income, 1929-78.... 202B-l8. Relation of national income and personal income, 1929-78 203B-l9. National income by type of income, 1929-78 204B-20. Sources of personal income, 1929-78 206B-21. Disposition of personal income, 1929-78 208B-22. Total and per capita disposable personal income and personal con-

sumption expenditures in current and 1972 dollars, 1929-78 209B-23. Gross saving and investment, 1929-78 210B-24. Saving by individuals, 1946-78 211B-25. Money income (in 1977 dollars) and poverty status of families and

unrelated individuals by race of head, 1947—77 212

POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY:

B-26. Population by age groups, 1929-78 213B-27. Noninstitutional population and the labor force, 1929-78 214B-28. Civilian employment and unemployment by sex and age, 1947-78. . 216B—29. Selected employment and unemployment data, 1948—78 217B-30. Unemployment rate by demographic characteristic, 1948-78 218B-31. Unemployment by duration, 1947-78 219B-32. Unemployment by reason, 1967-78 220B-33. Unemployment insurance programs, selected data, 1946-78 221B-34. Wage and salary workers in nonagricultural establishments, 1929-78. 222B-35. Average weekly hours and hourly earnings in selected private non-

agricultural industries, 1947-78 224B-36. Average weekly earnings in selected private nonagricultural indus-

tries, 1947-78 225B-37. Productivity and related data, private business economy, 1947-78. . . 226B-38. Changes in productivity and related data, private business economy,

1948-78 227

179

PRODUCTION AND BUSINESS ACTIVITY: P a g e

B-39. Industrial production indexes, major industry divisions, 1929-78. .. . 228B-40. Industrial production indexes, market groupings, 1947-78 229B-41. Industrial production indexes, selected manufactures, 1947-78 230B-42. Capacity utilization rate in manufacturing, 1948-78 231B-43. New construction activity, 1929-78 232B-44. New housing units started and authorized, 1959-78 234B-45. Business expenditures for new plant and equipment, 1947-79 235B-46. Sales and inventories in manufacturing and trade, 1947-78 236B-47. Manufacturers5 shipments and inventories, 1947-78 237B-48. Manufacturers' new and unfilled orders, 1947-78 238

PRICES:

B-49. Consumer price indexes by expenditure classes, 1929-78 239B-50. Consumer price indexes by commodity and service groups, 1939-78. 240B-51. Consumer price indexes, selected commodities and services, 1939-78. 241B-52. Consumer price indexes for commodity groups, seasonally adjusted,

1975-78 242B-53. Consumer price indexes for service groups and selected expenditure

classes, seasonally adjusted, 1975-78 243B-54. Changes in consumer price indexes, major groups, 1948—78 244B-55. Producer price indexes by stage of processing, 1947—78 245B-56. Producer price indexes by stage of processing, seasonally adjusted,

1975-78 247B-57. Producer price indexes by major commodity groups, 1929-78 248B-58. Changes in producer price indexes for finished goods, 1948—78 250

MONEY STOCK, CREDIT, AND FINANCE:

B-59. Money stock measures, 1953-78 251B-60. Commercial bank loans and investments, 1930-78 252B-61. Liquid asset holdings of private domestic nonfinancial investors,

1952-78 253B-62. Total funds raised in credit markets by nonfinancial sectors, 1970-78. 254B-63, Federal Reserve Bank credit and member bank reserves, 1929-78. . . 256B-64. Aggregate reserves and deposits of member banks, 1959-78 257B-65. Bond yields and interest rates, 1929-78 258B-66. Consumer installment credit, 1970-78 260B-67. Mortgage debt outstanding by type of property and of financing,

1939-78 261B-68. Mortgage debt outstanding by holder, 1939-78 262

GOVERNMENT FINANCE:

B-69. Federal budget receipts and outlays, fiscal years 1929-80 263B-70. Federal budget receipts, outlays, and debt, fiscal years 1970-80 264B-71. Relation of Federal Government receipts and expenditures in the

national income and product accounts to the unified budget,1978-80 266

B-72. Government receipts and expenditures, national income and productaccounts, 1929-78 267

B-73. Federal Government receipts and expenditures, national income andproduct accounts, 1952-80 268

B-74. State and local government receipts and expenditures, national incomeand product accounts, 1946-78 269

B-75. State and local government revenues and expenditures, selected fiscalyears, 1927-77 270

B-76. Interest-bearing public debt securities by kind of obligation, 1967-78. 271

180

GOVERNMENT FINANCE—Continued PageB-77. Estimated ownership of public debt securities, 1967-78 272B-78. Average length and maturity distribution of marketable interest-

bearing public debt securities held by private investors, 1967-78. . 273

CORPORATE PROFITS AND FINANCE:B-79. Corporate profits by industry, 1929-78 274B-80. Corporate profits of manufacturing industries, 1929-78. 276B-81. Corporate profits with inventory valuation and capital consumption

adjustments, 1946-78 278B-82. Sales, profits, and stockholders' equity, all manufacturing corpora-

tions, 1947-78 279B-83. Relation of profits after taxes to stockholders' equity and to sales, all

manufacturing corporations, 1947-78 280B-84. Relation of profits after taxes to stockholders' equity and to sales, all

manufacturing corporations, by industry group, 1977-78 281B-85. Sources and uses of funds, nonfarm nonfinancial corporate business,

1946-78 282B-86. Current assets and liabilities of U.S. corporations, 1939-78 283B-87. State and municipal and corporate securities offered, 1934-78 284B-88. Common stock prices and yields, 1949-78 285B-89. Business formation and business failures, 1929-78 286

AGRICULTURE:B-90. Income of farm people and farmers, 1929-78 287B-91. Farm production indexes, 1929-78 288B-92. Farm population, employment, and productivity, 1929-78 289B-93. Indexes of prices received and prices paid by farmers and selected farm

resource prices, 1929-78 290B-94. Selected measures of farm resources and inputs, 1929-78 291B-95. Balance sheet of the farming sector, 1929-79 292

INTERNATIONAL STATISTICS:B-96. Exchange rates, 1971-78 293B-97. U.S. international transactions, 1946-78 294B-98. U.S. merchandise exports and imports by principal end-use categories,

1965-78 296B-99. U.S. merchandise exports and imports by area, 1972-78 297B—100. International investment position of the United States at year-end,

1970-77 298B-101. International reserves, 1952, 1962, and 1974-78 299B-102. Summary of major U.S. Government net foreign assistance, July 1,

1945 to December 31, 1977 300B-103. World trade: Exports and imports, 1965, 1970, and 1974-78 302B—104. World trade balance and current account balances, 1965, 1970,

and 1974-78 303B—105. Consumer prices and hourly compensation, major industrial coun-

tries, 1960-78 304B-106. Industrial production and unemployment rate, major industrial

countries, 1960-78 305B-107. Growth rates in real gross national product, 1960-78 306

181

General Notes

Detail in these tables may not add to totals because of rounding.Unless otherwise noted, all dollar figures are in current dollars.

Symbols used:» Preliminary.__ Not available (also, not applicable).

182

NATIONAL INCOME OR EXPENDITURE

T A B L E B-l.—Gross national product, 1929-78

[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Yearo

1929

1933

1939

194019411942.1943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

19701971197219731974197519761977.1978

1976-

1977-

1978-

r quarter

P

1II.I l lI V

1IIIIIIV

1IIIIIIV v

Grossnationalproduct

11,1,1,1,1,1,

11,1,1,

1,1,1,1,

1,

2,

103.4

55 8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347 2366.1366.3399.3420.7442.8448.9486 5

506 0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.4063.4171.1306.6412.9528.8700.1887.2106.6

649.7685.4715.6749.8

806.8867.0916.8958.1

992.0087.5136.1210.8

Per-sonalcon-

sump-tionex-

pend-i tures

111

111

1111

1111

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

, 090. 2, 206. 5, 339.7

, 053. 8, 075.1098.4133.7

167.7188.6214.5255.2

276.7322.9356.9

, 402.2

Grossprivate

do-mesticinvest-ment

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977 6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190.9243.0297.8344.5

231.5243.5249.9247.1

272.5295.6309.7313.5

322.7345.4350.1359.9

Net exports of goodsand services

Netexports

1.1

. 4

1.1

1.71.3.0

- 2 . 0- 1 . 8- . 67.6

11.66.56.2

1.93.82.4.6

2.0

4.36.12.5

.6

4.45.85.46.38.97.65.14.92.31.8

3.91.6

- 3 . 37.16.0

20.47.4

- 1 1 . 1- 1 1 . 8

10.49.7'6.92.8

- 8 . 5- 5 . 9- 7 . 0

- 2 4 . 1- 5 . 5

- 1 0 . 7- 6 . 9

Ex-ports

7

?

4,

5.5.

0

4

4

49

4.84.57.

14.19.

43?88

16.915.9

1318.18.17.1820.

99?100

23.9?6?323.

27.?830.

737

696

32.73739.4?45.

4586

49.954

62.

7

565.672.7

101.137.

69

147.3163. ?175.5205.2

154160

47

168.2169.4

170.917818017?

181?05210223

181

7415

Im-ports

5.9

2.0

3.4

3.64.64.86.57.17.87.28.2

10.49.6

12.015.115.816.616.017.819.620.720.823.2

23.223.125.226.428.432.037.740.647.752.9

58.564.075.994.4

131.9126.9155.7186.6217.0

144.1150.9161.3166.6

179.4184.0187.8195.2

205.8210.9220.8230.4

Government purchases of goods andservices

Total

8. 8

8.2

13.5

14.24.59.

?

98

88.997.82.27.2532.

08550

38.4

38.560.175.82.75.

658

75.079.87.9597.

100.108118.123.129138.158180198207.

4106

3

07847

79

218.9233. 7253.1269.5302. 7338.4359. 5394.0434.2

354357360.366.

0

43

375.0388.839941?

4164?4439455.

55

7786

Tot<

1

5.

6.

\\

4

1

116.952.081.8974.17.

3466

12.716. 720.4

18. 738.352 457.54744.

95

45.9505353

535763

099

747

64.6656778909897

9596

102

f38905

6

1102.2111

129

119

145.1154.0

127.1127 8129.9134.6

13814?14615?

151147154163

398

5

04

Federal

Na-tional

de-fense i

1.2

2.213.749.479.787.473.514.89.0

10.713.2

14.033.545.848.641.138.440.244.045.645.6

44.547.051.150.349.049.460.371.576.976.3

73.570.273.573.577.083.786.894.399.5

85.985.686.589.1

91.993.794.497.1

97.998.699.6

102.1

Non-defense

3.9

3.93.22.61.62.01.12.83.76.07.2

4.74.86.58.96.86.05.75.98.38.3

9.310.412.714.316.217.818.519.521.221.2

22.126.028.628.734.139.443.150.854.5

41.242.243.445.5

46.449.352.455.1

53.648.654.561.3

Stateandlocal

7.4

6.1

8.3

8.18.07.87.57.68.29.9

12.815.318.0

19.821.823.225.027.830.633.537.141.143.7

46.550.854.359.064.671.179.889.3

100.7110.4

123.2137.5151.0167.3191.5215.4229.6248.9280.2

226.92?9.4230.5231.7

236.7245.9252.7260.3

265.2277.6285.8292.2

Per-cent

changefrompre-

cedingperiod,gross

na-tionalprod-uct'

- 4 2

6.9

10.124.926.821.39.6.9

- 1 . 311.111.3- . 4

10.915.45.15.5

.09.05.45.21.48 4

4.03.47.75.56.98.29.45.89.17.7

5.08.2

10.111.68.18.2

11.211.011.6

13.69.07.38.2

13.714.011.18.9

7.120.6

9.614.7

» This category corresponds closely to the national defense classification in "The Budget of the United States Govern-ment, Fiscal Year 1980."

1 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.

Source: Department of Commerce, Bureau of Economic Analysis.

183

TABLE B-2.—Gross national product in 1972 dollars, 1929-78

[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year or quarter

1929

1933

1939

19401941 .1942..19431944 . . . .1945194619471948 . .1949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

1970197119721973197419751976—19771978 P

1976:1IIIII _IV

1977:1IIIIIIV

1978:1IIIIIIV 9

Grossnationalproduct

314.6

222.1

318.8

343.3398.5460.3530.6568.6560.0476.9468.3487.7490.7

533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4925.9981.0

, 007.7, 051.8, 078.8

, 075.31,107.51,171.1I, 235.01,217 8L, 202.31,271.0L,332.7I, 385.1

1,255.51, 268.0I, 276.51. 284.0

1, 306.71, 325.51, 343.91, 354.5

1 354.21, 382.61,391.41,412.2

Personal consumption expenditures

Total

215.6

170.7

220.3

230.4244.1241.7248.7255.7271.4301.4306.2312.8320.0

338.1342.3350.9364.2370.9395.1406.3414.7419.0441.5

453.0462.2482.9501.4528.7558.1586.1603.2633.4655.4

668.9691.9733.0767.7760 7774.6819.4857.7891.2

806.3814.0820.9836.2

846 6849.5858.0876.6

873 5886.3895.1910.0

Durablegoods

21.5

10.9

19.1

21.824.716.314.513.514.825.830.633.136.3

43.439.938.943.143.552.249.849.746.451.8

52.550.355.760.765.773.479.079.788.291.9

88.998.1

111.2121.8112 5112 7125.9137.8144.7

124.8125.2125.3128 5

134 9136.2136.9143.0

137 8145.8144.8150.2

Non-durablegoods

98.1

82.9

115.1

119.9127.6129.9134.0139.4150.3158.9154.8155.0157.4

161.8165.3171.2175.7177.0185.4191.6194.9196.8205.0

208.2211.9218.5223.0233.3244.0255.5259.5270.2276.4

282.7287.5299.3309.3303 9306.6320.2330.4339.1

314.6318.2320.5327.7

327.1327.2329.2338.1

333.3336.3340.4346.6

Services

96.1

76.8

86.1

88.791.895.5

100.1102.7106.3116.7120.8124.6126.4

132.8137.1140.8145.5150.4157. 5164.9170.2175.8184.7

192.3200.0208.7217.6229.7240.7251.6264.0275.0287.2

297.3306.3322.4336.5344.3355.3373.2389.5407.4

366.9370.6375.1380.0

384.6386.0391.8395.6

402.4404.2410.0413.2

Gross private domestic investment

Total

55.9

8.4

33.6

44.655.829.618.119.827.871.070.182.365.6

93.794.183.285.683.4

104.1102.997.287.7

107.4

105.4103.6117.4124.5132.1150.1161.3152.7159.5168.0

154.7166.8188.3207.2183.6142.6173.4196.3210.1

168.5174.7177.1173.4

186.1197.1201.7200.3

205.7213.1210.4211.1

Fixed investment

Total

51.3

13.3

32.0

38.443.824.418.022.131.458.870.476.870.0

83.280.478.984.185.696.397.195.789.6

101.0

101.0100.7109.3116.8124.8138.8144.6140.7150.8157.5

150.4160.2178.8190.7175.6152.4166.8187.4199.6

161.0164.6167.8173.6

180.3187.1189.5192.8

193.4200.4201.4203.4

Nonresidential

Total

37.0

10.4

20.7

25.730.317.614.018.727.642.048.951.046.0

50.052.952.156.355.461.265.266.058.962.9

66.065.670.973.581.095.6

106.1103.5108.0114.3

110.0108.0116.8131.0130.6113.6118.9129.8139.9

115.5117.8121.0121.4

126.8129.1130.8132.5

133.8140.5141.7143.5

Struc-tures

20.6

4.9

8.6

9.911.96.74.25.58.3

18.817.318.417.8

19.120.620.622.523.525.328.128.126.426.8

28.829.330.830.833.339.642.541.142.044.0

42.841.742.545.542.537.138.340.044.3

38.338.538.338.3

38.340.040.841.0

41.044.645.646.2

Pro-ducers'durableequip-ment

16.4

5.5

12.1

15.818.510.99.8

13.219.223.231.632.728.2

30.932.331.533.831.835.937.137.932.536.1

37.236.340.142.747.756.063.662.466.170.3

67.266.374.385.588.176.580.689.895.5

77.279.382.783.1

88.589.090.091.5

92.995.996.197.4

See next page for continuation of table.

184

TABLE B-2.—Gross national product in 1972 dollars, 1929-78— Continued

[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940 .19411942 .1943 ._.194419451946194719481949 .

1950 .195119521953195419551956195719581959

19601961..19621963196419651966.196719681969

197019711972197319741975197619771978 P _

1976: 1| |I II . . . .IV

1977:1IIIIIIV..._

1978:1IIlll..__IV P

Gross private domesticinvestment—continued

Fixed investment—continued

Residential

Total

14.3

2.9

11.3

12.813.56.84.03.43.8

16.821.525.824.0

33.227.526.827.830.235.131.929.730.638.1

35.035.138.443.243.843.238.537.242.843.2

40.452.262.059.745.038.847.857.759.7

45.546.846.852.3

53.558.058.860.3

59.559.959.759.8

Non-farmstruc-tures

13.6

2.6

10.6

11.812.56.13.53.03.5

15.519.823.922.3

31.525.925.326.328.833.830.428.329.236.5

33.733.636.941.742.241.636.935.541.141.5

38.950.560.357.943.037.246.055.657.6

43.545.245.250.2

51.455.956.658.4

57.457.857.657.8

Farmstruc-tures

0.6

.2

.6

.8

.9

.6

.4

.4

.313

.54

33?

1.9

1.01.0.9

1.0

.81.0.9.9.9.8.9.9.8.9

.6

.7

.7

.5

.9

.7

.7

.9

.8

1.0.6.6.9

1.01.01.0.7

.8

.8

.8

.8

Pro-duc-ers'dur-able

equip-ment

0.1

.1

.1

.1

.2

.1

.0

.0

.1

.2

.3

.3

.3

.3

.3

.3

.3

.4

.4

.4

.5

.6

.5

.5

.6

.6

.7

.7

.8

.8

.9

.9

.91.01.11.21.1.9

1.11.21.3

1.11.01.11.1

1.11.11.21.2

1.31.41.31.3

Changein

busi-ness

inven-tories

4.6

- 4 . 9

1.6

6.212.05.2

- 2 . 3- 3 . 612.2- . 25.5

- 4 . 4

10.613.74.31.5

- 2 . 27.75.81.5

- 1 . 86.5

4.42.98.17.87.3

11.316.712.08.7

10.6

4.36.69.4

16.58.0

- 9 . 86.78.9

10.4

7.510.19.3

5.810.012.27.5

12.312.79.07.7

Net exports of goodsand services

Netex-

ports

2.2

.2

2.0

3.0.8

- 2 . 5- 7 . 3- 7 . 2- 4 . 511.616.68.58.8

4.07.44.92.04.54.77.38.93.5.9

5.56.75.87.3

10.98.24.33.5

- . 4- 1 . 3

1.4- . 6

- 3 . 37.6

15.922.615.49.58.6

16.516.116.113.1

11.211.012.53.1

2.911.39.2

11.0

Ex-ports

15.6

9.4

13.3

14.614.710.39.0

10.013.526.130.224.224.2

21.725.924.923.825.327.932.334.830.731.5

35.837.039.642.247.849.151.654.258.562.2

67.167.972.787.493.090.095.998.2

107.3

93.295.298.097.3

97.198.9

100.896.0

99.1108.4109.0112.6

Im-ports

13.4

9.3

11.4

11.514.012.816.317.318.014.613.615.715.4

17.718.520.021.820.823.225.026.027.230.6

30.330.333.935.036.941.047.350.758.963.5

65.768.575.979.977.167.580.588.798.7

76.779.281.984.2

85.987.988.292.9

96.297.199.7

101.6

Government purchasesof goods and services

Total

40.9

42.8

62.9

65.297.7

191.5271.2300.3265.393.075.484.196.2

97.7132.7159.5170.0154.9150.9152.4160.1169.3170.7

172.9182.8193.1197.6202.7209.6229.3248.3259.2256.7

250.2249.4253.1252.5257.7262.6262.8269.2275.2

264.3263.2262.5261.3

262.8267.9271.7274.5

272.1271.9276.7280.1

Fed-eral

7.0

10.9

22.8

26.761.0

157.4239.6269.7233.758.236.142.448.9

47.081.3

107.0114.695.286.985.989.892.891.8

90.895.6

103.1102.2100.6100.5112.5125.3128.3121.8

110.7103.9102.196.695.896.596.6

101.6100.5

96.295.996.897.5

98.7101.3102.9103.6

101.297.1

100.4103.3

Stateandlocal

33.8

31.9

40.2

38.536.734.131.630.631.634.739.341.847.4

50.751.352.555.459.764.066.570.376.478.9

82.087.190.095.4

102.1109.1116.8123.1130.9134.9

139.5145.5151.0155.9161.8166.1166.2167.6174.7

168.1167.3165.7163.8

164.1166.6168.8170.9

170.8174.8176.3176.8

Percentchange

frompre-

cedingperiod,gross

nationalproduct1

—2 2

7 6

7.716 115.515.37.1

- 1 . 5—14.8—1.8

4.1.6

8.78.13.83.9

- 1 . 36.72.11.8

26.0

2.32.55.84.05.35.95.92. 74.42.6

- . 33.05.75.5

- 1 . 4- 1 . 3

5.74.93.9

9.34.02.72.3

7.35.95.73.2

- . 18.72.66.1

1 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.Source: Department of Commerce, Bureau of Economic Analysis.

185

TABLE B-3.—Implicit pries deflators for gross national product, 1929-78

[Index numbers, 1972 = 100, except as noted; quarterly data seasonally adjusted]

Year orquarter

Grossnational

prod-uct *

Personal consumption expenditures

TotalDur-able

goods

43.1

31.7

34.9

35.739.142.145.049.553.761.166.869.169.1

70.874.774.875.573.274.076.079.279.481.9

82.182.783.984.885.785.685.787.490.793.1

95.599.0

100.0101.6108.4117.7124.4129.5136.6

122.0123.6125.0126.8

128.4128.9129.5130.9

133.1135.7137.8139.5

Non-durablegoods

38.4

26.8

30.5

30.933.639.143.746.247.852.158.762.360.3

60.765.866.666.366.666.367.369.471.071.4

72.673.373.974.975.877.380.181.985.389.4

93.696.6

100.0107.9123.8133.4138.2145.0155.0

136.8137.4138.7139.9

142.4144.7145.7147.0

150.4154.4156.2158.9

Serv-ices

Gross private domestic investment *

Fixed investment

Total

Nonresidential

Total Struc-tures

Pro-ducers'durableequip-ment

1929

1933

1939—.

1940194119421943194419451946. . . .19471948.1949

1950...1951..195219531954.19551956...195719581959

196019611962196319641965196619671968...1969

1970.19711972197319741975197619771978 v

1S76:1IIIIIIV

1977:1IIIIIIV

1978:1IIIII

32.87

25.14

28.48

29.1331.3434.3936.1837.0337.9243.9549.7053.1352.59

53.6457.2758.0058.8859.6960,9862.9065.0266.0667.52

68.6769.2870.5571.5972.7174.3276.7679.0282.5786.72

91.3696.02100.00105.80116.02127.15133.76141.61152.09

131.40132.92134.39136.28

138.27140. 86142. 63144. 56

147.10150.98153.52156. 54

35.8

26.8

30.4

30.833.136.740.042.344.047.752.855.955.7

56.860.561.963.163.664.265.567.669.170.4

71.772.573.674.775.777.179.381.384.688.5

92.596.6100.0105.5116.9126.4133.1140.7150.3

130.7132.1133.8135.6

137.9139.9141.6143.2

146.2149.3151.6154.1

31.6

26.1

29.2

29.530.832.434.236.137.338.941.744.446.1

47.449.952.655.457.258.560.262.264.266.0

68.069.170.471.772.874.376.578.882.086.1

90.595.8

100.0104.7113.6123.2131.6141.0151.3

128.4130.3132.5134.9

137.4139.7142.3144.4

147.1149.9152.6155.3

28.2

22.4

27.6

28.530.633.435.636.937.141.348.953.654.8

56.560.862.162.963.464.868.370.970.871.6

71.971.672.072.172.873.876.278.782.186.9

91.195.9

100.0106.0117.1132.3139.6150.6164.7

136.7138.5140.3142.6

145.4148.9151.9155.9

158.2162.31K7.1170.8

28.2

22.8

28.2

29.130.933.835.736.636.639.946.851.352.8

54.358.959.961.061.462.667.070.770.672.0

72.271.872.372.973.674.576.879.382.686.6

91.396.4

100.0103.8115.3132.2138.4146.7158.7

136.6137.7138.9140.5

142.5145.0147.9151.2

153.6156.7160.6163.7

24.1

19.1

22.8

23.124.728.132.033.433.636.343.748.448.0

48.854.755.856.855.957.061.864.463.363.6

63.162.763.063.564.465.968.871.875.381.1

88.094.4

100.0107.8128.1144.9149.5159.6174.8

147.4149.4149.7151.4

154.9158.3160.2164.5

167.2171.8177.3182.0

See next page for continuation of table.

186

TABLE B-3.—Implicit price deflators for gross national product, 1929-78—Continued[Index numbers, 1972=100, except as noted; quarterly data seasonally adjusted]

Year orquarter

1929

1933.

1939

1940194119421943194419451946194719481949 . . . .

1950195119521953195419551956195719581959

196019611962196319641965196619671968 . -.1969

197019711972 . . .1973197419751976 . - .19771978 P . . .

1976: 1IIIIIIV

1977: 1IIIllIV

1978: 1IIIllIV P . . . .

Gross private domesticinvestment1—continued

Fixed investment—continued

Residential

Total

28.2

20.7

26.6

27.429.932.434.938.140.844.653.758.158.7

60.064.466.466.967.168.770.971.371.271.0

71.471.371.570.971.272.374.677.080.787.7

90.694.9

100.0110.8122.3132.8142.5159.4178.7

137.2140.7143.8147.6

152.3157.6160.6166.1

168.6175.7182.6187.9

Non-farm

struc-tures

27.8

19.8

26.3

27.229.731.834.337.340.043.953.057.458.1

59.563.865.866.366.668.270.570.870.770.6

70.970.971.170.570.872.074.276.780.487.5

90.494.8

100.0111.0122.7133.2143.0160.0179.8

137.6141.1144.2148.1

152.9158.2161.3166.9

169.5176.7183.7189.1

Farmstruc-tures

28.6

19.5

23.4

23.626.630.735.740.842.946.652.857.358.0

59.463.865.766.266.568.370.670.970.870.8

71.270.771.370.771.072.374.376.780.587.5

90.595.0

100.0110.7122.7132.9142.6159.7178.9

137.2141.0144.4148.0

153.3158.7161.8167.5

168.9176.5182.8186.9

Pro-ducers'dur-able

equip-ment

77.2

58.8

61.1

59.663.871.371.475.084.695.2

105.6111.5107.9

107.4114.9114.6114.2112.4109.1104.3103.4101.9101.8

100.899.196.895.394.392.190.891.093.295.2

97.599.3

100.0100.1105.3116.2122.2126.2132.2

120.2121.8123.0123.6

124.3126.2126.6127.5

128.8131.8133.3135.1

Exports andimports ofgoods andservices i

Ex-ports

45.0

25.5

33.3

36.840.246.549.252.653.656.765.869.865.5

64.073.173.071.971.271.873.976.475.775.4

77.178.077.377.578.380.582.884.085.387.9

93.196.6

100.0116.2148.3163.6170.1178.7191.2

165.7168.7171.7174.0

176.1180.0179.4179.2

183.3189.4192.8198.4

Im-ports

43.8

22.1

29.6

31.533.237.439.641.143.649.760.766.162.7

67.881.879.175.876.976.878.379.576.575.7

76.776.174.575.677.178.079.780.180.983.3

89.193.5

100.0118.2171.0188.0193.5210.3219.9

187.8190.7197.0197.8

208.9209.3212.9210.2

213.8217.2221.5226.8

Government purchasesof goods and services

Total

21.6

19.3

21.5

21.725.531.232.832.331.229.633.838.039.9

39.445.347.448.548.949.752.154.456.157.2

58.059.261.162.664.066.069.272.676.781.0

87.593.7

100.0106.7117.5128.9136.8146.3157.8

134.0135.7137.3140.2

142.7145.1147.1150.3

153.2156.2158.9162.7

Fed-eral

20.5

19.4

22.7

22.727.833.034.033.131.930.235.139.441.8

39.947.148.950.250.451.153.455.758.158.7

59.160.061.863.364.867.070.172.676.480.0

86.492.6

100.0105.8115.9127.5134.4142.7153.2

132.1133.3134.2138.0

140.1141.1142.7146.9

149.6151.5153.4158.2

Stateandlocal

21.8

19.2

20.7

21.021.722.923.824.925.928.632.536.638.0

39.042.444.245.146.647.850.452.853.855.4

56.858.360.361.963.365.168.472.576.981.9

88.394.5

100.0107.3118.4129.7138.1148.5160.4

135.0137.1139.1141.5

144.3147.6149.7152.3

155.2158.8162.1165.2

Grossdo-

mesticprod-uct

32.8

25.2

28.5

29.131.334.436.237.037.943.949.753.152.6

53.657.257.958.859.660.962.865.066.067.5

68.669.270.571.672.774.376.879.082.686.8

91.496.0

100.0105.7115.6126.8133.3141.1151.5

131.0132.5133.9135.8

137.7140.3142.1144.1

146.6150.4153.0156.0

Percent changefrom preceding

period 2

Grossnationaproductimplicitprice

deflator

- 2 . 1

- 7

2 37 69 75.22 32 4

15.913 16.9

- 1 . 0

2.06.81.31.51.42.23.23.41.62.2

1.7.9

1.81.51.62.23.32.94.55.0

5.45.14.15.89.79.65.25.97.4

3.94.74.55.7

6.07.75.15.5

7.211.06.98.1

Grossdo-

mesticproductimplicitprice

deflator

- 2 . 0

_ 7

2 37 69 75 22 32 4

15 913 06 9

- 1 . 0

2 06.71 31 51.42.23 23.41.62 2

1.7.9

1.91.51.62.23.33.04.55.1

5.35.14.15.79.39.75.25.87.4

3.64.84.45.8

5.77.75.15.8

7.110.97.08.1

1 Separate deflators are not available for gross private domestic investment, change in business inventories, and netexports of goods and services.

3 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.Quarterly data are at annual rates.

Source: Department of Commerce, Bureau of Economic Analysis.

187

TABLE B-4.—Implicit price deflators and alternative price measures for gross national productand gross domestic product^ 1929-78

[Quarterly data seasonally adjusted]

Year orquarter

1929

1933

1939

19401941194219431944194519461947 . . .19481949

195019511952.1953195419551 9 5 6 . . . . . . .195719581959

1960196119621963196419651966196719681969

197019711972197319741975197619771978 v

1976: 1IIIllIV

1977: 1III I I . . . .IV . . . .

1978: 1III l l — .IV p . . .

Index numbers, 1972=100

Gross nationalproduct

Implicitprice

deflator

32.87

25.14

28 48

29.1331.3434 3936.1837.0337.9243.9549.7053.1352.59

53.6457.2758.0058.8859.6960.9862.9065.0266.0667.52

68.6769.2870.5571.5972.7174.3276.7679.0282.5786.72

91.3696.02

100.00105.80116.02127.15133.76141.61152.09

131.40132.92134.39136.28

138.27140.86142.63144.56

147.10150.98153.52156.54

Fixed-weighted

price index(1972

weights)

68.169.1

70.371.172.072.873.775.077.279.583.087.1

91.696.1

100.0186.0116.8127.7134.9143.3154,3

132.2133.8135.5137.6

139.9142.5144.1146.5

149.0152.9155.8159.0

Gross domesticproduct

Implicitprice

deflator

32.8

25.2

28.5

29.131.334.436.237.037.943.949.753.152.6

53.657.257.958.859.660.962.865.066.067.5

68.669.270.571.672.774.376.879.082.686.8

91.496.0

100.0105.7115.6126.8133.3141.1151.5

131.0132.5133.9135.8

137.7140.3142.1144.1

146.6150.4153.0156.0

Fixed-weighted

price index(1972

weights)

68.069.1

70.271.172.072.873.775.077.279.683.087.1

91.796.2

100.0105.9116.4127.2134.4142.8153.8

131.8133.4135.0137.2

139.4142.0143.6146.0

148.5152.5155.3158.6

Percent change from preceding period l

Gross national product

Implicitprice

deflator

- 2 . 1

- . 7

2.37.69.75.22.32.4

15.913.16.9

- 1 . 0

2.06.81.31.51.42.23.23.41.62.2

1.7.9

1.81.51.62.23.32.94.55.0

5.45.14.15.89.79.65.25.9

3.94.74.55.7

6.07.75.15.5

7.211.06.98.1

Fixed-weighted

price index(1972

weights)

1.6

1.71.11.31.11.21.82.93.04.35.0

5.24.94.06.0

10.29.35.66.3

4.34.95.16.4

7.07.44.76.8

7.011.07.68.7

Chainpriceindex

1.6

1.71.21.41.31.41.93.13.04.45.0

5.35.04.16.09.99.45.66.2

4.55.05.26.3

6.67.34.66.5

7.110.87.68.5

Gross domestic product

Implicitprice

deflator

-2 .0

—.7

2.37.69.75.22.32.4

15.913.06.9

-1 .0

2.06.71.31.51 42.23.23.41.62.2

1.7.9

1.91.51.62.23.33.04.55.1

5.35.14.15.79.39.75.25.8

3.64.84.45.8

5.77.75.15.8

7.110.97.08.1

Fixed-weighted

price index(1972

weights)

i

I

L.6

L.71.21.3l . lL.21.8J.OJ.O1.45.0

5.21.9».O5.93.9a. 35.73.3

4.24.95.06.5

6.87.54.67.0

7.011.07.68.7

Chainpriceindex

•

i

L.6

L.7L.2L.5L.3L4L.9J.IJ.I1.4).O

5.35.0U5.9).6).45.75.1

4.55.05.16.4

6.47.44.56.7

7.110.97.58.4

i Changes are based on unrounded data and therefore may differ slightly from those obtained from published Indexesshown here. Quarterly data are at annual rates.

Source: Department of Commerce, Bureau of Economic Analysis.

188

TABLE B-5.—Gross national product by industry in 1972 dollars•, 1947-77

[Billions of 1972 dollars]

Year

194719481949

1950. _..195119521953.1954

19551956195719581959

19601961196219631964

1965196619671968.1969

19701971197219731974

1975.19761977.

Grossna-

tionalproduct

468.3487 7490.7

533.5576.5598.5621.8613.7

654.8668.8680.9679.5720.4

736.8755.3799 1830.7874.4

925.9981.0

1,007.71,051.81,078.8

1,075.31,107.51,171.11,235.01,217.8

1,202.31 271.01,332.7

Agri-culture,fores-

try,andfish-eries

26.128 027.8

29.128.229.030.331.1

31.931.430.832 030.9

32.232.332 332.832.1

33.031.332.632.433.0

34.336.135.435.935.7

37.036 038.3

Con-struc-tion

22.926.526.5

29.332.533.834.836.0

38 240 940 942 145 5

46 146.648 349 853.7

57.059 059.562.561.2

57.157.158.058.356.0

49.853.456.9

Manufacturing

Total

114.9121.5115.0

131.3146.0150.7161.2149.6

165.8166.9167.8153.3170.7

172.0171.2186.2201.0215.7

235.1254.0254.1268.4276.2

260.6264.1288.8313.0291.9

277.1303 2322.3

Du-rablegoodsindus-tries

68.572.066.3

78.189.994.3

102.691.7

103.4102.5102.988.8

100.7

101.599.3

110.1119.0129.3

144.1157.0157.2165.5169.1

154.4155.3171.9189 0176.0

162.2178 1190.9

Non-durablegoodsindus-tries

46.449.648.8

53.256.156.458.657.9

62.464.464.964.570.0

70.572.076.282.186.4

91.097.096.9

102.9107.2

106.2108.7116.8124.1115.9

114.9125 0131.5

Trans-porta-tion,com-muni-cation,

andutili-ties

38.338.736.4

39.644.244.345.945.6

49.452.353.452.255.7

58.059.162.165.668.9

74.380.082.388.292.9

95.197.3

103.6112.6112.4

113.5119 7124.0

Whole-saleand

retailtrade

76.178.079.9

87.688.391.194.094.6

103.2106.2108.0107.9115.8

117.9119.2126.7131.7139.7

148.6156.9160.7170.6174.5

178.4186.8201.2212.0205.7

206.2218 0227.9

Finance,insur-ance,andreal

estate

55.457.160.7

64.466.771.174.077.7

82.085.789.893.598.1

101 9106 8115 3115 3119.3

127.2131 4136 5142.9149.3

152.9160 6167.3171 1180.3

182.3193 0204.0

Serv-ices

55.156 757.2

59.460.661.663.063.1

67.571.173.375 880.3

82.285.488.692.296.9

101.2106.5112.7116.3121.4

124.7126.6134.5143 1144.7

145.2151 6159.0

Gov-ern-mentand

govern-ment

enter-prises

68.569 073.1

75.489.896.696.494.9

95.497.6

100.1101.7103.6

107.2111.1115.1118.3122.6

127.4136 4143.5148.1151.8

152.0153.1154.9157.3160.0

162.7164 5165.7

Allother i

11.112 014.1

17.520.220.222.321.1

21.416.616.821 020.0

19.423.624 524.125.6

22.125.425.722.418.4

20.425.727.731 631.1

28.631 634.5

1 Mining, rest of the world, and residual (GNP in 1972 dollars measured as the sum of final products less GNP in 1972dollars measured as the sum of gross product by industry).

Note.—The industry classification is on an establishment basis and is based on the 1972 Standard Industrial Classification.

Source: Department of Commerce, Bureau of Economic Analysis.

189

278-216 O - 79 - 13

T A B L E B-6.—Gross national product by major type of product, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Yearor

quar-ter

1929..

1933..

1939..

1940..1941. .1942-.1943.-1944.-1945..1946..1947..1948.-1949..

1950..1951. .1952..1953..1954..1955..1956..1957-.1958-.1959. .

1960..1961. .1962..1963. .1964..1965..1966 . .1967..1968-.1969. .

1970..1971. .1972--1973. .1974..1975..1976..1977..1978 p.

1976:1 . . .II —III -IV..

1977:1 . . .II —III..IV. .

1978:1 . . .II —III..IV*.

Grossnationalproduct

103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.41,063.41,171.11,306.6lr 412.91, 528.81, 700.11, 887.22,106.6

1,649.71,685.41,715.61,749.8

1,806.81,867.01,916.81,958.1

1,992.02,087.52,136.12,210.8

Finalsales

101.7

57.4

90.4

97.8120.4156.5192.5211.5213.4203.2233.2254.4261.1

279.4319.9344.0365.7367.8393.3416.0441.4450.4481.2

502.2521.1557.3588.8629.9678.6738.7786.2860.8926.2

978.61,057.11,161. 71, 288.61, 404.01, 539.61, 689.91,871.62,090.9

1, 638.31,670.11,701.01, 750.4

1, 796.51,850.01, 894.91,945.0

1, 975.32,067.42,122.52,198.4

Inven-tory

change

1.7

- 1 . 6

.4

2.24.51.8

- . 6- 1 . 0- 1 . 0

6.4- . 54.7

- 3 . 1

6.810.33.1.4

- 1 . 56.04.71.3

- 1 . 55.2

3.82.26.56.05.89.5

14.310.17.79.4

3.86.49.4

17.98.9

-10.710.215.615.7

11.415.414.5- . 6

10.317.021.913.1

16.720.113.612.4

Goods

Total

Total

56.1

27.0

49.0

56.072.593.7

120.4132.3128.9125.3139.8154.4147.7

162.4189.5194.6203.1196.1214.5223.3232.3228.2247.4

254.3256.5278.0289.7309.0336.6373.9387.3418.9446.2

456.2479.8526.0598.8638.6686.6760.3832.6917.5

741.9758.0768.1772.9

800.2825.8844.7859.6

861.8912.2927.3968.6

Finalsales

54.4

28.6

48.6

53.868.091.9

121.0133.3129.9118.9140.3149.7150.8

155.6179.2191.5202.7197.6208.5218.6231.0229.7242.2

250.6254.3271.5283.7303.2327.1359.6377.2411.2436.8

452.4473.5516.6580.9629.7697.3750.1817.0901.8

730.5742.6753.6773.5

789.9808.8822.8846.5

845.1892.1913.7956.2

Inven-tory

change

1.7

- 1 . 6

.4

2.24.51.8

- . 6- 1 . 0- 1 . 0

6.4- . 54.7

- 3 . 1

6.810.33.1.4

- 1 . 56.04.71.3

- 1 . 55.2

3.82.26.56.05.89.5

14.310.17.79.4

3.86.49.4

17.98.9

-10.710.215.615.7

11.415.414.5- . 6

10.317.021.913.1

16.720.113.612.4

Durablegoods

Finalsales

16.1

5.4

12.4

15.423.834.554.258.550.131.844.146.948.3

54.762.567.671.569.078.282.387.380.587.4

89.190.298.4

105.4115.0127.0139.0143.5157.4169.2

170.7179.8202.1229.6240.8267.9299.3332.9364.8

288.4295.3303.1310.4

326.1330.0334.6341.1

336.3365.0369.8388.0

Inven-tory

change

1.4

- . 5

.3

1.23.11.0.0

- . 6- 1 . 3

5.31.7.7

- 2 . 1

4.16.91.1.9

- 2 . 53.02.81.3

- 2 . 82.7

2.4- . 13.62.73.96.6

10.05.35.06.1

.01.86.3

10.97.1

- 8 . 95.38.4

11.5

.16.59.35.2

6.19.1

11.96.3

14.810.810.210.1

Nondurablegoods

Finalsales

38.3

23.2

36.2

38.444.257.466.874.879.887.196.2

102.8102.5

100.9116.7123.9131.2128.7130.3136.3143.7149.2154.8

161.4164.1173.2178.3188.2200.1220.6233.7253.8267.6

281.7293.7314.5351.3389.0429.4450.7484.1537.0

442.1447.3450.4463.1

463.8478.8488.2505.4

508.7527.1543.9568.2

Inven-tory

change

0.3

- 1 . 1

.1

1.01.4.7

- . 6- . 3

.21.1

- 2 . 24.0

- 1 . 0

2.73.42.0

- . 51.02.91.9.0

1.32.5

1.42.32.93.31.92.94.34.82.83.3

3.74.63.27.01.8

- 1 . 84.97.24.2

11.38.95.3

- 5 . 8

4.27.9

10.06.8

1.99.33.42.4

Serv-ices

35.9

25.9

34.3

35.740.650.662.972.276.968.671.376.781.9

88.2102.9113.1121.0125.7135.3145.2157.5166.9179.5

193.2206.7221.5236.2254.4272.7297.7326.1356.6388.7

424.6465.5510.8560.5626.8697.6778.0862.8962.9

749.7766.9787.1803.1

832.3850.0875.3893.6

926.4952.0973.7999.4

Struc-tures

11.4

2.9

7.5

8.311.814.08.76.16.5

15.721.728.028.4

35.637.839.442.044.549.552.253.053.859.5

58.460.164.368.972.478.881.482.993.0

100.7

101.6118.1134.3147.2147.4144.7161.9191.8226.2

158.1160.5160.3168.7

174.3191.3196.8204.9

203.8223.4235.0242.8

Autoout-put

~

" 7 . 18.9

12.0

15.513.412.216.314.921.517.219.614.619.6

21.618.122.925.626.531.831.128.836.636.8

30.642.245.150.742.945.661.472.377.4

60.561.959.563.8

72.772.170.074.5

73.879.575.880.7

Source: Department of Commerce, Bureau of Economic Analysis.

190

TABLE B-7.—Gross national product by major type of product in 1972 dollars, 1929-78

[Billions of 1972 dollars; quarterly data at seasonally adjusted annual rates]

Yearor

quar-ter

1929..

1933..

1939..

1940..1941..1942..1943. .1944..1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..

I960. .1961..1962..1963..1964..19651966"1967..1968..1969..

1970..1971. .1972..1973..197419751"1976._1977_.1978 v.

1976:I . . .II—III..IV._

1977:l . _ .II—III..IV_.

1978:1 . . .II—IIL.IV ».

Grossnationalproduct

314.6

222.1

318.8

343.3398.5460.3530.6568.6560.0476.9468.3487.7490.7

533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4925 9981.0

L, 007.71,051.81,078.8

1,075.31,107.51,171.11,235.0L 217 8,'202.3,271.0

L, 332.71,385.1

, 255.5, 268.0

1,276.5, 284.0

, 306.7, 325.5, 343.9, 354.5

1,354.21,382.61,391.41,412.2

Finalsales

310.0

226.9

317.2

337.1386.4455.1530.5570.9563.6464.7468.5482.2495.1

522.9562.8594.2620.3615.8647.1663.0679.4681.3714.0

732.4752.4791.0823.0867.1914 6964.3995.7

1,043.11,068.2

1,071.01,100.91,161.71,218.51 209 91,212.11,264.41,323.81,374.7

1,248.01,258.01,267.31,284.2

1,300.91, 315. 51,331.71,347.1

1,341.81,369.91,382.41,404. 5

Inven-tory

change

4.6

- 4 . 9

1.6

6.212.05.2.1

- 2 . 3- 3 . 612.2- . 25.5

- 4 . 4

10.613.74.31.5

- 2 . 27.75.81.5

- 1 . 86.5

4.42.98.17.87.3

11.316.712.08.7

10.6

4.36.69.4

16.58 0

- 9 . 86.78.9

10.4

7.510.19.3

- . 2

5.810.012.27.5

12.312.79.07.7

Goods

Total

Total

143.9

97.2

153.9

171.2197.4221.1263.5286.8279.2238.0236.8244.2239.9

261.5283.1292.3306.9292.2316.3320.9321.8312.0332.5

337.1338.1362.0373.0394.0421.5455.6461.9481.1492.3

483.4491.6526.0569.0554.2538.3576.5608.4629.1

568.5576.3580.8580.3

596.0604.4613.3620.1

611.8627.7630.2646.8

Finalsales

139.3

102.1

152.3

165.0185.4215.9263.4289.1282.8225.8237.0238.7244.3

250.9269.4288.0305.4294.4308.6315.1320.3313.8326.1

332.8335.2353.8365.2386.7410.2438.9449.9472.4481.7

479.1484.9516.6552.5546.2548.0569.8599.6618.7

561.0566.2571.5580.5

590.1594.3601.1612.7

599.4615.0621.2639.1

Inven-tory

change

4.6

- 4 . 9

1.6

6.212.05.2.1

- 2 . 3- 3 . 612.2- . 25.5

- 4 . 4

10.613.74.31.5

-2 .27.75.81.5

- 1 . 86.5

4.42.98.17.87.3

11.316.712.08.7

10.6

4.36.69.4

16.58.0

- 9 . 86.78.9

10.4

7.510.19.3

- . 2

5.810.012.27.5

12.312.79.07.7

Durablegoods

Finalsales

40.7

17.6

35.6

43.157.576.0

119.3135.9121.960.574.975.676.1

84.492.6

100.6105.9101.7112.9113.5114.6104.8110.6

111.6112.6121.1128.4139.2152.6165.2166.6175.7183.3

179.1181.5202.1225.9222.7219.8232.5248.0257.8

228.7231.1234.0236.2

246.5246.9248.0250.5

245.0260.2258.7267.6

Inven-tory

change

3.5

- 2 . 1

.7

3.48.23.5.7

- 1 . 8- 3 . 710.81.81.5

- 3 . 7

6.39.81.81.4

- 3 . 64.23.71.5

- 3 . 43.3

2.9- . 14.43.45.08.0

11.96.45.66.8

.11.86.2

10.65.6

- 7 . 03.65.87.2

.24.66.33.5

4.46.17.94.6

9.66.46.16.6

Nondurablegoods

Finalsales

98.6

84.5

116.7

121.8127.9140.0144.1153.2161.0165.3162.1163.1168.2

166.5176.8187.4199.5192.7195.7201.6205.6209.0215.5

221.2222.7232.7236.8247.5257.7273.7283.3296.7298.4

300.0303.4314.5326.6323.5328.2337.3351.6360.8

332.3335.2337.4344.3

343.6347.5353.1362.1

354.5354.8362.5371.5

Inven-tory

change

1.1

- 2 . 8

.9

2.83.81.7

- . 6- . 5

.11.3

- 2 . 04.0

- . 8

4.23.92.5.1

1.43.52.1.0

1.63.2

1.53.03.74.32.33.34.85.63.23.7

4.24.83.25.92.4

- 2 . 73.03.13.3

7.35.43.0

- 3 . 7

1.43.94.32.9

2.76.32.91.1

Serv-ices

126.8

110.9

134.6

139.5157.6192.7240.9263.6261.9199.7186.9190.9197.0

206.0229.0240.6245.5247.0257.6267.2279.3285.6298.0

310.7325.5339.9354.0372.2389.1410.2432.7449.9465.4

477.2491.1510.8531.1546.4560.1583.0602.9627.2

575.5580.5585.8589.9

596.3598.8606.9609.6

620.1625.6629.7633.3

Struc-tures

44.0

14.0

30.3

32.643.446.426.318.118.939.244.752.553.7

66.064.465.669.474.580.980.779.981.989.9

89.091.797.2

103.8108.1115.3115.2113.1120.9121.1

114.6124.9134.3134.8117.2104.0111.6121.3128.8

111.5111.2109.9113.8

114.5122.3123.7124.8

122.3129.3131.6132.2

Autoout-put

~

12.914.718.9

24.020.418.423.922.931.324.425.820.024.7

26.822.627.530.331.1V 436.733.540.640.0

32.542.145.150.640 139.449.255.255.2

49.750.147.349.7

56.255.653.755.4

54.157.053.556.3

Source: Department of Commerce, Bureau of Economic Analysis.

191

TABLE B-8.—Gross national product: Receipts and expenditures by majoreconomic groups, 1929-78

[Billions of dollars]

Year orquarter

1929

1933..

1939 . .

1940 . .19411942194319441945. . . .1946194719481949

1950195119521953195419551956195719581959..

196019611962..196319641965.1966 . .196719681969

19701971197219731974 .197519761977 ___.1978*

Persons

Disposable personalincome

Total i

82.3

45.5

69.9

75.292.0

116.5132.9145.5149.0158.6168.4187.4187.1

205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1

349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4

685.9742.8801.3901.7984.6

1, 086.71,184.41, 303.01,451.2

Less:Inter-

estpaidand

trans-fers 2

1.9

.7

.9

1.01.1.8.7.8.9

1.41.72.12.3

2.72.93.34.04.34.85.65.96.06.5

7.47.78.39.4

10.511.712.613.314.115.6

16.617.318.921.523.423.926.129.634.8

Equals:Total

exclud-ing in-terestpaidand

trans-fers

80.4

44.8

69.1

74.391.0

115.6132.1144.6148.0157.3166.7185.3184.9

202.8221.9233.1246.6251.4268.6285.7301.0311.1329.6

342.0355.2375.6393.4426.5460.4497.8531.2574.0614.8

669.4725.5782.4880.2961.3

1,062.71,158.31,273.41,416.4

Per-sonalcon-

sump-tionex-

pendi-tures

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,090.21, 206.51, 339.7

Per-sonalsaving

ordis-

saving

3.1

- 1 . 0

2.1

3.310.227.032.736.528.513.44.9

10.66.7

10.814.816.017.015.614.919.720.621.718.8

17.120.220.418.826.130.333.040.938.135.1

50.657.349.470.371.783.668.066.976.7

Government

Net receipts

Taxandnon-taxre-

ceiptsor ac-cruals

11.3

9.3

15.4

17.725.032.649.251.253.251.056.958.955.9

69.085.290.194.689.9

101.1109.7116.2115.0129.4

139.5144.8156.7168.5174.0188.3212.3228.2263.4296.3

302.6322.2367.4411.2455.1468.5537.2603.3682.7

Less:Trans-fers,inter-estandsub-

sidies 3

1.5

2.5

4.1

4.33.84.24.46.09.9

18.017.118.520.9

22.519.118.319.021.323.025.128.232.633.4

36.140.942.444.146.549.554.962.270.277.8

93.1106.8117.8135.4155.6194.4210.9227.9250.0

Equals:Netre-

ceipts

9.8

6.9

11.3

13.521.228.444.745.243.333.039.940.435.0

46.566.271.875.668.678.184.688.082.496.0

103.4103.9114.3124.4127.5138.9157.4166.0193.2218.5

209.5215.5249.6275.8299.5274.1326.3375.4432.7

Expenditures

Totalex-

pendi-tures

10.3

10.7

17.6

18.428.864.093.3

103.092.745.642.550.559.3

61.079.293.9

101.697.098.0

104.5115.3127.6131.0

136.4149.1160.5167.8176.3187.8213.6242.4268.9285.6

311.9340.5370.9404.9458.2532.8570.4621.8684.2

Less:Trans-fers,inter-est,andsub-

sidies3

1.5

2.5

4.1

4.33.84.24.46.09.9

18.017.118.520.9

22.519.118.319.021.323.025.128.232.633.4

36.140.942.444.146.549.554.962.270.277.8

93.1106.8117.8135.4155.6194.4210.9227.9250.0

Equals:Pur-

chasesof

goodsand

serv-ices

8.8

8.2

13.5

14.224.959.888.997.082.827.525.532.038.4

38.560.175.682.575.875.079.487.195.097.6

100.3108.2118.0123.7129.8138.4158.7180.2198.7207.9

218.9233.7253.1269.5302.7338.4359.5394.0434.2

Sur-plusor

deficit<-),na-

tionalin-

comeand

prod-uct ac-counts

1.0

-1 .4

- 2 . 2

- . 7- 3 . 8

-31.4-44.1-51.8-39.5

5.414.48.4

- 3 . 4

8.06.1

- 3 . 8-6 .9- 7 . 1

3.15.2.9

-12.6-1 .6

3.1- 4 . 3- 3 . 8

.7- 2 . 3

.5- 1 . 3

-14.2-5 .510.7

- 9 . 4-18.3-3 .5

6.3- 3 . 2

-64.4-33.2-18.6-1 .5

See next page for continuation of table.

192

TABLE B-8.—Gross national product: Receipts and expenditures by majoreconomic groups, 1929-78—Continued

[Billions of dollars]

Yearor

quarter

1929 . .

1933

1939.

19401941.19421943194419451946194719481949

1950195119521953195419551956 ----19571958 _.1959 ----

I960196119621963196419651966196719681969

19701971197219731974..197519761977..1978 P

Grossre-

tainedearn-ings4

11.7

3.2

8.8

10.912.014.816.717.716.015.821.830.031.4

30.834.637.138.041.047.548.751.151.358.5

58.759.867.070.176.284.691.293.798.2

101.7

101.4115.7131.0140.2137.9176 2202.6223.9243.6

Business

Grosspri-vatedo-

mesticinvest-ment5

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977.6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190 9243.0297.8344.5

Excessof earn-ings orof in-vest-ment(-)

-4.4

1.8

- .5

-2.2-5.8

4.910.910.55.4

-14 .9-12 .1-15 .8- 3 . 8

-23 .0-24 .6-15 .1-15 .3-11 .7-20 .8-22 .3-18 .1-10 .6-19 .0

-17 .7-14 .5-18 .2-20 .1- 2 0 . 4-27 .4- 3 3 . 3-27 .1-33 .3-44 .5

-39 .5- 4 4 . 3-57 .3-79 .8-76 .7— 14 8-40 .3-74 .0

-100.9

International

Nettrans-

fers andinter-est

paid tofor-

eigners(6)

0.4

.2

.2

.2

.2

.2

.2

.3

.82.92.64.55.6

4.03.52.62.52.32.52.52.52.42.6

2.62.83.03.13.23.33.53.73.63.8

4.35.56.57.78.58 58.79.7

13.0

Net exports of goodsand services

Ex-ports

7.0

2.4

4.4

5 45.94.84.45.37.2

14.819.816.915.9

13.918.918.217.118 020.023.926.723.323.7

27.628.930.632.737.439.542.845.649.954.7

62.565.672.7

101.6137.9147 3163 2175.5205.2

Less:Im-

ports

5.9

2.0

3.4

3.64.64.86.57.17.87.28.2

10.49.6

12.015.115.816.616 017.819.620.720.823.2

23.223.125.226.428.432.037.740.647.752.9

58.564.075.994.4

131.9126 9155 7186.6217.0

Equals:Netex-

ports

1.1

.4

1.1

1.71.3.0

- 2 0- 1 . 8- . 67 6

11.66.56.2

1.93.82 4.6

2 02.24.36.12.5.6

4.45.85.46.38.97.65.14.92.31.8

3.91.6

- 3 . 37.16.0

20 47 4

-11 .1-11.8

Excessofnet

trans-fersand

inter-est

or ofnet ex-ports(_)7

- 0 . 7

- . 2

- . 9

- 1 . 5- 1 . 1

.22.22.11.4

- 4 . 6- 9 . 0- 2 . 0- . 6

2.1- . 3

.21.9.3.3

- 1 . 8- 3 . 6

i

2.0

- 1 . 7- 3 . 0- 2 . 4- 3 . 2- 5 . 7- 4 . 3- 1 . 6- 1 . 2

1.42.0

.33.99.8.6

2.511 91.2

20.924.8

Totalincomeor re-ceipts

102.3

55.1

89.4

98 9124 3159.1193 8207 8208.2208 9231 0260.3257 0

284 1326.2344 5362 8363 3396 8421. 5442.6447.2486.7

506.7521 7559.8591.0633.5687.2749.8794 6869 1938.8

984.51,062.11.169.41,303.91,407.11 521 51, 695.91, 882.42,105. 7

Statis-ticaldis-

crep-ancy

1.1

.7

1.4

1 i5

- . 8—1 8

2 74.1

71 8

- 1 . 21 0

2 04.02 73.33 02 5

- . 8.2

1.7- . 2

y1.64.03.72.2.9

3.21.7

- . 6- 3 . 3

- 2 . 11.31.72.65.87 44.24.7.9

Grossna-

tionalprod-uct

or ex-pendi-ture

103.4

55.8

90.8

100 0124 9158.3192 0210 5212.3209 6232.8259.1258.0

286 2330.2347 2366.1366 3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.41,063.41,171.11,306.61,412.91 528 81, 700.11, 887.22,106.6

1 Personal income less personal tax and nontax payments (fines, penalties, etc.).3 Interest paid by consumers to business and net personal transfer payments to foreigners.3 Government transfer payments to persons and foreigners, net interest paid by government, subsidies less current

surplus of government enterprises, and disbursements less wage accruals.* Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and non-

corporate capital consumption allowances with capital consumption adjustment, and private wage accruals lessdisbursements.

5 See Table B-14.6 Net transfers to foreigners by persons and government and interest paid by government to foreigners.7 Capital grants received by the United States (net) less net foreign investment.Source: Department ot Commerce, Bureau of Economic Analysis.

193

T A B L E B-9.—Gross national product by sector, 1929- 78

[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year or quarter

1929

1933

1939

1940194119421943194419451946194719481949..

1950195119521953195419551956195719581959 .

I960196119621963196419651966196719681969

19701971197219731974197519761977 _1978 v

1976- 1IIIIIIV

1977: 1IIIII ^IV

1978: 1IIIIIIV v

Grossnationalproduct

103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982.4lf 063.41,171.11,306.61,412.91, 528.81, 700.11,887.22,106.6

1,649.71,685.41,715.61,749.8

1, 806.81,867.01,916.81,958.1

1,992.02, 087.52,136.12,210.8

Gross domestic product

Total

102.6

55.5

90.5

99.6124.5157.9191.6210.1212.0209.0231.8257.9256.9

284.8328.7345.7364.6364.5397.3418.5440.5446.6484.0

503.5520.2560.2591.1631.4683.4748.8791.8863.7931.1

977.81, 056.81,164.11,297.51, 399.81,518.31,685.71,869.92,087.1

1,635.31,671.91, 700. 71, 734.9

1,789.71,849.01, 898.71, 942.2

1,973.82,066. 52,117.32,190.8

Business

Total

95.4

49.1

80.6

89.4112.6139.9162.8174.2172.8183.8210.0234.9231.5

257.5294.4307.3324.9323.9354.0372.1390.8393.1427.7

442.5455.3490.4516.5550.7596.6651.1682.7742.2798.1

831.5896.9989.5

1,108.01,193.71,289.21,436.71, 599.31, 789.1

1,392.81, 425.41, 450.71,478.1

1,527.81, 582.51,626.41,660.4

1,684.11,771.81,817.51,883.1

Non-farm *

84.7

43.8

72.9

81.8103.1127.7149.3156.2152.7164.2188.0212.7211.7

235.5267.4282.5301.2301.3332.8354.3372.3370.7408.9

423.0433.4465.9492.2529.2573.8625.0658.8720.2776.2

807.6867.9955.8

1,055.21,139.91, 232.61, 385.61,544.01, 730. 5

1,340.91, 373.51,401.01,427.1

1,474.91,528.01,571.61,601.6

1,628.91,714.91, 758.5

Farm

9.7

4.6

6.3

6.58.9

13.015.315.316.018.920.223.318.8

20.022.922.220.319.618.818.618.420.719.1

20.220.220.520.519.322.022.922.222.625.2

25.927.732.050.148.049.246.950.557.8

48.547.845.745.6

49.550.847.754.0

53.056.458.663.0

Sta-tis-ticaldis-

crep-ancy

1.1

.7

1.4

1.1.5

- . 8- 1 . 8

2.74.1

.71.8

- 1 . 21.0

2.04.02.73.33.02.5

- . 8.2

1.7- . 2

- . 71.64.03,72.2.9

3.21.7

- . 6- 3 . 3

- 2 . 11.31.72.65.87.44.24.7

.9

3.44.14.05.3

3.43.77.14.8

2.2.5.4

House-holdsand

insti-tutions

2.9

1.7

2.3

2.42.52.93.23.74.14.55.15.65.9

6.46.97.27.88.19.19.8

10.511.412.3

13.814.415.516.617.819.221.123.926.429.2

31.634.737.240.544.850.556.562.771.5

54.255.957.058.9

60.061.363.565.9

68.870.572.374.4

Government *

Total

4.3

4.7

7.6

7.89.4

15.125.632.235.220.816.717.419.4

20.927.431.231.932.534.236.639.142.144.0

47.150.554.358.062.967.676.585.195.2

103.7

114.7125.2137.4149.1161.4178.6192.5208.0226.5

188.3190.7193.0197.9

201.9205.2208.9215.9

221.0224.1227.5233.4

Fed-eral

0.9

1.2

3.4

3.55.0

10.620.927.229.814.69.48.9

10.0

10.716.218.918.617.818.419.019.620.520.9

21.722.624.125.227.028.332.435.639.341.8

44.746.850.151.954.959.062.466.471.1

61.561.661.864.6

65.265.465.769.5

69.970.170.574.0

Stateandlocal

3.5

3.5

4.2

4.34.44.54.74.95.46.27.38.59.4

10.111.212.313.314.715.817.619.621.623.1

25.527.930.232.935.939.344.149.555.961.9

70.078.587.397.1

106.5119.6130.1141.5155.4

126.8129.1131.2133.3

136.8139.8143.2146.4

151.1154.1157.0159.4

Restof theworld

0.8

.3

.3

.4

.4

. 4

. 3

.4

.3

. 5

.91.21.1

1.31.51.51.51.82.02.22.32.22.4

2.53.13.63.74.34.74.24.64.84.5

4.66.67.09.1

13.110.514.417.319.5

14.413.514.914.9

17.118.018.115.9

18.221.118.820.0

Percentchangefrom

preced-ing

period,gross

domes-tic

prod-uct?

- 4 . 1

7.0

10 125.026 821.49 6

9- 1 410 911 3- . 4

10.915.45.25.5

- 09.05 35.21.48.4

4.03.37 75.56.88.29.65.79.17.8

5.08.1

10.111.5

7.98.5

11.010.911.6

12.79.37.18.3

13.313.911.29.5

6.720.110.214.6

1 Includes compensation of employees in government enterprises.' Compensation of government employees.3 Changes are based on unrounded data and therefore may differ slightly from those obtained from data shown here.

See Table B-l for percent changes in gross national product.Source: Department of Commerce, Bureau of Economic Analysis.

194

TABLE B-10.—Gross national product by sector in 7972 dollars, 1929-78

[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year or quarter

1929-.

1933—

1939—

1940—1941 —1942—1943-.1944—1945-1946-1947—1948-1949-

1950-1951-1952—1953-1954—1955-1956-1957-1958-1959-

1960-1961-1962—1963-1964—1965—1966—1967—1968-1969—

1970—1971..1972—1973—1974—1975—1976—1977—1978 v

1976: I . . .I I . .III.IV.

1977:III I I . . . .IV

1978: IIII I I —IV*

Grosslationaliroduct

314.6

222.1

318.8

343.3398.5460.3530.6568.6560.0476.9468.3487.7490.7

533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4

736.8755.3799.1830.7874.4925.9981.0

., 007.7,051.8, 078.8

075.3107.5171.1235.0217.8202.3271.0332.7

,385.1

1,255.51,268.01,276.51,284.0

1,306.71,325.51,343.91,354.5

1,354.21,382.61,391.41,412."

Gross domestic product

Total

312.8

220.5

317.7

342.0397.2459.2529.7567.5559.2475.8466.7485.9488.8

531.5574.7596.7619.9611.4652.2666.1678.0676.5717.3

733.6751.2794.3825.8868.7919.9975.6

,001.9,045.7, 073.1

1,069.81.100.3, 164.1,227.4,211.0, 197.5,264.3i,325.3,377.2

,248.61,261.61,269.71,277.1

1.299.4,317.7,336.3,347.9

,346.6,373.9,383.9,404.'

Total

271.1

179.7

260.6

282.0326.3361.0385.2403.5397.9384.9392.8411.2409.4

448.6477.2492.8515.6508.0546.5557.2566.0561.9600.5

611.8625.6663.9692.0730.4776.4822.4839.8878.2901.5

898.3927.6989.5

,050.4,031.2,013.6,077.9, 135.9, 183.1

1,063.01 075.31,083.41,090.0

1,112.11,129.61,146.11,155.9

1,153.51,180.01,189.31,209.5

Business

Non-farm i

244.2

152.1

230.7

253.8299.1336.0363.9372.7366.4362.2370.8387.2382.1

417.9445.9460.7480.6473.4512.5529.3538.7528.2569.6

580.5590.9629.6658.4697.1746.7791.1807.8850.6877.4

871.3894.9955.8,013.2993.7975.3

, 040.1,, 094.21,146.0

[,025.5,039.61,045.71,049.6

1,072.71,088.91,102.61,112.4

1,115.41,145.21,151.81,171.5

!3.8

!5.0

25.3

24.726.328.727.827.325.825.823.925.725.5

26.925.826.327.628.329.228.828.129.328.2

29.529.629.530.029.230.128.529.629.429.9

31.132.832.032.332.233.732.234.432.5

34.130.531.532.6

32.934.134.536.1

32.530.533.33.7

:esid-l

4.42.7

1.85.14.83.64.0

- . 42.82.41.85.9

4.2- . 11.74.95.34.75.67.34.6

3.45.26.27.8

6.46.69.07.4

5.54.34.34.3

use-loldsandnsti-jtions

5.6

2.2

.5.1

[6.1[5.9[6.4[5.25.15.05.1.6.016.717.3

18.318.78.6

19.319.421.422.523.124.224.9

26.827.228.329.029.931.132.834.835.936.6

36.336.637.238.138.039.440.742.244.6

40.240.740.641.3

41.241.742.543.6

43.844.344.945.3

Government 3

Total

26.1

28.7

42.0

43.955.181.8.29.3[49.0[46.275.857.958.062.2

64.678.885.385.083.984.486.588.990.491.8

94.998.5

102.1104.8108.4112.4.20.411.1L31.735.0

.35.2

.36.0

.37.438.941.9.44.445.6.47.2.49.6

L45.4145.6145.145.8

146.1146.3147.7148.4

149.4149.149.8149.

5.2

6.6

6.9

18.629.656.705.025.2.21.849.729.829.231.3

32.746.251.649.647.245.945.645.844.544.5

45.246.248.348.248.548.753.057.258.158.2

55.252.550.148.348.648.548.548.748.9

48.348.48.648.6

48.648.748.848.8

48.848.49.48.

Stateandlocal

lestof theworld

20.9

!2.0

!5.3!5.5!5.0!4.4!3.8!4.56.1

28.128.830.9

31.932.633.735.536.738.440.843.145.847.3

49.752.353.956.660.063.667.570.073.676.8

80.183.587.390.693.396.097.198.4

100.

97.097.197.197.1

97.597.699.99.

100.100.100.100.

1.9

1.6

1.2

1.31.21.11.01.0.8

1.11.61.81.9

1.91.81.82.02.32.52.72.93.03.2

3.24.14.84.95.76.15.45.86.15.7

5.57.27.07.66.84.96.87.37.9

7.06.46.86.8

7.47.87.66.

7.8.

i.

»ercentchangefromi reced-

ingperiod,gross>mesticoduct *

- 2 . 2

7.7

7.716.115.615.47.2

-1 .5-14.9- 1 . 9

4.1.6

8.78.13.83.9

-1 .46.72.11.8

- . 26.0

2.32.45.74.05.25.96.12.74.42.6

- . 32.85.85.4

- 1 . 3- 1 . 1

5.64.83.9

8.74.22.62.4

7.15.85.83.5

- . 48.33.06.1

1 Includes compensation of employees in government enterprises.2 The difference between gross product in 1972 dollars measured as the sum of final products and that measured as the

sum of gross product by industry.3 Compensation of government employees.* Changes are based on unrounded data and therefore may differ slig

See Table B-2 for percent changes in gross national product in 1972 c" "

Source: Department of Commerce, Bureau of Economic Analysis.

195

T A B L E 35—11.—Gross domestic product of nonfinancial corporate business, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Yearor

quar-ter

1929..

1933..

1939..

194019411942"19431944"19451946194719481949..

195019511952.19531954.19551956"195719581959..

I960. .196119621963..1964..19651966..19671968..1969..

1970..1971..1972..1973..1974..1975..1976..1977..1978*.

1976:l - ._II..III..IV..

1977:1 . . .II..111..IV..

1978:1 . . .II..III..

Grossdo-

mes-tic

prod-uctof

non-finan-cialcor-po-rate

busi-ness

50.1

24.4

43.7

50.465 682. S98.7

102.195.399.3

120 0137.3133.5

151.9174.5182.3195 0191.8216 7231*. 6242 3236.3265.7

277.3284 5311.0330.9357.6392.1430.7452 9498.4541.8

560.6602.5671.0752.0808.8874.1988.5

1,103.21,240.5

959.4982.0999.3

1,013.1

1, 048.51,093.31,124.61,146.3

1,161.61,233.01,260.6

Cap-italitai

con-sump-

tionallow-anceswithcapi-

tallai

sump-tionad-

just-ment

5.4

4.2

4.7

4.85.36.06.16.26.47.39.1

10.711.6

12.614.615.717.017. S19 ?21.5?3 724.926.0

27.027.828.729.831.032.835.739 343.047 8

53.158.262.668.780.896.8

106.7115.6126.5

103.6105.4107.7109.9

111.5114.6117.2119.0

121.6124.6128.6

Net domestic product

Total

44.7

20.2

39.1

45.660.477.092.695.988.992.1

110.9126.5121.9

139.3159.9166.7178.1174.1197 5210.1218.5211.4239.7

250.3256.7282.3301.1326.6359.3394.9413.6455.4494 0

507.5544.2608.4683.3728.0777.3881.8987.6

1,114.0

855.8876.6891.6903.2

936.9978.7

1,007.41,027.3

1, 040.01,108.51,132.0

Indi-rect

busi-nesstax,

etc.*

3.4

3.8

5.1

5.56.46.87.38.18.9

10.111.212.112.6

14.115.216.818.217.419 220.822.422.825.4

28.330.133.035.638.441.142.945.851.657 1

61.868.273.580.585.792.699.5

107.8117.9

96.498.9

100.5102.5

104.8106.8108.7110.9

113.5118.0118.4

Domestic income

Total

41.3

16.4

34.0

40.153.970.185.387.880.081.999.8

114.4109.3

125.2144.7149.8159.9156.6178.3189.2196.2188.6214.4

222.0226.5249.2265.6288.3318.2352.0367.9403.8437 0

445.7476.0534.8602.8642.3684.6782.2879.8996.1

759.4777.7791.1800.7

832.1871.9898.7916.4

926.5990.5

1,013.6

Com-pen-

sationof

em-ploy-ees

32.3

16.7

28.2

31.239.851.062.265.161.967.279.187.885.3

94.7110.2118.3128.7126.5138 5151.4159.1155.9171.6

181.1185.1199.8210.7226.3246.1273.5291.9321.6357 4

377.1399.4443.8503.8552.9576.9650.2732.1833.9

626.3642.9656.9674.8

699.5725.3741.6762.2

789.9826.0845.5

Corporate profits with inventory valuation and capital

Total

7.6

- 2 . 0

4.3

7.512.817.922.021.717.214.119.925.823.0

29.633.430.329.928.638.236.135.030.139.7

37.437.444.950.056.766.171.267.272.166 4

51.658.772.076.059.576.9

101.3113.9125.1

102.2104.2103.695.3

100.6113.5122.8118.7

100.9127.8130.6

consumption adjustments

Profits before tax

Total

8.4

.6

6.1

8.816.420.123.622.217.822.029.131.824.9

38.539.133.834.932.142.041.839.833.743.1

39.539.243.748.354.664.469.565.471.968 4

55.163.375.992.7

102.9101.3130.2143.5167.0

127.8134.1131.4127.3

135.4144.7145.3148.5

140.0169.5170.3

Profitstax

liabil-ity

1.2

.5

1.4

2.77.5

11.213.812.610.28.6

10.811.89.3

16.921.217.818.515.620 220.119.116.220.7

19.219.520.622.824.027.229.527.733.633.3

27.329.933.539.642.740.653.059.068.6

53.155.353.150.4

56.159.959.460.4

55.970.170.2

Profits after tax

Total

7.3

.1

4.7

6.19.08.99.89.67.6

13.418.320.015.6

21.617.916.016.416.421.821.820.717.522.3

20.319.723.125.530.737.240.037 738.335.1

27.933.342.453.160.260.777.284.598.4

74.878.878.376.9

79.384.885.988.0

84.299.4

100.1

Divi-dends

5.2

2.0

3.3

3.64.03.84.04.24.25.15.96.56.5

7.97.87.88.08.29 4

10.110.410.210.8

11.511.712.714.115.317.218.118.920.720 7

19.920.021.723.926.028.533.539.145.0

28.733.234.437.9

36.437.939.542.5

43.042.946.2

Undis-tribu-

tedprofits

2.0

- l . S

1.4

2.54.95.15.75.43.48.3

12.413.59.1

13.610.18.18.48.2

12.411.610.37.3

11.5

8.78.0

10.311.415.420.021.918.817.614.4

8.013.320.729.234.232.243.745.553.5

46.145.643.939.0

43.046.946.445.6

41.256.553.9

Inven-

toryationad-

just-ment

0.5

- 2 . 1

- . 7

- . 2- 2 . 5- 1 . 2- . 8- . 3- . 6

- 5 . 3- 5 . 9- 2 . 2

1.9

- 5 . 0- 1 . 2

1.0- 1 . 0- . 3

- 1 . 7- 2 . 7- 1 . 5

2- ! 5

.3

.1

.1- . 2- . 5

- 1 . 9- 2 . 1- 1 . 7- 3 . 4- 5 . 5

- 5 . 1- 5 . 0- 6 . 6

-18.6-40.4-12.4-14.5-14.8-24.3

-11.4-15.7-13.3-17.6

-20.3-16.6- 7 . 7

-14.8

-23.5-24.9-20.9

Capi-tal

con-sump-

tionad-

just-ment

- 1 . 3

- . 5

- 1 . 0

- 1 . 1- 1 . 1- 1 . 0- . 8- . 2- . 1

- 2 . 7- 3 . 3- 3 . 9- 3 . 8

- 3 . 9- 4 . 5- 4 . 4- 4 . 0- 3 . 2- 2 . 1- 3 . 0- 3 . 3- 3 . 4- 2 . 9

- 2 . 3- 1 . 8

1.01.92.63.63.83.63.63.5

1.5.5

2.71.8

- 3 . 0-11.9-14.3-14.7-17.7

-14.2-14.3-14.4-14.4

-14.5-14.7-14.8-15.0

-15.7-16.8-18.9

Netinter-

est

1.4

1.7

1.5

1.41.31.31.11.01.0.7.8.9

1.0

.91.11.21.31.61 61.7? 22.73.1

3.53.94.54.85.36.17.48.7

10.113 1

17.017.919.123.129.930.830.733.737.2

30.930.730.530.6

32.033.234.435.4

35.736.637.6

1 Indirect business tax and nontax liability plus business transfer payments less subsidies.

Source: Department of Commerce, Bureau of Economic Analysis.

196

TABLE B-12.—Output, costs, and profits of nonfinancial corporate business, 1948-78

[Quarterly data at seasonally adjusted annual rates]

Year orquarter

1948.1949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969, __

197019711972.19731974

1975. . .197619771978 p . . . .

1976: I . . . .I I . . .I I I . .IV. . .

1 9 7 7 : 1 . . . .I I . . .I I L .IV. . .

1978: 1 .I I . . .I I I . .

Gross domesticproduct of

nonfinancialcorporatebusiness

(billions ofdollars)

Cur-rent

dollars

137.3133.5

151.9174.5182.3195.0191.9

216.7231.6242.3236.3265.7

277.3284.5311.0330.9357.6

392.1430.7452.9498.4541.8

560.6602.5671.0752.0808.8

874.1988.5

1,103. 21,240. 5

959.4982.0999.3

1,013.1

1, 048.51, 093. 31,124.61,146. 3

1,161.61, 233.01,260.6

1972dollars

229.7219.9

247.5270.2275.2292.0283.5

315.1324.1328.3313.4347.3

358.9366.7399.7425.4455.2

494.6532.9545.8581.6607.3

600.6619.3671.0720.4695.0

680.0730.0769.3810.3

722.1731.7733.5732.7

750.2766.9776.7783.6

783.6811.9814.9

Current-dollar cost and profit per unit of output (dollars

Totalcostand

profit2

0.598.607

.614

.646

.663

.668

.677

.688

.715

.738

.754

.765

.773

.776

.778

.778

.786

.793

.808

.830

.857

.892

.933

.9731.0001.0441.164

1.2851.3541.4341.531

1.3291.3421.3621.383

1.3981.4261.4481.463

1.4821.5191.547

Capitalcon-

sump-tion

allow-anceswith

capitalcon-

sump-tion

adjust-ment

0.047.053

.051

.054

.057

.058

.063

.061

.066

.072

.080

.075

.075

.076

.072

.070

.068

.066

.067

.072

.074

.079

.088

.094

.093

.095

.116

.142

.146

.150

.156

.143

.144

.147

.150

.149

.149

.151

.152

.155

.153

.158

In-directbusi-nesstax,

etc. 3

0.053.057

.057

.056

.061

.062

.061

.061

.064

.068

.073

.073

.079

.082

.083

.084

.084

.083

.080

.084

.089

.094

.103

.110

.110

.112

.123

.136

.136

.140

.145

.133

.135

.137

.140

.140

.139

.140

.142

.145

.145

.145

Com-pen-

sationof

em-ployees

0.382.388

.383

.408

.430

.441

.446

.439

.467

.484

.497

.494

.505

.505

.500

.495

.497

.497

.513

.535

.553

.589

.628

.645

.661

.699

.796

.848

.891

.9521.029

.867

.879

.896

.921

.932

.946

.955

.973

1.0081.0171.038

Netin-

terest

0.004.004

.004

.004

.004

.004

.006

.005

.005

.007

.009

.009

.010

.011

.011

.011

.012

.012

.014

.016

.017

.022

.028

.029

.028

.032

.043

.045

.042

.044

.046

.043

.042

.042

.042

.043

.043

.044

.045

.046

.045

.046

I1

Corporate profits withinventory valuation

and capitalconsumption adjust-

ments

Total

0.112.105

.120

.124

.110

.102

.101

.121

.112

.106

.096

.114

.104

.102

.112

.118

.125

.134

.134

.123

.124

.109

.086

.095

.107

.105

.086

.113

.139

.148

.154

.142

.142

.141

.130

.134

.148

.158

.151

.129

.157

.160

Profitstax

liability

0.051.042

.068

.079

.065

.063

.055

.064

.062

.058

.052

.060

.053

.053

.052

.054

.053

.055

.055

.051

.058

.055

.045

.048

.050

.055

.061

.060

.073

.077

.085

.073

.076

.072

.069

.075

.078

.076

.077

.071

.086

.086

Profitsaftertax*

0.061.062

.051

.045

.046

.039

.046

.057

.050

.048

.044

.055

.051

.049

.061

.064

.072

.079

.078

.072

.066

.055

.041

.046

.057

.050

.024

.053

.066

.071

.070

.068

.067

.069

.061

.059

.070

.082

.074

.057

.071

.074

Outputper

hour ofall em-ployees(1972

dollars)

5.1105.333

5.4555.6345.9126.1676.427

6.6256.7776.8737.1057.139

7.1327.3747.5957.7887.489

7.7217.9628.057

7.9177.9788.0067.9577.991

8.0258.1138.103

8.0538.1398.165

Compen-sationper

hour ofall em-ployees(dollars)

2.5412.635

2.7522.8442.9563.0543.195

3.2963.4783.6763.9294.198

4.4784.7575.0245.4465.958

6.5507.0937.667

6.8677.0107.1707.3297.451

7.5907.7467.881

8.1178.2818.471

1 Output is measured by gross domestic product of nonfinancial corporate business in 1972 dollars.2 This is equal to the deflator for gross domestic product of nonfinancial corporate business with the decimal point

shifted two places to the left.3 Indirect business tax and nontax liability plus business transfer payments less subsidies.* With inventory valuation and capital consumption adjustments.

Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics).

197

TABLE B-13.—Personal consumption expenditures, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Yearor

quarter

1929

1933

1939

19401941. . . .19421943194419451946194719481949 . . . .

19501951195219531954 .19551956195719581959

19601961 . . .196219631964 . . . .1965 .19661967. . .19681969.

1970 . . . .1971 . .19721973197419751976 . . .19771978 v

1976: 1I I . . . .I I I . . .I V . . . .

1977:1III I I . . .I V . . . .

1978:1II —Ill—.IV *__

Pers

onal

con

sum

ptio

nex

pend

iture

s

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143 8161.7174* 7178 1

192 0207.1217.1229 7235 8253.7266 0280 4289.5310 8

324.9335.0355.2374.6400.4430.2464 8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,090.21,206.51,339.7

1,053.81,075.11,098.41,133.7

1,167.71,188.61,214.51,255.2

1,276.71,322.91,356.91,402.2

Durable goods l

1

9.2

3.5

6.7

7.89.76.96.56.78.0

15 820 422.9?s n

30.829.8?<H32.531.838.637.939.336.842.4

43.141.646.751.456.362.867.769.680.085.5

84.997.1

111.2123.7122.0132.6156.6178.4197.6

152.2154.7156.7162.8

173.2175.6177.4187.2

183.5197.8199.5209.6

•eCOa.

|o

1

3.3

1.1

2.3

2.83.5

.8

.81.04.16.68.0

10.6

13.712.211.313 q13.017.815.817.214.818.9

19.717.821.524.426.029.830.129.735.837.7

34.943.850.655.248.053.469.781.589.7

67.769.169.572.6

81.381.279.584.0

84.192.589.892.5

iiIf4.7

1.9

3.4

3.84.84.63.93.84.58.4

10.611.511.3

13.714.014.014.614.616.217.116.916.617.8

17.717.918.920.322.824.727.729.532.635.0

36.739.444.850.754.958.063.971.377.6

61.963.064.266.5

68.069.972.075.3

72.176.578.982.9

f

I37.7

22.3

35.1

37.042.950.858.664.371.982.790.996.694.9

98.2108.8113.9116.5118.0122.9128.9135.2139.8146.4

151.1155.3161.6167.1176.9188.6204.7212.6230.4247.0

264.7277.7299.3333.8376.3408.9442.6479.0525.8

430.3437.4444.5458.3

465.9473.6479.7496.9

501.4519.3531.7550.8

Nondurable goods *

I19.5

11.5

19.1

20.223.428.433.236.740.647.452.354.252.5

53.960.463.464.465.467.269.973.676.479.1

81.183.285.587.892.798.9

106.6109.6118.3126.1

136.3140.6150.4168.1189.8209.6225.8245.2269.2

219.4223.9227.4232.3

237.5244.5246.4252.6

257.7267.8272.0279.4

§

1Io

9.4

4.6

7.1

7.58.8

11.013.414.616.518.218.820.119.3

19.621.221.922.122.123.124.124.324.726.1

26.727.428.729 531.933.536.638.241.845.1

46.650.555.161.365.370.175.781.588.9

73.874.276.178.5

78.579.381.486.7

82.987.590.594.6

1|

1.8

1.5

2.2

2.32.62.11.31.41.83.44.04.85.3

5.56.16.87.47.88.69.4

10.210.611.3

12.012.012.612.913.514.716.017.018.420.4

22.023.424.927.836.439.542.846.551.1

41.441.943.045.1

46.146.246.047.5

48.349.151.555.6

1-o

I1.6

1.2

1.4

1.51.71.92.02.02.22.53.03.43.1

3.43.53.43.43.53.83.94.14.24.0

3.83.73.74.04.14.44.74.85.05.2

5.45.56.37.79.6

10.212.213.514.8

11.311.512.313.7

13.912.913.113.9

15.815.214.313.7

130.3

20.1

25.2

26.228.231.034.337.139.645.350.455.358.2

63.068.574.080.686.192.199?

105.9112.8121.9

130.7138.1147.0156.1167.1178.7192.4208.1225.6247.2

269.1293.4322.4352.3391.3437.5491.0549.2616.3

471.3483.0497.2512.6

528.6539.4557.5571.1

591.8605.8625.8641.8

Services

DO

j11.7

8.1

9.4

9.710.411.211.812.312.814.216.017.919.6

21.724.327.029.832.234.336.739.342.045.0

48.151.254.758.061.465.569.574.179.986.8

94.0102.7112.3123.2136.5150.2166.4184.6207.2

160.2164.7168.2172.3

177.3182.1186.9192.0

198.1204.1210.1216.6

I

Householdoperation1

I4.0

2.8

3.8

4.04.34.85.25.96.46.87.58.18.5

9.510.4U. 112.012.614.015 216.217.318.5

20.121.022.223.424.826.328.030.632.735.5

38.341.645.950.256.164.572.881.690.9

69.370.273.578.2

80.278.083.784.6

89.688.992.692.6

3"Oci1

1.2

1.1

1.4

1.51.51.61.71.81.92.12.32.62.9

3.33.74.14.55.05.56.16.57.17.6

8.38.89.49.9

10.410.911.512.213.114.2

15.517.018.920.624.129.333.038.042.7

31.331.033.036.8

38.035.039.539.3

43.341.543.342.7

1|

2.6

1.5

2.0

2.12.42.73.43.74.05 05.35.85.9

6.26 77 17.87 98.28.69 09.3

10.1

10.711?11.712.212.813.715.016.217.418.9

21.123.826.027.930.732.637.944.252.7

36 037.038.739.8

40.843.545.047.3

49.752.153.755.2

1 Total includes "other" category, not shown separately.> Includes imputed rental value of owner-occupied dwellings.Source: Department of Commerce, Bureau of Economic Analysis.

198

TABLE B-14.—Gross private domestic investment, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940..194119421943...19441945.1946194719481949

1950 . .1951.1952195319541955 . .1956195719581959

1960 . .19611962196319641965 .1966196719681969

19701971 . .1972197319741975197619771978 P

1976" 1II

1977: 1IIlll . ._-

1978: 1II

IV*"~

Grossprivatedomes-

ticinvest-ment

16.2

1.4

9.3

13.117.99.95.87.2

10.630.734.045.935.3

53.859.252.153.352.768.471.069.261.977.6

76.474.385.290.296.6

112.0124.5120.8131.5146.2

140.8160.0188.3220.0214.6190.9243 0297.8344.5

231 5243.5249.9247.1

272.5295.6309.7313.5

322.7345.4350.1359.9

Total

14.5

3.0

8.8

10.913.48.16.48.1

11.724.334.441.138.4

47.048.949.052.954.362.466.367.963.472.3

72.772.178.784.290.8

102.5110.2110.7123.8136.8

137.0153.6178.8202.1205.7201.6232 8282.3328.8

220 1228.1235.3247.6

262.2278.6287.8300.5

306.0325.3336.5347.4

f ixed investmen

Nonresidential

Total

10.5

2.4

5.8

7.59.46.05.06.8

10.116.822.926.224.3

27.131.131.234.334.038.343.746.741.645.3

47.747.151.253.659.771.381.482.189.398.9

100.5104.1116.8136.0150.6150.2164 6190.4222.0

157 7162.2168.1170.5

180.6187.2193.5200.3

205.6220.1227.5235.0

Structures

Total

5.0

.9

2.0

? 32.91.91 31.82.86.87.68.98.6

9 311.311.51? 813.214.417.418.116,717.0

18 ?18.419.419.621.526.1?9.229.531.635.7

37.739.342.549.054.553.857.363.977.5

56.457.657.357.9

59.363.465.467.4

68.576.680.984.0

Non-farm

4.8

.9

1.9

2.22.81.81.21.72.66.16.88.17.8

8.610.510.612.012.413.716.617.416.016.1

17.317.518.518.620.525.128.128.230.434.3

36.137.841.146.951.851.354.761.074.3

53.855.054.855.1

56.460.462.764.5

65.273.478.080.8

Producers'durable

equipment

Total

5.5

1.4

3.9

5.26.44.13.75.07.39.9

" 15.317.315.7

17.819.919.7

20.823.926.328.674.928.3

29.528.731.834.038.245.15?.?52.657.763.3

62.864.774.387.096.296.4

107.3126.5144.5

101.3104.6110.8112.6

121.4123.8128.1132.8

137.1143.5146.6151.0

Non-farm

4.8

1.3

3.3

4.55.53.53.24.26.39.0

13.414.712.8

14.916.917.118.718.421.324.126.221.925.2

27.026.128.930.634.641.247.948.053.458.9

58.159.969.180.188.287.497.5

116.7133.8

91.494.7

100.5103.3

111.0113.8118.6123.4

127.2132.9135.5139.7

t

Residential

Total

4.0

.6

3.0

3.54.02.21.41.31.67.5

11.515.014.1

19.917.717.818.620.324.122.821.221.827.0

25.025.027.430.631.231.2?8 728.634.537.9

36.649.662.066.155.151.568.291.9

106.8

62.465.967.377.1

81.691.494.3

100.2

100.3105.3109.0112.5

Non-farmstruc-tures

3.8

.5

2.8

3.23.71.91.21.11.46.8

10.513.812.9

18.716.616.617.519.223.021.420.020.725.8

23.923.826.329.429.929.927.427.233.136.3

35.147.960.364.352.749.565.888.9

103.6

59.863.865.174.4

78.688.491.297.5

97.3102.1105.7109.3

Farmstruc-tures

0.2

.0

.1

. 2

.2

.2

.2

.1

.1

.5

.7

.9

. 8

. 8

.8

.8

.8

.7

.6

.7

.7

.7

.7

.6

.7

.6

.7

.7

.6

.7

.7

.6

.7

.6

.7

.7

.61.2.9

1.11.51.4

1.3. 8.8

1.4

1.61.61.61.2

1.31.41.51.5

Pro-ducers'

dur-able

equip-ment

0.1

.0

.1

.1

.1

.1

.0

.0

.0

.2

.3

.3

.3

.4

.4

.4

.4

.4

.4

.5

.5

.5

.6

.5

.5

.5

.6

.6

.7

.7

.7

.8

.9

.9

.01

.2

.135

.7

.3

.3

.4

.4

.4

.5

.6

.7

.8

.7

.7

Change inbusiness

inventories

Total

1.7

- 1 6

.4

2.24.51.8

- . 6—1.0- 1 . 0

6.4- . 54.7

- 3 . 1

6.810.33.1

.4- 1 . 5

6.04.71.3

- 1 . 55.2

3.82.26.56.05.89.5

14.310.17.79.4

3.86.49.4

17.98.9

-10.710.215.615.7

11.415.414.5- . 6

10.317.021.913.1

16.720.113.612.4

Non-farm

1.8

- 1 4

.3

1.94 0.7

- . 6—.6- . 66.41.33.0

- 2 . 2

6.09.12.11.1

- 2 . 15.55.1.8

- 2 . 35.3

3.51.95.85.26.48.5

14.59.47.69.2

3.75.18.8

14.710.8

-14 .312.215.016.7

12.718.815.22.2

11.116.522.010.4

16.922.114.613.1

Source: Department of Commerce, Bureau of Economic Analysis.

199

TABLE B-15.—Inventories and final sales of business, 1946-78

[Billions of dollars, except as noted; seasonally adjusted]

Year andquarter

Fourth quarter:1946194719481949

19501951195219531954

1955 .1956195719581959 . .

19601961196219631964

1965196619671968 . . .1969

19701971197219731974

1975 . .19761977-1978 v _ .

1976- 1II.IllIV

1977:1. .IIIII.IV . .

1978: 1||IIIIV v

Total

73.786.990.681.0

98.8112.1109.4110.1107.2

112.1121.8126.7128.9132.3

136.2138.4145.2151.5157.6

172.7189.1202.2215.3236.2

244.2261.9288.6355.8425.6

428.3459.7498.6571.0

435.9447.0451.8459.7

473.6476.4483.6498.6

520.7536.5548.5571.0

!

Farm

21.825.823.419.5

24.226.523.121.620.5

17.618.320.924.923.6

24.825.026.626.925.7

29.728.929.230.433.4

31.736.844.666.261.9

64.360.260.371.4

64.164.059.860.2

62.058.055.760.3

66.368.068.171.4

Inventories

Nonfarm

Total

51.961.167.261.4

74.685.686.388.586.7

94.6103.5105.8103.9108.7

111.3113.4118.6124.6131.8

143.0160.2173.0184.9202.8

212.5225.1243.9289.6363.7

364.0399.5438.3499.5

371.8383.0392.0399.5

411.6418.4428.0438.3

454.4468.5480.4499.5

Manufac-turing

26.731.834.831.0

37.446.247.349.347.0

51.457.557.956.057.5

58.159.562.564.868.5

73.783.491.197.4

107.1

110.8113.6120.4143.6186.4

187.9203.9219.2248.4

190.5195.3199.7203.9

208.7211.9215.5219.2

225.9232 0239.0248.4

Wholesaletrade

9.610.612.111.7

14.314.914.915.115.4

16.717.818.118.119.2

19.620.220.922.423.6

25.328.630.632.435.3

38.341.245.755.269.8

68.176.685.9

100.5

70.073.875.476.6

80.180.982.885.9

90.994.296.4

100.5

Retailtrade

11.914.115.314.3

17.718.317.918.518.7

20.921.822.922.924.1

25.625.126.728.229.8

33.136.637.840.744.4

45.651.055.964.472.3

72.180.289.9

103.4

74.676.578.6£0.2

82.984.887.589.9

94.397.599.0

103.4

Other

3.74.64.94.4

5.26.26.25.55.6

5.66.46.96.98.0

8.18.78.69.29.9

10.911.613.514.416.1

17.719.221.826.435.2

35.938.843.347.2

36.737.338.338.8

39.940.742.343.3

43.344.845.947.2

Finalsales:

192.0219.6235.7234.6

259 8295.6313.3325.8330.1

356.5377.0392.7405.0426.7

442.1465.3492.7524.2553.1

610.7647.5688.0757.6804.5

839.4915.2

1,019.91,120. 51,216.0

1, 355.11, 478. 61, 647.31,870.6

1,381.41,410.01, 436.11, 478. 6

1,517.51, 565. 51, 604. 51, 647. 3

1,667.31,751.71, 803.91, 870. 6

Inventory-finalsales ratio

Total

0.384.396.384.345

380.379.349.338.325

.315

.323

.323

.318

.310

.308

.297

.295

.289

.285

.283

.292

.294

.284

.294

.291

.286

.283

.318

.350

.316

.311

.303

.305

.316

.317

.315

.311

.312

.304

.301

.303

.312

.306

.304

.305

Non-farm 3

0.270278

.285262

287290

.275272

.263

.265

.274269

.257255

252.244.241.238.238

.234

.247

.251

.244

.252

.253

.246

.239

.258

.299

.269

.270

.266

.267

.269

.211

.273

.270

.271

.267

.267

.266

.273

.267

.266

.267

1 End of quarter.2 Annual rates.3 Ratio based on total final sales, which include a small amount of final sales by farms.

Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 Standard Indus-trial Classificaticn (SIC) beginning in 1948 and on the 1942 SIC prior to 1948.

Source: Department of Commerce, Bureau of Economic Analysis.

200

TABLE B-16.—Inventories and final sales of business in 1972 dollars, 1947-78

[Billions of 1972 dollars, except as noted; seasonally adjusted]

Year andquarter

Fourth quarter:194719481949

1950195119521953 .1954

19551956..19571958 .1959

1960 .1961196219631964 .

1965196619671968 .1969

197019711972- _ . . .19731974 .

1975..197619771978 p

1976:1IIIIIIV

1977:1IIIIIIV

1978-1III I I .I V P

Total

118.6124.1119.7

130.2143.9148.2149.7147.5

155.3161.1162.6160.8167.2

171.6174.5182.6190.4197.7

209.0225.7237.7246.4257.0

261.3267.9277.4293 9301.8

292.1298.7307.6318.0

293.9296.5298 8298.7

300.2302.7305.7307.6

310.7313.9316.1318.0

Farm

?5.726.726.2

27.529.130.430.231.1

31.530.731.432.432.4

32.833.234.535.735.1

36.236.036.837.037.3

37.739.239.842.141.8

43.041.140.640.0

42.74i.941.841.1

40.740.740.340.6

40.540.240.140.0

Total

93.097.393.5

102.7114.8117.9119.6116.5

123.7130.3131.2128.4134.8

138.8141.2148.1154.7162.6

172.8189.7200.9209.4219.7

223.6228.8237.6251.8260.1

249.1257.6267.0278.0

251.3254.5257.0257.6

259.5262.0265.4267.0

270.2273.6276.0278.0

Inventories i

Nonfarm

Manufac-turing

49.951.348.5

51.862.565.266.963.3

66.771.671.168.671.1

72.474.278.480.884.7

89.199.0

105.9110.7115.8

117.1115.4117.5123 6128.6

124.2126.9128.8133.2

124.3125.3126.3126.9

127.3128.3129.1128.8

129.9131.5132.9133.2

Wholesaletrade

13.816.116.1

18.318.919.219.419.7

21.422.021.921.823.7

24.325.025.927.829.1

30.533.735.536.638.2

40.442.044.447.450.6

47.250.453.757.8

48.049.650.350.4

51.451.952.753.7

55.756.656.857.8

Retailtrade

20.521.320.9

23.923.923.924.524.6

27.227.528.428.229.6

31.530.632.534.136.0

39.442.743.145.347.7

47.351.954.458.256.5

54.056.760.662.9

55.255.856.656.7

57.358.359.860.6

61.161.762.262.9

Other

8.78.67.8

8.79.59.68.78.8

8.49.29.89.8

10.5

10.711.411.412.012.8

13.814.316.316.818.0

18.819.521.322.724.5

23.623.623.924.1

23.823.923 723.6

23.523.523.823.9

23.423.924.124.1

Finalsales >

397.2412.0415.1

442.6476.5499.1516.2517.0

547.4557.6565.3577.2596.8

609.0636.6664.2699.3730.7

791.3809.2837.2882.8892.2

891.7935 n

1,007.61,031 8,005.3

, 043.31,090.3L, 148.4,201.8

, 055. 51,065 3I 074 1L, 090.3

1,106.21,119.61,133.91,148.4

L, 141.11,167.31,180.31,201.8

Inventory-finalsales ratio

Total

0.299.301.288

.294

.302

.297

.290

.285

.284

.289

.288

.279

.280

.282

.274

.275

.272

.271

.264

.279

.284

.279

.288

.293

.287

.275285

.300

280.274.268.265

.278

.278278

.274

.271

.270

.270

.268

.272

.269

.268

.265

Non-farm 3

0.234.236.225

.232

.241

.236

.232

.225

.226

.234

.232

.222

.226

.228

.221

.223

.221

.223

.218

.234

.240

.237

.246

.251

.245

.236244

.259

239.236233

.231

.238239239

.236

.235

.234

.234

.233

.237

.234

.234

.231

1 End of quarter.1 Annual rates.3 Ratio based on total final sales, which include a small amount of final sales by farms.

Note.—The industry classification of inventories is on an establishment basis and is based on the 1972 StandardIndustrial Classification (SIC) beginning in 1948 and on the 1942 SIC prior to 1948.

Source: Department of Commerce, Bureau of Economic Analysis.

201

T A B L E B—17.—Relation of gross national product and national income, 1929— 78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

1929

1933

1939

1940194119421943194419451946.194719481949

19501951._19521953195419551956195719581959

19601961.1962196319641965.1966196719681969

197019711972197319741975197619771978 v

1976- 1IIIllIV

1977: 1. ~ .IIIIIIV

1978:1

nMlIV p

Grossnationalproduct

103.4

55.8

90.8

100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0

286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5

506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5

982 41,063.41,171.1L, 306.61,412.9I, 528.8t, 700.1. 887.2

2,106.6

1,649.71,685.41,715.61,749.8

1,806.81,867.01,916.81,958.1

1,992.02,087.52,136.12,210.8

Less:Capital

consump-tion allow-ances with

capitalconsump-

tion adjust-ment

9.7

7.5

8.7

9.010.011.211.511.812.313.817.220.322.0

23.927.629.631.633 135.338.942.044.146.1

47.749.150.552.254.657.561.767.073.882.5

90 898.8

105 4117.7137.7162.0177.8195.2216.9

172.7175.8179 2183.4

187.3192 4198.5202.6

207.3213.3220.8226.3

Equals:Net

nationalproduct

93.7

48.3

82.1

91.0114.9147.1180.5198.7200.0195.7215.6238.8236.1

262.3302.6317.6334.5333.2364.0381.8400.8404.8440.4

458.3474.2513.3542.5581.2630.6691.3729.3794.7853.1

891.6964.7

1, 065.81.188.9I, 275.2, 366.9

L, 522.31,692.0, 889.7

1,477.0, 509.6

L, 536.31,566.4

1,619.5, 674.6

1,718.31,755.5

L, 784.7L, 874.21,915.3L, 984.5

Plus:Subsidies

lesscurrentsurplus

of govern-mententer-prises

- 0 . 2

- . 0

.4

.4

.1

.1

.1

.6

.7

.9- . 2- . 1- . 3

.1- . 1- . 3- . 5- . 3- . 0

.7

.71.1.1

.478

.1

.6> 5

6.38

2.72.43.63.91.02.3.7

2.83.7

.8

.4

.9

.8

1.01.12.76.3

4.14.32.14.4

Less:

Indirectbusinesstax andnontaxliability

7.1

7.1

9.4

10.111.311.812.814.215.517.118.420.121.3

23.425.327.729.729.632.235.137.538.741.8

45.448.051.654.658.862.665.370.278.886.4

94.0103.4111.0120.2128.6139.2151.3165.1178.2

146.4149.8152.9156.3

160.3163 3166.5170.1

173.3179.4177.7182.3

Businesstransfer

payments

0.6

.7

.5

.4

.5

.5

.5

.5

.5

.5

.6

.7

.8

.8

.91.01.21.11.21.41.51.61.8

2.02.02.12.42.72.83.03.13.43.8

4.04.24.75.45.97.68.39.6

10.7

8.18.28 28.5

9.29.49.9

10.0

10.210.510.911.3

Statisticaldiscrep-

ancy

1.1

.7

1.4

1.1

- . 8- 1 . 8

2.74.1.7

1.8- 1 . 2

1.0

2.04.02.73.33.02.5

- . 8

1.7- . 2

- . 71.64.03.72.2.9

3.2

.6- 3 . 3

- 2 . 1

L72.65.87.44.24.7.9

3.44.14.05.3

3.43.77.14.8

2.2.5.4

Equals:Nationalincome

84.8

39.9

71.3

79.7102.6135.7169.1181.9180 6178.3194.6219.0212.7

236.2272.3285.8299.7299 1328.0346.9362.3364.0397.1

412.0424.2457.4482.8519.2566.0622 2655.8714.4767.9

798 4858.1951.9

1,064.61,136.01,215.01,359 21,515.31, 703.6

1,319.81, 347.91,372 11, 397.0

1,447.51,499 31,537.61,576.9

1,603 11,688.11,728.4

Source: Department of Commerce, Bureau of Economic Analysis.

202

TABLE B-18.—Relation of national income and personal income, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

19401941 _19421943194419451946 . . .19471948 . . . .1949

19501951 . .195219531954195519561957 .19581959

1960 . .19611962 . .1963196419651966196719681969

1970...197119721973. _19741975197619771978*-—

1976: l . _ .II —III..IV..

1977: l ._ .II —III-IV..

1978: l ._ .II —III..IVP.

Nationalincome

84.8

39.9

71.3

79 7102.6135.7169.1181.9180.6178.3194 6219.0212 7

236 2272.3285.8299.7299.1328.0346.9362.3364.0397.1

412.0424.2457.4482 8519.2566.0622.2655.8714.4767.9

798.4858.1951.9

1,064.61,136.01,215.01,359.21,515.31, 703. 6

1,319.81,347.91,372.11,397.0

1,447.51,499.31,537.61,576.9

1,603.11,688.11,728.4

Less:

Corpo-rate

profitswith

inven-tory

valuationand

capitalcon-

sumptionadjust-ments

9.2

- 1 . 7

5.3

8.714.119.323.523.619.016.622.229.126 9

33.738.135.435.534.644.642.942.137.548.2

46.646.954.959.667.077.182.579.385.881 4

67.977.292.199.183.695.9

127.0144.2160.0

126.8128.6130.0122.5

129.9143.7154.8148.2

132.6163.4165.2

Netinterest

4.7

4.1

3.6

3 33.33.12.72.42.21.62 12.12 2

2 32.73.03.44.34.85.26.58.08.8

9.811 212.814 315.918.521.924.326.830 8

37.542 847.052.369.078.684.395.4

106.1

80.182.086.288.9

91.793.797.399.0

101.7104.6107.4110.8

Contri-butions

forsocialinsur-ance

0.2

.3

2.1

2.32.83.54.55.26.16.15.85.45.9

7.18.59.09.1

10.111.512.914.915.218.0

21.121.924.327.328.730.038.843.448.154 9

58.764.873.691.5

103.8110.6125.1140.3164.3

121.7124.1126.1128.7

136.0139.1141.3145.0

157.4162.7166.2170.7

Wageaccruals

lessdis-

burse-ments

.0

.0

.0

.0

.0

.0

.2- . 2

.0- . 0

.0

.0- . 0

.0

.1- . 0- . 1

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.6

.0- . 1- . 5

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.2

.0

Plus:

Govern-ment

transferpay-

mentsto

persons

0.9

1.5

2.5

2.72.62.72.53.15.6

10.811.210.611.7

14.411.612.112.915.116.217.320.124.325.2

27.030.831.633.434.837.641.649.556.562.7

75.989.999.4

113.5134.9170.6185.6199.2215.2

182.1181.1188.1191.2

194.2194.6202.0205.9

208.9210.1219.6222.4

Personalinterestincome

6.9

5.5

5.4

5.35.35.25.1b.25.96.47.37.78.2

8.99.6

10.311.412.713.815.317.418.820.9

23.324.627.130.233.337.241.845.049.655.9

64.369.374.684.1

103.0115.5126.3141.2158.9

121.0123.5128.2132.5

135.9139.1143.6146.0

151.4156.3161.7166.3

Divi-dends

5.8

2.0

3.8

4.04.44.34.44.64.65.66.37.07.2

8.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.319.119.420.121.922.6

22.923.024.627.831.031.937.943.749.3

34.537.238.441.4

41.542.744.146.3

47.048.150.151.9

Businesstransfer

Pay-ments

0.6

.7

.5

.4

.5

.5

.5

.5

.5

.56

.7

.8

.8

.90

L.21

1.241.568

2.02.02.12.42.72.83.03.13.43.8

4.04.24.75.45.97.68.39.6

10.7

8.18.28.28.5

9.29.49.9

10.0

10.210.510.911.3

Equals:

Personalincome

84.9

46.9

72.4

77.895.3

122.4150.7164.4169.8177.3189.8208.5205.6

226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1

399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8

801.3859.1942.5

1,052.41,154.91, 255.51, 380.91,529.01,707. 3

1,336.91,363.21,392.81,430.5

1,470.71, 508.61, 543.71,593.0

1,628.91,682.41,731.71,786.4

Source: Department of Commerce, Bureau of Economic Analysis.

203

T A B L E B-19.—National income by type of income, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933...

1939

194019411942.19431944194519461947.19481949

195019511952.. . .1953195419551956.. .195719581959

196019611962196319641965...1966196719681969..

1970.. . .19711972197319741975 . .19761977.. .1978 v

1976:1II .IllIV

1977:1IIIllIV

1978:1 . . .IIIllIV v .

Na-tional

in-come i

84.8

39.9

71.3

79.7102.6135.7169.1181.9180.6178.3194.6219 0212.7

236.2272 3285.8299 7299.1328 0346.9362 3364.0397.1

412 0424.2457.4482.8519.2566.0622.2655.8714.4767.9

798.4858.1951.9

,064 6, 136.0, 215.0, 359.2, 515.3, 703.6

,319.8, 347.9, 372.11,397.0

1,447.51,499.31,537.61,576.9

1,603.1L, 688.11,728.4

Compensation ofemployee

Total

51.1

29.5

48.1

52.164.885.3

109.5121.2123.1118.1129.2141.4141.3

154.8181.0195.7209.6208.4224.9243.5256.5258.2279.6

294.9303.6325.1342.9368.0396.5439.3471.9519.8571.4

609.2650 3715.1799 2875.8931.1

1,036 81,153.41, 301.2

1,001.71,026.01,046.11,073.3

1,107.91,140.51,165.81,199.7

1,241.01,287.81,317.11,358.9

Wagesand

sala-ries

50.5

29.0

46.0

49.962.182.1

105.8116.7117.5112.0123.1135.5134.7

147.0171.3185.3198.5196.8211.7228.3239.3240.5258.9

271.9279.5298.0313.4336.1362.0398.4427.5469.5514.6

546.5580.0633.8701.2764.1805.9890.1983.6

1,100.7

861.7881.5897.3919.9

946.4973.4993.6

1,021.2

1,050.81,090.21,113.41,148.5

Sup-ple-

mentsto

wagesand

sala-ries 2

0.6

.5

2.1

2.32.73.23.84.55.66.06.15.96.6

7.89.7

10.411.011.613.215.217.217.720.6

23.024.127.129.531.834.540.944.450.356.8

62.770.381.498.0

111.7125.2146.7169.8200.5

140.0144.6148.8153.4

161.5167.1172.2178.4

190.2197.6203.6210.4

Proprietors

Total

14.9

5.8

11.7

12.917.424.029.030.231.736.635.840.736.1

38.442.842.941.340.842.543.645.047.447.2

47.048.349.650.352.256.760.361.063.466.2

65.167.776.192.486.287.088.699.8

112.9

88.688.887.489.5

95.698.997.2

107.3

105.0110.1114.5121.9

' income with inventory valuation and capitalconsumption adjustments

Farm

Total

6.2

2.6

4.4

4.56.49.8

11.711.612.214.915.217.512.7

13.515.814.912.912.311.311.211.013.110.7

11.411.811.911.610.312.613.612.112.013.9

13.914.318.032.025.423.518.420.225.1

20.919.616.916.3

19.420.016.525.1

21.924.025.029.5

In-come 3

6.3

2.5

4.4

4.56.5

10.312.212.212.615.115.618.113.4

14.116.615.713.712.911.911.811.813.911.6

12.312.712.812.511.213.514.613.213.315.4

15.316.020.034.227.927.122.424.629.9

24.923.620.920.3

23.424.221.029.8

26.628.829.734.3

Capi-tal

con-sump-tionad-just-ment

- 0 . 1

.1

- . 0

- . 0- . 0

- . 5- . 6- . 4- . 2- . 4- . 6- . 7

- . 7- . 8- . 8- . 7- . 6- . 6- . 6- . 8- . 8- . 9

- . 9- . 9

- 1 . 0- . 9

- 1 . 0- . 9

- 1 . 0- 1 . 2- 1 . 3- 1 . 4

- 1 . 4- 1 . 7- 2 . 0- 2 . 2- 2 . 5- 3 . 7- 4 . 0- 4 . 4- 4 . 8

- 4 . 0- 4 . 0- 4 . 0- 4 . 0

- 4 . 0- 4 . 2- 4 . 5- 4 . 7

- 4 . 7- 4 . 8- 4 . 8- 4 . 8

Nonfarm

Total

8.8

3.2

7.3

8.410.914.317.318.619.421.620.623.223.5

24.927.028.028.428.531.232.433.934.336.6

35.636.437.738.742.044.146.748.951.452.3

51.253.458.160.460.963.570.279.587.8

67.769.370.573.2

76.178.980.882.3

83.186.189.692.4

In-come4

8.8

3.9

7.6

8.611.714.417.118.319.323.321.823.122.2

25.126.426.927.627.630.531.833.133.235.3

34.235.336.437.240.242.745.347.550.451.3

50.752.856.460.362.964.071.481.491.9

68.570.671.774.8

78.180.682.284.8

86.790.193.597.3

Inven-tory

valua-tionad-

just-ment

0.1

- . 5

- . 2

- . 0- . 6

- . 2- . 1- . 1

- 1 . 7- 1 . 5

- . 4.5

- 1 . 1- . 3

.2- . 2- . 0- . 2- . 5- . 3- . 1- . 1

.1- . 1- . 0- . 0- . 0- . 2- . 3- . 3- . 4- . 5

- . 5- . 4- . 7

- 1 . 7- 3 . 6- 1 . 2- 1 . 2- 1 . 3- 2 . 1

- . 9- 1 . 3- 1 . 1- 1 . 6

- 1 . 8- 1 . 4

- . 7- 1 . 3

- 2 . 1- 2 . 2- 1 . 8

2.3

Capi-tal

con-sump-tionad-

just-ment

- 0 . 2

- . 2

- . 1

- . 1- . 1

.2

.3

.4

.2

.0

.4

.5

.8

.9

.9

.9

.91.01.01.11.21.11.3

1.31.21.41.61.81.61.61.71.51.4

1.01.12.51.81.6.6

- . 0- . 6

- 2 . 0

.0

.0

.0

. 0

- . 1- . 3

- L 2

- 1 . 5- 1 . 8- 2 . 1- 2 . 6

See next page for continuation of table.

204

T A B L E B-19.—National income by type of income, 1929-78—Continued

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

19401941!!!!!!194219431944194519461947 _19481949

1950195119521953195419551956.1957195819591960196119621963196419651966196719681969197019711972197319741975197619771978 p

1 9 7 6 : 1 . . . .I I . . .I I I . .I V . _

1 9 7 7 : 1 . . . .I I . . .I I I . .I V . _

1 9 7 8 : 1 . . . .I I . . .I I I . .IV P .

Rental i ncome of per-SOnS WIIII cdfJiuii

consumptionadjustmen

Total

4.9

2.2

2.62 73.14.04.44.54.65.55.35.76.17.17.78.8

10.011.011.311.612.212.913.213.814.315.015.716.117.118.219.418.618.118.620.121.521.621.422.422.522.523.422.522.422.422.822.522.422.422.722.822.224.324.4

Rentalincome

ofpersons

5.7

2.33.1

3 33.95.05.65.96.27.37.78.58.9

10.011.012.213.414.414.815.215.916.717.317.818.319.019.620.121.022.123.423.824.825.827.729.431.333.736.938.742.147.638.138.338.839.740.441.542.644.044.645.549.551.0

Capitalcon-

sump-tion

adjust-ment

- 0 . 8

- . 1

- . 6

- . 6- . 8

- 1 . 0- 1 . 2- 1 . 4- 1 . 6- 1 . 8- 2 . 5- 2 . 8- 2 . 8- 2 . 9-3 .3-3 .4- 3 . 4- 3 . 3-3 .5- 3 . 6- 3 . 6- 3 . 8- 4 . 0- 4 . 1-4 .0- 4 . 0- 3 . 9- 4 . 0- 3 . 9-3 .9- 4 . 0- 5 . 2- 6 . 7

- 7 . 1- 7 . 6- 7 . 9- 9 . 8

- 1 2 . 3- 1 4 . 5- 1 6 . 2- 1 9 . 6- 2 4 . 2- 1 5 . 6- 1 5 . 9- 1 6 . 3- 1 6 . 9- 1 7 . 9- 1 9 . 0- 2 0 . 2- 2 1 . 3

- 2 1 . 8- 2 3 . 3- 2 5 . 2- 2 6 . 6

Corporate profits with inventory valuation and capital consumptionadjustments

Total

9.2

- 1 . 75.3

8.714.119.323.523.619.016.622.229.126.933.738.135.435.534.644.642.942.137.548.246.646.954.959.667.077.182.579.385.881.467.977.292.199.183.695.9

127.0144.2160.0126.8128.6130.0122.5129.9143.7154.8148.2132.6163.4165.2

Profits

Total

10.5- 1 . 2

6.3

9.815.220.324.423.819.219.325.633.030.837.642.739.839.537.846.745.945.440.851.248.948.753.757.664.273.378.675.682.177.966.476.989.697.286.5

107.9141.4159.1178.1141.2143.0144.5137.0144.5158.5169.9163.5148.7180.6184.5

with inventory valuation adjustment and withoutcar.)ital consumption adjustment

Profits before tax

Total

10.01.0

7.0

10.017.721.525.124.119.724.631.535.228.942.643.938.940.538.148.448.646.941.151.648.548.653.657.764.775.280.777.385.683.471.582.096.2

115.8126.9120.4155.9173.9202.4152.6158.7157.8154.6164.8175.1177.5178.3172.1205.5205.4

Profitstax

liability

1.4

.5

1.4

2 87 6

11.414.112.9io! 7

11 312! 410.2

17.922.619.420.317! 622 022.021.419 023! 622.722.824.026.228.030! 933.732.539.439. 734.537.741.548.752.449.864.371.884.163.666.364.762.468.372.372.873.9

70.085.086.2

Profits after tax

Total

8.6

.4

5.67.2

10.110.111.111.29.0

15.520.222.718.724.721.319.520.220.526.426.625.522.128.025.825.829.631.536.744.347.144.946.243.837.044.354.667.174.570.691.7

102.1118.389.092.493.192.296.5

102.8104.8104.4102.1120.5119.2

Divi-dends

5.82.03.8

4.04.44.34.44.64.65.66.37.07.2

8.88.58.58.89.1

10.311.111.511.312.212.913.314.415.517.319.119.420.121.922.622.923.024.627.831.031.937.943.749.334.537.238.441.441.542.744.146.347.048.150.151.9

Undis-tributedprofits

2.8- 1 . 6

1.83.25.75.96.66.54.49.9

13.915.711.515.912.811.011.511.416.115.514.010.815.813.012.515.216.019.425.227.624.724.221.214.121.330.039.343.638.753.858.469.154.555.254.750.855.060.160.658.155.172.469.2

Inven-tory

valua-tion

adjust-ment

0.5- 2 . 1

- . 7

- . 2- 2 . 5- 1 . 2

- . 8- . 3- . 6

-5 .3- 5 . 9- 2 . 2

1.9- 5 . 0- 1 . 2

1.0- 1 . 0

- . 3- 1 . 7- 2 . 7- 1 . 5- . 3- . 5

. 3

.1

.1- . 2- . 5

- 1 . 9- 2 . 1- 1 . 7- 3 . 4- 5 . 5- 5 . 1- 5 . 0- 6 . 6

- 1 8 . 6- 4 0 . 4- 1 2 . 4- 1 4 . 5- 1 4 . 8- 2 4 . 3- 1 1 . 4- 1 5 . 7- 1 3 . 3- 1 7 . 6- 2 0 . 3- 1 6 . 6- 7 . 7

- 1 4 . 8- 2 3 . 5- 2 4 . 9- 2 0 . 9- 2 7 . 8

Capitalcon-

sump-tion

adjust-ment

- 1 . 3

- . 5- 1 . 0- 1 1- 1 . 1- 1 . 0- . 8- . 2- . 1

- 2 . 7- 3 . 4- 3 . 9-3 .8- 4 . 0- 4 . 6- 4 . 5- 4 . 1- 3 . 2- 2 . 1- 3 . 0- 3 . 3- 3 . 4- 2 . 9- 2 . 3- 1 . 8

1.22.12.83.83.93.73.73.5

1.5.3

2.51.9

- 2 . 9- 1 2 . 0- 1 4 . 4- 1 4 . 9- 1 8 . 1- 1 4 . 4- 1 4 . 4- 1 4 . 5- 1 4 . 5- 1 4 . 6- 1 4 . 8- 1 5 . 0-15.3- 1 6 . 1- 1 7 . 2- 1 9 . 3- 1 9 . 9

Netinter-

est

4.74.13.6

3 33.33.12.72.42.21.62.12.12.22.32.73.03.44.34.85.26.58.08.8

9.811.212.814.315.918.521.924.326.830.837.542.847.052.369.078.684.395.4

106.180.182.086.288.991.793.797.399.0

101.7104.6107.4110.8

1 National income is the total net income earned in production. It differs from gross national product mainly in that itexcludes depreciation charges and other allowances for business and institutional consumption of durable capital goodsand indirect business taxes. See Table B-17.

2 Employer contributions for social insurance and to private pension, health, and welfare funds; workmen'scompensation; directors' fees; and a few other minor items.

3 With inventory valuation adjustment and without capital consumption adjustment.* Without inventory valuation and capital consumption adjustments.Source: Department of Commerce, Bureau of Economic Analysis.

205

278-216 O - 7 9 - 1 4

T A B L E B-20.—Sources of personal income, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

1929

1933

1939 . . . .*.-.

194019411942 . . .19431944194519461947. .19481949

19501951.19521953195419551956195719581959

196019611962196319641965196619671968. .1969

1970.19711972197319741975...1976.19771978 P . .

1976: L. .IIIIIIV. .

1977:1II.III.IV

1978: LII.III..IV p

Per-sonal

income

84.9

46.9

72.4

77.895.3

122.4150.7164.4169.8177.3189.8208.5205.6

226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1

399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8

801.3859.1942.5

, 052 4, 154.9, 255.5,380 9, 529.0, 707. 3

, 336.9363 2

, 392.8, 430.5

,470.7, 508.6, 543.7,593.0

, 628.9, 682.4,731.7,786.4

Wage and salary disbursements*

Total

50.5

29.0

46.0

49.962.182.1

105.6116.9117.5112.0123.1135.5134.8

147.0171.3185.4198.6196.8211 7228.3239.3240.5258.9

271.9279 5298.0313 4336.1362.0398 4427.5469.5514.6

546 5579.4633.8701 3764.6805 9890 1983.6

, 100. 7

861.7881 5897 3919.9

946.4973 4993.6

,021.2

,050 8, 090.2,113.2, 148.5

Commodity-producingindustries

Total

21.5

9.8

17.4

19.727.539.149.050.445.946.054.261.157.8

64.876.382.089.685.793.1

100.6104.2100.0109.6

113.1113.7121.8126.9135.4146.0161.0168.3183.4199.6

202.9208.3227.3254.3274.6275.0307.5343.7390.1

298.4305.4309.8316.2

327.3342.0348.3357.1

365.9387.0396.4410.8

Manu-factur-

ing

16.1

7.8

13.6

15.621.730.940.942.938.236.542.547.144.6

50.359.364.171.267.573 879.482.478.686.8

89.789 896.7

100 6107.1115.5128 0134.1145 8157.5

158 2160.3175 4196 2211.4211 0237 5266.3299.7

230 2235 8239 5244.6

254.6264 1269.3277.3

286 9296.1302.0313.6

Distrib-utive

indus-tries

15.6

8.8

13.3

14.216.318.020.122.724.831.035.237.537.7

39.844.346.949.750.153.457.760.560.864.8

68.269.372.876 381.487.294 4

100.9109.9120.7

130 1139.3151.9168 1184.3195 3216 4239.1268.7

208.6213 9218 9224.4

231.2236 5241.2247.5

257 0266.4271.6279.9

Serviceindus-tries

8.4

5.2

7.1

7.58.19.09.9

10.911.914.316.117.918.5

19.821.523.124.926.128.631.333.635.638.5

41.444.147.250.254.458.964.771.879.889.4

97.5106.2117.2130.3145.1160.1178.6200.1225.8

171.0176.1180.5186.6

192.7196.8202.3208.5

216.5222.8228.5235.6

Govern-mentand

govern-ment

enter-prises

5.0

5.2

8.2

8.510.216.026.633 034.920.717.519.020.8

22.629.233.334.434.936 638.841.044.146.0

49.252.456.360.064.969.978 386.496.4

104.9

116.0125.6137.3148 6160.5175 4187 6200.8216.1

183.7186 1188.1192.6

195.2198.1201.7208.1

211.4213.9216.7222.2

Otherlabor

in-come1

0.5

.4

.6

.6

.7

.91.11.51.82.02.42.72.9

3.74.65.25.96.17.08.09.09.4

10.6

11.211.813.014.015.717.819.921.725.128.2

32.036.242.048 755.665.177.090.4

105.9

72.475.578.681.6

84.988.592.296.1

100.0104.0107.9111.8

Proprietors' in-come with inven-tory valuation andcapital consump-tion adjustments

Farm

6.2

2.6

4.4

4.56.49.8

11.711.612.214.915.217.512.7

13.515.814.912.912.311.311.211.013.110.7

11.411.811.911.610.312.613.612.112.013.9

13.914.318.032 025.423.518 420.225.1

20.919.616.916.3

19.420.016.525.1

21.924.025.029.5

Non-farm

8.8

3.2

7.3

8.410.914.317.318.619.421.620.623.223.5

24.927.028.028.428.531.232.433.934.336.6

35.636.437.738.742.044.146.748.951.452.3

51.253.458.160 460.963.570.279.587.8

67.769.370.573.2

76.178.980.882.3

83.186.189.692.4

See next page for continuation of table.

206

TABLE B-20.—Sources of personal income, 1929-78—Continued

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933... .

1939....

19401941... .194219431944....19451946....1947....1948....1949....

1950....1951... .1952... .1953... .1954... .1955....1956....1957....1958....1959....

I960. . . .1961.. . .1962... .1963196419651966... .1967....1968....1969... .

1970... .1971.. . .1972197319741975....1976....1977....1978 p . . .

1976:1 . .II.IllIV.

1977:L.II..III.IV.

1978:1..II..III.IV v

Rentalncomeof per-

sonswith

capitalcon-

sump-ion ad-just-ment

4.9

2.2

2.6

2.73.14.04.44.54.65.55.35.76.1

7.17.78.8

10.011.011.311.612.212.913.2

13.814.315.015.716.117.118.219.418.618.1

18.620.121.521.621.422.422.522.523.4

22.522.422.422.8

22.522.422.422.7

22.822.224.324.4

Divi-dends

5.8

2.0

3.8

4.04.44.34.44.64.65.66.37.07.2

8.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.319.119.420.121.922.6

22.923.024.627.831.031.937.943.749.3

34.537.238.441.4

41.542.744.146.3

47.048.150.151.9

Personalinterestincome

6.9

5.5

5.4

5.35.35.25.15.25.96.47.37.78.2

8.99.6

10.311.412.713.815.317.418.8

^20.9

23.324.627.130.233.337.241.845.049.655.9

64.369.374.684.1

103.0115.5126.3141.2158.9

121.0123.5128.2132.5

135.9139.1143.6146.0

151.4156.3161.7166.3

Transfer payments

Total

1.5

2.1

3.0

3.13.13.13.03.66.2

11.311.711.312.5

15.212.613.114.116.217.518.721.625.927.0

28.932.833.835.837.440.444.752.659.966.5

79.994.1

104.1118.9140.8178.2193.9208.8226.0

190.3189.3196.3199.7

203.4204.0211.9215.9

219.2220.6230.4233.6

Old age,survivors,disability,and healthinsurancebenefits

0.0

.0

.1

\l

.3

.4

.5

.6

.7

1.01.92.23.03.64.95.77.38.5

10.2

11.112.614.315.216.018.120.825.530.232.9

38.544.549.660.470.181.492.9

105.0117.3

88.089.395.898.3

99.7101.8108.5110.1

112.1113.7121.1122.4

Govern-ment

unem-ploy-

ment m-surancebenefits

0.4

.5

.4

.4

.1

.1

.41.1.8.9

1.9

1.5.9

1.11.02.21.51.51.94.12.8

3.04.33.13.02.72.31.92.22.12.2

4. a5.85.64.36.6

17.415.512.58.9

17.014.815.214.8

14.812.011.411.5

10.48.58.78.0

Vet-eransbene-fits

0.6

.6

.5

.5

.5

.5

l'.O3.07.07.05.95.3

7.74.64.34.14.24.44.44.54.74.6

4.65.04.74.84.74.94.95.65.96.7

7.78.89.7

10.411.814.514.413.813.6

15.814.313.413.8

14.313.813.413.7

13.813.513.313.7

Govern-mentem-

ployeeretire-ment

benefits

0.1

.2

.3

.3

.3

.3

.4

.4

.5

.7

.7

.7

.9

1.0l.l1.2L.4L.5.7

1.92.22.52.8

3.13.43.74.24.75.26.16.97.78.6

10.111.713.515.618.822.725.728.832.8

24.525.726.126.5

27.228.429.230.5

31.332.533.234.4

Aid tofamilieswith de-pendentchildren(AFDC)

Other

0.R

1

1.

1.1.1.

1.

1..3.4.5

.6

.6

.5

.5

.6

.6

.6

.7

.8

.9

1.01.11.31.41.51.71.92.32.83.5

4.86.26.97.27.99.2

10.110.610.8

9.710.010.210.3

10.410.510.610.7

10.710.810.910.8

4

7

7888001

2.52.93.3

3.53.63.84.14.14.34.54.95.35.8

6.26.46.77.37.88.39.2

10.211.112.5

14.917.218.921.025.533.035.538.142.5

35.135.235.536.1

37.037.438.739.4

40.941.643.344.4

Less:Personalcontri-butions

forsocialinsur-ance

0.1

.2

.6

.7

.81.21.82.22.32.02.12.22.2

2.93.43.84.04.65.25.86.76.97.9

9.39.7

10.311.812.613.317.820.622.826.3

28.030.834.242.247.750.555.561.069.7

54.255.055.956.8

59.460.561.462.6

67.269.270.572.0

Non-farmper-

sonalin-

come3

159.6171.5187.7189.9

209.3234.4252.0269.9272.7294.3316.4335.0342.6367.7

384.4399.0424.5447.0480.7519.5566.1609.1667.5725.8

780.7838.0917.3

1,011.91,119.31, 220.81, 349.51, 494.41,666.5

1, 303.81,330.91, 362. 71,400.6

1,437.51,474.41,512.81, 552.9

1,591.81, 642.81,690.81,740.6

1 The total of wage and salary disbursements and other labor income differs from compensation of employees in TableB-19 in that it excludes employer contributions for social insurance and the excess of wage accruals over wage disburse-ments.

2 Persona! income exclusive of farm proprietors' income, farm wages, other farm labor income, and agricultural netinterest.

Note.—The industry classification of wage and salary disbursements and proprietors' income is on an establishmentbasis and is based on the 1972 Standard Industrial Classification (SIC) beginning 1948 and on the 1942 SIC prior to 1948.

Source: Department of Commerce, Bureau of Economic Analysis.

207

T A B L E B-21.—Disposition of personal income, 1929-78

(Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940194119421943194419451946194719481949

1950.. . .195119521953195419551956195719581959

1960196119621963196419651966196719681969 . . . .

197019711972197319741975 . . . .197619771978 v

1976: l____I I . . .I I I . . .I V . . .

1977: 1I I . . .I I I . . .I V . . .

1978: L —I I . . .I I I . . .IV p . .

Per-sonal

income

84.9

46.9

72.4

77.895.3

122.4150.7164.4169.8177.3189.8208.5205.6

226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1

399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8

801.3859.1942.5

1, 052.41,154.91,255. 51, 380. 91, 529.01,707.3

1, 336.91,363.21, 392.81,430.5

1,470.71, 508.61, 543.71,593.0

1,628.91,682.41,731.71,786.4

Less:Per-sonaltaxand

nontaxpay-

ments

2.6

1.4

2.4

2.63.35.9

17.818.920.818.721.421.018.5

20.628.934.035.532.535.439.742.442.146.0

50.452.156.860.358.664.974.582.197.1

115.4

115.3116.3141.2150.8170.3168.8196.5226.0256.2

184.4192.6200.0209.0

222.7223.3224.6233.3

237.3249.1263.2275.0

Equals:Dispos-

ableper-sonal

income

82.3

45.5

69.9

75.292.0

116.5132.9145.5149.0158.6168.4187.4187.1

205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1

349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4

685.9742.8801.3901.7984.6

1,086.71,184.41, 303.01,451.2

1,152.51,170.61,192.81,221.5

1, 248.01, 285.31, 319.11,359.6

1,391.61, 433.31,468.41,511.4

Less: Personal outlays

Total

79.1

46.5

67.8

72.081.889.4

100.1109.0120.4145.2163.5176.9180.4

194.7210.0220.4233.7240.1258.5271.6286.4295.4317.3

332.3342.7363.5384.0410.9441.9477.4503.7550.1595.3

635.4685.5751.9831.3913.0

1,003.01,116.31, 236.11, 374.4

1, 078.91,100.71,124.81,160.9

1,195.81,217.81,244.81, 285.9

1, 309.21, 357.01,392.51,439.2

Per-sonalcon-

sump-tion

expend-itures

77.3

45.8

67.0

71.080.888.699.4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1, 090.21, 206. 51, 339.7

1,053.81, 075.11, 098.41,133.7

1,167.71,188.61, 214.51,255.2

1, 276.71, 322.91, 356.91, 402.2

Interestpaid by

con-sumers

tobusi-ness

1.5

.5

.7

.8

.9

.7

.5

.5

.5

.71.01.41.7

2.32.52.93.63.84.45.15.55.66.1

7.07.37.88.89.9

11.112.012.513.314.7

15.516.217.920.222.423.025.128.633.8

24.124.825.526.2

27.128.229.329.8

31.533.034.636.0

Per-sonal

transferpay-

mentsto for-eigners(net)

0.3

.2

.2

.2

.2

.1

.2

.4

.5

.7

.7

.7

.5

. 4

.4

. 4

.5

.5

. 4

.5

.5

.4

. 4

.4

.4

.5

.6

.6

.7

.6

.9

.8

.9

1.11.11.01.31.0.9.9

1.01.0

1.0.9.9

1.0

1.01.0.9.9

1.01.1.9

1.0

Equals:Per-

sonalsaving

3.1

- 1 . 0

2.1

3.310.227.032.736.528.513.44.9

10.66.7

10.814.816.017.015.614.919.720.621.718.8

17.120.220.418.826.130.333.040.938.135.1

50.657.349.470.371.783.668.066.976.7

73.669.968.160.7

52.267.574.373.7

82.476.376.072.3

Percent of disposablepersonal income

Personaloutlays

Total

96.2

102.2

97.0

95.688.976.875.474.980.891.597.194.396.4

94.793.493.293.293.994.693.293.393.294.4

95.194.494.795.394.093.693.592.593.594.4

92.692.393.892.292.792.394.394.994.7

93.694.094.395.0

95.894.794.494.6

94.194.794.895.2

Con-sump-

tionexpend-itures

93.9

100.7

95.8

94.387.776.174.874.480.290.696.193.295.2

93.492.191.891.692.292.891.391.491.392.5

93.092.392.593.091.691.191.190.091.192.0

90.290.091.589.890.390.192.192.692.3

91.491.892.192.8

93.692.592.192.3

91.792.392.492.8

Per-sonalsaving

3.8

- 2 . 2

3.0

4.411.123.224.625.119.28.52.95.73.6

5.36.66.86.86.15.46.86.76.85.6

4.95.65.34.76.06.46.57.56.55.6

7.47.76.27.87.37.75.75.15.3

6.46.05.75.0

4.25.35.65.4

5.95.35.24.8

Source: Department of Commerce, Bureau of Economic Analysis.

208

T A B L E B—22.—Total and per capita disposable personal income and personal consumption expendi-tures in current and 1972 dollars, 1929-78

[Quarterly data at seasonally adjusted annual rates, except as noted]

Year or quarter

1929

1933

1939

194019411942 . . . .1943194419451946194719481949

1950195119521953195419551956195719581959

I9601961196219631964 - . .19651966196719681969

197019711972197319741975197619771978 v

1976: 1||IIIIV

1977: 1 .__| |III „___IV

1978- 1IIIIIIV P

Disposable personal income

Total (billionsof dollars)

Currentdollars

82.3

45.5

69.9

75.292.0

116.5132.9145.5149.0158.6168.4187.4187.1

205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1

349.4362 9383.9402 8437.0472.2510.4544.5588.1630.4

685.9742.8801.3901.7984.6

1,086.71,184.41,303.01,451.2

1,152.51,170.61,192.81,221.5

1,248.01,285.31, 319.11, 359.6

1,391.61,433.31, 468.41,511.4

1972dollars

229.8

169.7

230.1

244.3278.1317.3332 2343.9338.6332.4318.8335.5336.1

361.9371.6382.1397.5402.1425.9444.9453.9459.0477.4

487.3500.6521.6539 2577.3612.4643.6669.8695.2712.3

741.6769.0801.3854.7842.0859.7890.1926.3965.5

881.8886.3891.5900.9

904.8918.6931.9949.6

952.1960.3968.7980.9

Per capita(dollars)

Currentdollars

675

362

534

570690863972

1,0511,0651,1221,1681,2781,254

1,3551,4571,5061,5711,5741,6541,7311,7921,8211,898

1,9341,9762,0582,1282,2782,4302,5972,7402,9303,111

3,3483,5883,8374,2854,6465,0885,5046,0096,640

5,3705,4465,5385,660

5,7725,9346,0776,250

6,3876,5666,7126,893

1972dollars

1,886

1,350

1,756

1,8492,0842,3532,4292,4852,4202,3512,2122,2882,253

2,3862,4082,4342,4912,4762,5772,6432,6502,6362,696

2,6972,7252,7962,8493,0093,1523,2743,3713,4643,515

3,6193 7143,8374,0623,9734,0254,1364,2714,418

4,1094,1244,1394,174

4,1854,2414,2934,365

4,3704,3994,4284,474

Personal consumption expenditures

Total (billionsof dollars)

Currentdollars

77.3

45.8

67.0

71.080.888.699 4

108.2119.5143.8161.7174.7178.1

192.0207.1217.1229.7235 8253.7266.0280.4289.5310.8

324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7

618.8668.2733.0809.9889.6979.1

1,090. 21, 206. 51, 339.7

1,053.81, 075.11, 098.41,133.7

1,167.71,188.61, 214. 51,255.2

1, 276.71, 322. 91,356.91,402.2

1972dollars

215.6

170.7

220.3

230.4244.1241.7248 7255.7271.4301.4306.2312.8320.0

338.1342.3350.9364.2370 9395.1406.3414.7419.0441.5

453.0462.2482.9501.4528.7558.1586.1603.2633.4655.4

668.9691.9733.0767.7760.7774.6819.4857.7891.2

806.3814.0820.9836.2

846.6849.5858.0876.6

873.5886.3895.1910.0

Per capita(dollars)

Currentdollars

634

364

511

537605657727781854

1.017,122

1,192,194

,266,342

1,3831,439L, 4521,5351,5811,6371,6621,755

1,798L8241,9041.9792', 0872,2142,3652,4682,6702,860

3,0203,2273,5103,8494,1974,5845,0665,5646,130

4,9105,0025,1005,253

5,4015,4875,5955,770

5,8596,0606,2036,395

1972dollars

1,769

1,358

1,681

1,7441,8301,7921,8191,8471,9392,1312,1242,1332,145

2,2292,2192,2362,2832,2842,3912,4152,4212,4062,493

2,5072,5162,5892,6492,7552,8722,9823,0353,1563,234

3,2653,3423,5103,6483,5893,6273,8083,9554,078

3,7573,7873,8123,874

3,9163,9223,9534,030

4,0094,0604,0924,150

Popu-lation(thou-

sands)1

121,875

125,690

131,028

132,122133, 402134, 860136, 739138, 397139, 928141,389144,126146,631149,188

151,684154,287156, 954159, 565162,391165, 275168,221171,274174,141177,073

180, 671183,691186,538189,242191, 889194,303196,560198,712200,706202,677

204,878207,053208, 846210,410211,945213,566215,191216, 856218, 554

214,608214,948215, 380215, 827

216, 206216,603217,073217, 541

217, 897218, 290218, 768219, 259

i Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annualdata are for July 1 through 1973 and are averages of quarterly data beginning 1974. Quarterly data are average for theperiod.

Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).

209

T A B L E B-23.—Gross saving and investment, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

197019711972197319741975197619771978 v .

1976: 1IIIII—.IV... .

1977: 1II.._III. . . .IV... .

1978: 1IIIII. . . .IVP .

Gross saving

Total

15.99

8.713 518.510.55.32 35.1

34.641 249.034 849.755.549.348.149 465.673.672.660 475.878.975.883 689.6

100.1115.4122 9120.3130.8147.5143.4155.4177.5216.8204.4195.4237.5272.2318.8

230.1240.9243.5235.6

251.8276.8285.5274.7284.2326.1326.2

Gross

Total

14.92 2

10.914 222.241.949.454 144.629.226 840.638 241.649.453.155.056 562.468.471.773 077.375.880.087 488.9

102.4114.9124 2134.6136.3136.8151.9173.0180.4210.5209.5259.8270.7290.8320.4

275.1270.8274.1262.7

259.6288.6310.7304.3305.4319.9325.7

private saving

Per-sonalsaving

3.1- 1 0

2.13 3

10.227.032.736 528.513.44 9

10 66 7

10.814.816.017.015 614.919.720.621 718.817.120 220 418.826.130 333 040.938.135.150.657.349.470.371.783.668.066.976.7

73.669.968.160.7

52.267.574.373.782.476.376.072.3

Grossbusi-ness

saving >

11.73 28.8

10 912.014.816.717 716.015.821 830.031 430.834.637.138.041 047.548.751.151 358.558.759.867 070.176.284.691 293.798.2

101.7101.4115.7131.0140.2137.9176.2202.6223.9243.6

201.5200.9206.0202.0

207.4221.1236.4230.6223.0243.6249.7

Government surplus ordeficit (—), nationalincome and product

accounts

Total

1.0— 1 4- 2 . 2

-j

- 3 . 8-31.4-44.1- 5 1 8-39 .5

5.414 48.4

- 3 48.06.1

- 3 . 8- 6 . 9- 7 1

3.15.2.9

-12 6- 1 . 6

3.1- 4 3- 3 8

.7- 2 . 3

.5- 1 3

-14.2- 5 . 510.7

- 9 . 4-18.3- 3 5

6.3- 3 . 2

-64.4-33.2

18 6- 1 . 5

-44.9-29.9-30.6-27.1

- 7 . 8-11.8-25.2-29.6-21.1

6.2.6

Fed-eral

1.2- 1 3- 2 . 2- 1 . 3- 5 . 1

-33.1-46.6-54 .5-42.1

3.513.48.3

- 2 69.26.5

- 3 . 7- 7 . 1- 6 0

4.46.12.3

- 1 0 3- 1 . 1

3.0- 3 . 9- 4 2

.3- 3 . 3

.5- 1 8

-13.2- 5 . 8

8.5-12 .1-22 .0-17 3- 6 . 7

-10.7-70.6-53 .8-48.1-29.4

-57.7-46.4-52.0-59.1

-37.3-40.3-56.4-58.6-52.6-23.6-22.8

Stateandlocal

- 0 . 2- l

.0

.61.31.82.52.72.61.91.0.1

- . 7- 1 . 2- . 4- . 0

.1- 1 . 1- 1 . 3- . 9

- 1 . 4- 2 4- . 4

.1- . 4

5. 5

1.0- . 0

.5- 1 . 1

.32.12.83.7

13.713.07.66.2

20.729.627.8

12.816.421.432.0

29.528.531.229.031.529.823.4

Capitalgrants

receivedby theUnitedStates(net) 2

0.9.7.7.0

4 - 2 . 0.0.0.0.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

.0

Gross investment

Total

17.01.6

10.114.619.09.73.55.19.2

35.342 947.835.951.759.551.951.452.468.072.872.862.075.578.277.387.693.4

102.3116.3126.1122.1130.2144.2141.4156.8179.2219.4210.1202.8241.7276.9319.7

233.5245.0247.5241.0

255.2280.4292.6279.5286.4326.6326.6339.1

Grossprivatedomes-tic in-vest-ment

16 21.49.3

13 117.99.95.87 2

10 630 734 045 935.353.859.252.153 352.768 471.069 261.977 676.474 385.290 296.6

112 0124.5120 8131.5146 2140.8160.0188 3220.0214.6190.9243 0297.8344.5

231.5243.5249.9247.1

272.5295.6309.7313.5322.7345.4350.1359.9

Netforeigninvest-ments

0.8.2.9

1 51.1

- . 2- 2 . 2- 2 1- 1 4

4 69 02 0

.6- 2 . 1

.3- . 2

- 1 9- . 321.83 6.1

- 2 01.73 02.43 25.74.31.61.2

- 1 . 4- 2 . 0

.5- 3 . 2- 9 . 0- . 6

- 4 . 511.9

- 1 . 2-20.9-24.8

2.01.5

- 2 . 4- 6 . 1

-17 .3-15.2-17.1-34.1-36 .3-18.9-23.5-20.7

Statis-ticaldis-

crep-ancy

1 l

.71.41 l.5

- . 8- 1 . 8

2 74 1

71 8

- 1 21.02.04 02.73 33.02 5

- . 82

1.7- 2- . 71 64.03.72.2

.93.21.7

- . 6- 3 . 3- 2 . 1

1.31.72.65.87.44 24.7.9

3.44.14.05.3

3.43.77.14.82.2.5.4

1 Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and non-corporate capital consumption allowances with capital consumption adjustment, and private wage accruals less disburse-ments.

2 Allocations of special drawing rights (SDR), except as noted in footnote 4.s Net exports of goods and services less net transfers to foreigners and interest paid by government to foreigners plus

capital grants received by the United States, net.* In February 1974, the U.S. Government paid to India $2,010 million in rupees under provisions of the Agricultural

Trade Development and Assistance Act. This transaction is being treated as capital grants paid to foreigners, i.e., a —$2.0billion entry in capital grants received by the United States, net.

Source: Department of Commerce, Bureau of Economic Analysis.

210

TABLE B-24.—Saving by individuals, 1946-78 1

(Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1946194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971197219731974

197519761977

1977: l . ._ .I I . . .III . .IV...

1978: I . . . .I I - . .III . .

Total

22.221.025.321.4

30.534.129.931.827.8

33.336.436.133.537.5

35.634.940.746.455.8

62.870.375.881.071.1

84.097.7

115.2134.0125.9

145.7154.4166.3

148.8146.2206.4163.7

161.2195.5180.8

Increase in financial assets

Total 2

18.913.29.1

10.0

13.719.223.122.822.1

28.130.128.631.637.2

32.635.940.147.756.2

59.158.470.976.464.2

79.1103.5128.3146.8138.8

166.4199.8235.7

218.7213.5283.0227.6

236.9278.8245.8

Cur-rencyandde-

mandde-

posits

5 6.1

- 2 9- 2 . 0

2.64.61.61.02.2

1.21.8

- . 43.8.8

1.0- . 9

- 1 . 24.25.2

7.52.49.9

11.1- 2 . 5

8.913.114.515.47.9

5.213.820.4

24.328.022.36.9

•22.223.517.9

Sav-ingsac-

counts

6.33.42.22.6

2.54.87.88.29.2

8.69.5

12.013.911.1

12.118.326.226.326.2

28.019.135.331.19.1

43.667.874.664.257.2

84.8108.1108.3

110.499.8

135.288.0

90.1111.8107.4

Securities

Gov-ern-mentsecu-rities*

- 1 . 51.61 31.8

- . 1- . 62.52.51.0

5.83.92.3

- 2 . 510.1

2.41.81.31 75.1

3.911.7—.75.7

25.3

- 7 . 2- 9 . 9

1.622.022.6

20.69.9

14.3

7.23.66.7

39.6

30.231.325.8

Corpo-rateandfor-eign

bonds

- 0 . 9- . 8- . 1- . 4

- . 8.2

- . 0- . 1- . 9

.71.0.9

1.2.4

.7- . 1- . 4

.1- . 5

.51.44.04.25.4

9.58.34.41.34.7

8.02.11.1

.9- . 03.5.2

- 1 . 0- 4 . 1- . 1

Corpo-rate

equi-ties*

1.11.11.0.7

.71.81.61.0.8

1.02.01.51.5.6

- . 5.3

- 2 . 1- 2 . 5- . 1

- 2 . 1-j

-4'. 2- 6 . 5- 3 . 7

- 1 . 6- 5 . 1- 5 . 7- 6 . 9- 2 . 2

- 3 . 6- 3 . 4- 5 . 1

- 9 . 6- 4 . 3- 5 . 7- . 8

.1- 8 . 8- 7 . 5

Insur-anceandpen-sionre-

serves(*)

5.35.45.35.6

6.96.37.77.97.8

8.59.59.5

10.411.9

11.512.112.713.916.1

16.919.219.020.221.3

24.427.329.333.036.0

43.452.963.6

54.649.991.658.4

59.072.865.9

Net investment in

Non-farmhomes

3.66.79.18.4

11.811.711.312.312.7

16.715.613.212.115.9

14.312.012.813.413.9

13.412.610.914.314.2

11.718.826.028.223.1

20.933.248.0

39.845.652.154.5

57.858.259.9

Con-sumer

du-rables

3.99.5

10.410.9

14.210.47.59.67.0

11.68.47.83.58.0

7.44.89.1

12 215.3

19.121.218.724.323.8

17.425.133.639.027.0

22.540.149.4

48.948.146.853.8

47.459.057.7

Non-cor-po-ratebusi-ness

assets

2 12.07 12.0

7.04.42.0.8

1 5

2 4

2.12.33.4

3.13.36.38.57.7

11.29.48.59.4

11.4

9.813 517.720.32.8

- . 3- 3 . 5

5.6

1.29.14.37.7

- 3 . 11.63.9

Less: Net increasein debt

Mort-gagedebton

non-farmhomes

3 64.74 64.4

6.76.66.27.68 7

12.211.28.99.5

12.8

11.712.214.116.217.5

17.013.812.517.118.5

14.127 041.647 135.4

38.161.393.0

75.992.9

102.4100.8

92.189.492.9

Con-sumercredit

2 73.22 92.9

4.11.24.83.91 1

6 43.52.6.2

6.4

4.61.85.87.98.5

9.66.44.5

10.010.4

5.913 117.123 810.2

9.423.635.0

33.238.332.636.2

38.051.643.4

Otherdebt6

- 0 02.63 02.4

5.43.83.02.25 8

6 93.54.06.37.8

5.57.17.5

11.211.2

13.411.116.116.213.6

13.923.031.729 420.2

16.330.344.4

50.738.844.942.9

47.761.150.3

1 Sav i ng by households, personal trust funds, nonprofit institutions, farms, and other noncorporate business.* Includes commercial paper and miscellaneous financial assets, not shown separately.2 Consists of U.S. savings bonds, other U.S. Treasury securities, U.S. Government agency securities and sponsored

agency securities, and State and local obligations.* Includes investment company shares.* Private life insurance reserves, private insured and noninsured pension reserves, and government insurance and

pension reserves.* Security credit, policy loans, noncorporate business mortgage debt, and other debt.

Source: Board of Governors of the Federal Reserve System.

211

TABLE B-25.—Money income (in 1977 dollars) and poverty status of families and unrelatedindividuals by race of head, 1947-77

Year

FAMILIES19471948194919501951195219531954195519561957195819591960196119621963 . .19641965 . _.1966196719681969197019711972 ._ _. ___19731974197421975 __19761977

UNRELATEDINDIVIDUALS

1947194819491950195119521953.. .195419551956 . .195719581959196019611962196319641965 . _19661967196819691970..19711972...197319741974*19751976. .1977

Totalnum-ber

(mil-lions)

37.238.639 339.940 640.841 242.042 943 543.744.245.1

M5.5M6.4M7.1M7.5148.0M8.5U9.2150.1150.8151.6•52.253.354.455.155.755.756.256.757.2

8.28 49 09 49 19 79.59 79.99.8

10.410 910.9

i l l . lU l 2U1.0111.2112.1112.2U2.5U3.2U3.9114.6U5.5

16.316.818.318.918.920 221.523.1

Total

Medianincome

$8,2238,0247 8998,3568 6528,8819 6119,3969,999

10 65810,69210,66111,26211, 50011,61711,93112,36812, 83413, 36214,06414,39815, 03615, 59315, 39915, 38916,10216, 43315, 77315,85515,44715,92316, 009

$2,6592,5092 6692,6302,7873 2183,1622,7562,9813,1793,2153, 1153,2383,5193 5523,5113,5633,8744,1354,2764,3184,8534,8454,8964,9625,1005,6375,4555,6565,4975,7225,907

Percent withincomes

Belowpov-ertylevel

18.518.118.11/.215.9lb.O13.911.811.410.09.7

10.110.09.38.89.28.89.79.49.3

Belowpov-ertylevel

46.145.245 945.444.242.739.838.338.134.034.032.931.629.025.625.524.125 124.922.6

$25,000andover

3.23.84.04.35 44.85.46.67.48.48.89.8

10.711.813.414.616.718.818.218.020.520.918.921.419.420.822.4

$15,000andover

1.21 92.11.82.22.33.23 73.73.74 85.86.26.67.47.48.2

10.19.9

10.310.611.212.611.011.511 011.812.6

Totalnum-ber

(mil-lions)

34.135.3

38.239.039.539.740.240.941.141.942.442.743.143.544.144.845.446.046.547.648.548.949.549.449.950.150.5

7. 3

8.38.58.58.99.29.39.69.69.59.7

10.410.510.711.312.012.513.414.214.515.816.316.317.518.619.9

White

Medianincome

$8, 5668,3328,2158,6729,0039,3939,9659,781

10,43911,15311,12711,10811,73211,94012,11512,49512,96113, 39813, 92714,61114, 94515, 56716,19015, 97415, 96816, 72917,17516,41216, 47616, 06516, 53916, 740

$2,8092,6512,8812,8062,9343,4673,3382,9663,1693,2633,4403,3373,4593,8053,8193,7583,7354,0804,3124,4964,4835,1425,0885,1245,1855,3265,8235,6975,8605,7415,9686,131

Percent withincomes

Belowpov-ertylevel

15.214.914.813.912.812.211.19.39.08.07.78.0/ . 97.16.67.06.87.77.17.0

Belowpov-ertylevel

44.143.043 242.742.040.738.136.136.532.232.130.829.627.123.723.221.822.722.720.4

$25,000andover

3.64.14.34.75.85.35.87.28.09.29.5

10.611.512.814.515.617.720.019.319.121.922.420.222.720.722.223.9

$15,000andover

1.22.22.42.02.52.53.74.24.24.15 46.56.97.48.38.28.9

11.010.911.211.412.013.311.812.211.712.513.3

Black and other races

Totalnum-ber

(mil-lions)

3.13.3

3.83.94.04.04.04.24.34.54.64.84.84.85.05.05.15.25.45.75.96.16.36.36.46.66.7

1.01.0

1.41.41.31.51.61.61.51.61.51.51.61.71.61.81.82.01.92.12.32.52.62.62.72.93.2

Medianincome

$4,3784,4514,1954,7044,7415,3385,5875,4485,7575,8685,9495,6906,0606,6106,4636,6666,8577,4987,6708,7599,2469,737

10,23410,16910,04610, 29310,35810,15610, 54110, 49510, 45510,142

$2,0241,9862,0832,0562,1682,3982,6241, 9692,1162,4232,1862,2632, 2342,1852,3452,5092,5642,7963,1442,8273,3123,4823,5873,5013,4793,9564,3513,8704,0973,8193,9194,642

Percent withincomes

Belowpov-ertylevel

50.449.049.048.043.740.039.733.932.128.226.928.127.427.726.226.025.125.326.426.5

Belowpov-ertylevel

57.459.362 762.158.355.050.753.148.245.745.546.744.940.937.840.038.040.939.535.9

$25,000andover

0.5.4.5. 3.6.3

1.01.01.72.41.92.73.33.03.95.77.38.08.48.19.39.48.5

10.79.4

10.010.8

$15,000andover

0.6.4.3.5.2.7.3.6

1.01.11.42.01.22.21.82.13.34.13.63.44.76.17.96.16.96.47.08.1

1 Revised using population controls based on the 1970 census. Such controls are not available by race.2 Based on revised methodology procedures.Note.—The poverty level is based on the poverty index adopted by a Federal interagency committee in 1969. That index

reflects different consumption requirements for families based on size and composition, sex and age of family head, andfarm-nonfarm residence. The poverty thresholds are updated every year to reflect changes in the consumer price index.For further details, see "Current Population Reports," Series P-60, No. 116, Bureau of the Census.

Source: Department of Commerce, Bureau of the Census.

212

POPULATION, EMPLOYMENT, WAGES, ANDPRODUCTIVITY

TABLE E-26.—Population by age groups, 1929-78

[Thousands of persons]

July 1

1929

1933

1939

19401941194219431944

194519461947 . .19481949 .

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

197019711972 .19731974

197519761977...1978

Total

121,767

125,579

130,880

132,122133, 402134, 860136, 739138, 397

139,928141,389144,126146, 631149,188

152,271154,878157, 553160 184163, 026

165, 931168, 903171, 984174,882177,830

180,671183,691186,538189, 242191,889

194, 303196, 560198,712200,706202,677

204, 878207, 053208, 846210, 410211,901

213, 559215, 152216, 863218, 548

Age (years)

Under 5

11,734

10,612

10,418

10, 57910,85011,30112,01612,524

12, 97913, 24414, 40614,91915, 607

16,41017,33317,31217, 63818, 057

18, 56619, 00319, 49419, 88720,175

20,34120, 52220, 46920,34220,165

19,82419, 20818, 56317,91317,376

17,14817,17716,99016, 69416, 288

15, 87915, 34515,24115,361

5-15

26, 800

26, 897

25,179

24,81124,51624, 23124, 09323,949

23, 90724,10324, 46825, 20925, 852

26,72127, 27928, 89430, 22731, 480

32,68233,99435, 27236, 44537, 368

38, 49439, 76541,20541,62642, 297

42,93843,70244. 24444,62244, 840

44, 77444, 44143,94843, 22742, 538

41, 95641, 45940, 57439, 598

16-19

9,127

9,302

9,822

9,8959,8409,7309,6079,561

9,3619,1199,0978,9528,788

8,5428,4468,4148,4608,637

8,7448,9169,1959,54310,215

10,68311,02511,18012,00712,736

13,51614,31114,20014,45214, 800

15,27515,63515,94616,31016, 590

16, 79316, 92816, 96616,921

20-24

10,694

11,152

11,519

11,69011,80711,95512, 06412,062

12, 03612, 00411,81411,79411,700

11,68011,55211,35011,06210,832

10,71410,61610, 60310,75610, 969

11,13411,48311,95912,71413, 269

13,74614,05015,24815,78616,480

17,18418,08918,03218, 34518, 741

19, 22919, 62920, 07620,441

25-44

35, 862

37,319

39, 354

39, 86840,38340,86141,42042,016

42, 52143, 02743,65744, 28844, 916

45, 67246,10346,49546, 78647, 001

47, 19447,37947, 44047, 33747, 192

47,14047, 08447, 01346, 99446, 958

46,91247,00147,19447,72148, 064

48,43548,81150, 25451,41152, 593

53, 73555, 13056, 70558, 320

45-64

21, 076

22,933

25, 823

26, 24926,71827,19627,67128,138

28, 63029,06429,49829,93130, 405

30, 84931, 36231, 88432,39432, 942

33, 50634, 05734, 59135, 10935, 663

36,20336,72237,25537,78238,338

38,91639, 53440,19340, 84641,437

41,97542,41342,78543, 07743,319

43, 54643, 70743, 79343, 852

65 andover

6,474

7,363

8,764

9,0319,2889,5849,86710,147

10, 49410,82811,18511,53811,921

12,39712, 80313, 20313,61714, 076

14,52514,93815, 38815, 80616, 248

16,67517,08917,45717,77818,127

18,45118,75519,07119, 36519,680

20, 08720,48820, 89221,34621,833

22, 42022,95423, 50724, 054

Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950.

Source: Department of Commerce, Bureau of the Census.

213

TABLE B-27.—Noninstitutional population and the labor force, 1929-78

[Monthly data seasonally adjusted, except as noted]

Year ormonth

1929

1933

1939

194019411942. _19431944

19451946.1947

194719481949. .

195019511952195331954

19551956195719581959

1960s19611962 319631964

19651966196719681969

197019711972 31973 31974

1975197619771978 3

Nonin-stitu-tionalpopu-lation i

ArmedForces i

Civilian labor force

Total

Employment

TotalAgri-cul-tural

Non-agri-cul-tural

Unem-ploy-ment

Thousands of persons 14 years of age and over

100,380101,520102,610103,660104,630

105,530106,520107,608

260

250

370

5401,6203,9709,020

11,410

11,4403,4501,590

49,180

51, 590

55,230

55,64055,91056,41055,54054,630

53,86057,52060,168

47 630

38, 760

45, 750

47,52050,35053,75054,47053,960

52,82055, 25057,812

10 450

10, 090

9,610

9,5409,1009,2509,0808,950

8,5808,3208,256

37 180

28,670

36,140

37,98041,25044,50045,39045,010

44,24046,93049,557

1 550

12,830

9,480

8,1205,5602,6601,070

670

1,0402,2702,356

Thousands of persons 16 years of age and over

103,418104 527105,611

106,645107,721108,823110,601111,671

112,732113,811115,065116,363117,881

119,759121,343122,981125,154127, 224

129,236131,180133,319135,562137,841

140,182142,596145,775148,263150,827

153,449156,048158,559161, 058

1,5911 4591,617

1,6503,1003,5923,5453,350

3,0492,8572,8002,6362,552

2,5142,5722,8282,7382,739

2,7233,1233,4463,5353,506

3,1882,8172,4492,3262,229

2,1802,1442,1332,117

59,35060 62161,286

62,20862,01762,13863,01563,643

65,02366,55266,92967,63968,369

69,62870,45970,61471,83373,091

74,45575,77077,34778,73780,734

82,71584,11386,54288,71491,011

92,61394,77397, 401100,420

57,03858 34357,651

58 91859,96160 25061,17960,109

62,17063,79964,07163,03664,630

65,77865,74666,70267,76269,305

71,08872,89574,37275,92077,902

78,62779,12081,70284,40985,935

84,78387,48590, 54694,373

7,8907,6297,658

7,1606,7266,5006,2606,205

6,4506,2835,9475,5865,565

5,4585,2004,9444,6874,523

4,3613,9793,8443,8173,606

3,4623,3873,4723,4523,492

3,3803,2973,2443,342

49,14850 71449,993

51,75853, 23553,74954,91953,904

55,72257,51458,12357,45059,065

60,31860,54661,75963,07664,782

66,72668,91570,52772,10374,296

75,16575,73278,23080,95782,443

81,40384,18887,30291,031

2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,047

Unem-ploy-mentrate

(percentof

civilianlaborforce)

Civilian labor forceparticipation rate *

Total Males Females

Percent

3.2

24.9

17.2

14.69.94.71.91.2

1.93.93.9

3.93.85.9

5.33.33.02.95.5

4.44.14.36.85.5

5.56.75.55.75.2

4.53.83.83.63.5

4.95.95.64.95.6

8.57.77.06.0

55.756.057.258.758.6

57.255.856.8

58.358.858.9

59.259.359.058.958.8

59.360.059.659.559.3

59.459.358.858.758.7

58.959.259.659.660.1

60.460.260.460.861.2

61.261.662.363.2

83.784.385.686.487.0

84.882.684.0

86.486.686.4

86.486.586.386.085.5

85.385.584.884.283.7

83.382.982.081.481.0

80.780.480.480.179.8

79.779.179.078.878.7

77.977.577.777.9

28.128.731.336.036.5

35.931.231.0

31.832.733.1

33.934.634.734.434.6

35.736.936.937.137.1

37.738.137.938.338.7

39.340.341.141.642.7

43.343.343.944.745.6

46.347.348.450.0

See next page for continuation of table.

214

TABLE E-27.—Noninstitutional population and the labor force, 1929-78— Continued

[Monthly data seasonally adjusted, except as noted]

Year or month

Nonin-stitu-tionalpopu-

lation 1

ArmedForces»

Civilian labor force

Total

Employment

TotalAgri-cul-tural

Nqn-agri-cul-tural

Unem-ploy-ment

Unem-ploy-mentrate

(percentof

civilianlaborforce)

Civilian labor forceparticipation rates

Total Males Females

Thousands of persons 16 years of age and over Percent

1 9 7 6 : J a n . . . .F e b . . . .M a r . . . .AprMay . . . .June_.

July—A u g . -S e p t . .O c t . . .N o v . . .D e c . . .

1977: J a n . . .F e b . . .M a r . .Apr.AprM a y . . . .Way.June

J u l y . .A u g . .Sept . .O c t . -N o v . .Dec . . .

1978: Jan 3 . .F e b . . .M a r . .A p r . . .M a y . .June . .

J u l y . .A u g . .S e p t . .O c t . . .N o v . .Dec . . .

154,915155,106155,325155,516155,711155,925

156,142156,367156,595156,788157,006157,176

157, 381157, 584157,782157,986158, 228158,456

158,682158,899159,114159,334159, 522159,736

159,937160,128160, 313160, 504160,713160,928

161,148161, 348161, 570161,829162,033162,250

2,1402,1462,1472,1442,1422,137

2,1402,1472,1452,1472,1492,146

2,1332,1372,1382,1322,1282,129

2,1352,1372,1312,1342,1322,129

2,1212,1242,1222,1182,1132,098

2,1162,1222,1232,1222,1172,108

93,61493,68393,90994, 35694,47594, 527

95,18895, 28595,14395,16395,74595, 840

95,77496,31696,65496,74997,06297, 508

97,31197,69897,81198,02898,83898,748

99,21599,13999,43599,767100,109100, 504

100,622100,663100,974101,077101, 628101, 867

86,22486,48886, 80587,13887,43887, 321

87,81887,90087,86387,84088,27888,454

88,65989,04889, 50389, 80590,16690, 500

90,60590,90391,18791,37492,20392, 561

92,92393,04793, 28293, 70493,95394,640

94, 44694,72395,01095, 24195, 75195, 855

3,3423,2753,2713,3983,3023,272

3,3203,3493,2573,2863,2433,231

3,1303,1883,1913,2613,3493,291

3,1983,2193,1883,2383,3643,304

3,3633,2803,3343,2743,2433,424

3,3773,3513,4063.3743,2753,387

82,88283,21383,53483,74084,13684,049

84,49884, 55184,60684,55485,03585,223

85, 52985, 86086,31286, 54486,81787, 209

87,40787,68487,99988,13688,83989,257

89, 56089,76789,94890, 43090,71091,216

91, 06991, 37291,60491, 86792, 47692, 468

7,3907,1957,1047,2187,0377,206

7,3707,3857,2807,3237,4677,386

7,1157,2687,1516,9446,8967,008

6,7066,7956,6246,6546,6356,187

6,2926,0926,1536,0636,1565,864

6,1765,9405,9645,8365,8776,012

7.97.77.67.67.47.6

7.77.87.77.77.87.7

7.47.57.47.27.17.2

6.97.06.86.86.76.3

6.36.16.26.16.15.8

6.15.95.95.85.85.9

61.361.261.361.561.561.5

61.861.861.661.561.861.8

61.762.062.162.162.262.4

62.262.362.362.462.862.7

62.962.762.963.063.163.3

63.363.263.363.363.663.6

77.477.377.377.777.677.3

77.677.677.577.577.677.5

77.477.677.677.577.677.8

77.677.677.377.878.077.9

78.077.877.977.877.978.0

77.877.777.777.778.078.0

46.846.947.047.147.147.3

47.647.747.347.347.747.7

47.647.948.248.348.448.5

48.348.648.848.549.249.0

49.249.249.449.749.950.1

50.350.250.550.350.650.7

i Not seasonally adjusted.* Civilian labor force as percent of civilian noninstitutional population.3 Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of

1950 census data added about 600,000 to population and about 350,000 to labor force, total employment, and agriculturall 9 l k d H i i d d d b t 500000 t l t i b t 300000 t l b

1950 nsu data added about 600,000 to population and about 350,000 to l , t empyment, and agriculturalemployment. Beginning 1960, inclusion of Alaska and Hawaii added about 500,000 to population, about 300,000 to laborforce, and about 240,000 to nonagricultural employment. Beginning 1962, introduction of 1960 census data reduced popu-lation by about 50,000 and labor force and employment by about 200,000. Beginning 1972, introduction of 1970 censusdata added about 800,000 to civilian noninstitutional population and about 333,000 to labor force and employment. Asubsequent adjustment based on 1970 census in March 1973 added 60,000 to labor force and to employment. Beginning1978, changes in sampling and estimation procedures introduced into the household survey added about 250,000 to laborforce and to employment. Unemployment levels and rates were not significantly affected.

Note.—Labor force data in Tables B-27 through B-32 are based on household interviews and relate to the calendarweek including the 12th of the month. For definitions of terms, area samples used, historic comparability of the data,comparability with other series, etc., see "Employment and Earnings."

Source: Department of Labor, Bureau of Labor Statistics.

215

TABLE B-28.—Civilian employment and unemployment by sex and age, 1947—78

[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]

Year ormonth

1 9 4 7 . . .1 9 4 8 . . .1 9 4 9 . . .

1950 . . .1 9 5 1 . . .19521953 L .1 9 5 4 . . .

1 9 5 5 . . .1956. .1 9 5 7 . . .1 9 5 8 . . .1 9 5 9 . . .

19601._1 9 6 1 . . .1 9 6 2 i _ _1 9 6 3 . . .1 9 6 4 . . .

1 9 6 5 . . .1 9 6 6 . . .1 9 6 7 . . .1 9 6 8 . . .1 9 6 9 . . .

1 9 7 0 . . .1 9 7 1 . . .1972119731. .1974 . . .

1 9 7 5 . . .1976 . . .1977. .19781. .

1977:J a n . .F e b . .Mar..Apr.May..June-

July. .Aug..Sept .Oct . .Nov_.D e c .

1978:J a n . .Feb . .Mar..Apr._May..June-

July..Aug..Sept.Oct . .Nov..D e c .

Employment

Total

57, 03858,34357,651

58,91859,96160, 25061,17960,109

62,17063,79964,07163, 03664,630

65, 77865, 74666,70267,76269,305

71,08872,89574,37275,92077,902

78,62779,12081,70284,40985, 935

84,78387, 48590, 54694, 373

88, 65989, 04889, 50389, 80590,16690,500

90, 60590, 90391,18791, 37492, 20392, 561

92, 92393, 04793, 28293, 70493, 95394, 640

94, 44694, 72395, 01095, 24195,75195, 855

Total

40,99541,72540,925

41,57841,78041,68242,43041,619

42,62143,37943,35742,42343,466

43,90443, 65644,17744,65745,474

46,34046,91947,47948,11448,818

48,96049,24550, 63051, 96352, 518

51,23052,39153, 86155, 491

52, 95953,11753, 33353, 47053, 59753,910

53, 90853, 98054, 04654, 36954, 70654, 922

54, 99254, 94355, 04255,18455, 37255, 766

55, 53155, 58055, 59455, 75456, 09656, 072

Males

16-19years

2,2182,3452,124

2,1862,1562,1062,1351,985

2,0952,1642,1172,0122,198

2,3602,3142,3622,4062, 587

2,9183,2523,1863,2553,430

3,4073,4703,7504,0174,074

3,8033,9044,1244,279

3,9413,9774,0224,0824,1334,147

4,1704,1314,1044,2224,2764,308

4,2874,1584,2014,1874,2534,429

4,3174,3654,3074,3064,2714,234

20yearsandover

38,77639,38238,803

39,39439,62639,57840, 29639,634

40, 52641,21641,23940,41141,267

41, 54341,34241,81542, 25142, 886

43,42243,66844,29344,85945,388

45,55345,77546,88047,94648,445

47,42748, 48649, 73751,212

49, 01849, 14049,31149, 38849, 46449,763

49, 73849, 84949, 94250,14750, 43050, 614

50, 70550, 78550, 84150, 99751,11951, 337

51,21451,21551, 28751, 44851, 82551,838

Total

16,04516,61716,723

17,34018,18118, 56818,74918,490

19,55120,41920,71420,61321,164

21,87422,09022,52523,10523,831

24,74825,97626,89327,80729,084

29,66729,87531.07232,44633,417

33,55335,09536,68538, 882

35, 70035, 93136, 17036, 33536, 56936, 590

36, 69736, 92337, 14137, 00537, 49737, 639

37, 93138,10438, 24038, 52038, 58138, 874

38,91539,14339, 41639, 48739, 65539, 783

Females

16-19years

1,6911,6831,588

1,5171,6111,6121,5841,490

1,5481,6541,6631,5701,640

1,7691,7931,8331,8491,929

2,1182,4692,4972,5252,686

2,7342,7252,9723,2193,329

3,2433,3653,4863,702

3,3323,4443,4633,4423,3403,533

3,5073,6613,4743,5143,5503,573

3,5733,5643,5623,6463,6953,776

3,7553,8313,7253,7613,7683,793

20yearsandover

14,35414,93715,137

15, 82416,57016,95817,16417,000

18,00218,76719,05219,04319,524

20,10520, 29620,69321,25721,903

22,63023, 51024, 39725,28126,397

26,93327,14928,10029,22830, 088

30,31031,73033,19935,180

32, 36832, 48732, 70732, 89333, 22933, 057

33, 19033,26233, 66733, 49133,94734, 066

34, 35834,54034, 67834, 87434, 88635, 098

35,16035, 31235, 69135, 72635, 88735, 990

Total

2,311

Total

1,6922,276 1,5593,637

3,288

2,572

2,2392,055 1,2211,8831,1851,834 1,2023,532

2,852

2,344

1,8542,750 1,7112,859 1,8414,602 3, 0983,740 2,420

3,852 2,4864,714 2,9973, 911 2,4234,070 2,4723,786

3,366

2,205

1,9142, 875 1, 5512,975 1,5082,817,1,4192,832

4,088

1,403

2,2354,993 2,7764.8402.6354, 304 2, 2405,076

7,8307,2886,8556,047

7,1157,268

2,668

4,3853,9683,5883,051

3,8493.948

7,15l|3; 7726, 944 3, 6276, 896 3, 6737,008

6,706

3,629

3,5066,795 3,5426, 624J3, 3526,654 3,4336,635 3,3316,187

6,292

3,146

3,2566,092 3,2216,153 3,2356, 063 3, 0966,156 3, 0325,864

6,176

2,816

2,9715,940 2,9375,964j2,9655,836 2,9715, 877 2, 9236,012 3,044

Unemployment

Males

16-19years

270255352

318191205184310

274269299416398

425479407500487

479432448427441

599691707647749

957928861799

866889895851871943

846875864828842759

792845841817768704

784756793826810849

20yearsandover

1,4221,3052,219

1,9221,029

9801,0192,035

1,5801,4421,5412,6812,022

2,0602,5182,0161,9711,718

1,4351,1201,060

993963

1,6362,0861,9281,5941,918

3,4283,0412,7272,252

2,9833,0592,8772,7762,8022,686

2,6602,6672,4882,6052,4892,387

2,4642,3762,3942,2792,2642,112

2,1872,1812,1722,1452,1132,195

Total

619717

1,065

1,049834698632

1,188

9981,0391,0181,5041,320

1,3661,7171,4881,5981,581

1,4521,3241,4681,3971,429

1,8532,2172,2052,0642,408

3,4453,3203,2672,996

3,2663,3203,3793,3173,2233,379

3,2003,2533,2723,2213,3043,041

3,0362,8712,9182,9673,1243,048

3,2053,0032,9992,8652,9542,968

Females

16-19years

144152223

195145140123191

176209197262256

286349313383386

395404391412412

506567535579660

795773781760

813781797802782838

757764796781780679

748759749756802754

792111769731746741

20yearsandover

475564841

854689559510997

823832821

1,2421,063

1,0801,3681,1751,2161,195

1,056921

1,078985

1,016

1,3471, 6501,6101,4851,748

2,6492,5462,4862,236

2,4532,5392,5822,5152,4412,541

2,4432,4892,4762,4402,5242,362

2,2882,1122,1692,2112,3222,294

2,4132,2312,2302,1342,2082,227

1 See footnote 3, Table B-27.Note.—See Note, Table B-27.

Source: Department of Labor, Bureau of Labor Statistics.

216

TABLE B-29.—Selected employment and unemployment data, 1948-78

[Percent1; monthly data seasonally adjusted]

Year or month

1948...1949

19501951 . .1952.1953 . .195419551956195719581959

196019611962 . . .19631964 .19651966196719681969

197019711972197319741975 . . . .19761977 . .1978

1977: JanFebMarAprMayJune

JulyAugSeptOctNovDec.

1978: JanFeb . . .MarAprMayJune

JulyAugSeptOctNov.Dec.

Unemployment rate'

Allwork-

ers

3.85.9

5.33.33.02.95.54.44.14.36.85.5

5.56.75.55.75.24.53.83.83.63.5

4.95.95.64.95.68.57.77.06.0

7.47.57.47.27.17.2

6.97 06.86.86.76.3

6 36.16.26.16.15.8

6.15.95.95.85.85.9

By sex and age

Bothsexes16-19years

9.213.4

12.28.28.57.6

12.611.011.111.615.914.6

14.716.814.717.216.214.812.812.812.712.2

15.216.916.214.516.019.919.017.716.3

18.818.418.418.018.118.8

17.317 418.017.217.215.4

16 417.217.016.716.515.1

16.315.716.316.216.216.5

Males20

yearsandover

3.25.4

4.72.52.42.54.93.83.43.66.24.7

4.75.74.64.53.93.22.52.32.22.1

3.54.44.03.23.86.75.95.24.2

5.75.95 55.35.45.1

5.15 14.74.94.74.5

4 64.54.54.34.24.0

4.14.14.14.03.94.1

Females20

yearsandover

3.65.3

5.14.03.22.95.54.44.24.16.15.2

5.16.35.45.45.24 53.84.23.83.7

4.85.75.44.85.58.07.47.06.0

7.07.27.37.16.87.1

6.97 06.96.86.96.5

6 25.85.96.06.26.1

6.45.95.95.65.85.8

By selected groups

Expe-riencedwageand

salarywork-

ers

4.36.8

6.03.73.33.26.24.84.44.67.25.7

5.76.85.65.55.04 33.53.63.43.3

4.85.75.34.55.38.27.36.65.6

7.07.26.96.76.76.6

6.46 56.36.46.35.9

5 95.75.75.65.75.4

5.75.55.65.45.45.6

Mar-ried

men*

3.5

4.61.51.41.74.02.82.62.85.13.6

3.74.63.63.42.82.41.91.81.61.5

2.63.22.82.32.75.14.23.62.8

4.04.13.83.73.73.5

3.43 53.33.53.33.1

3.12.93.02.82.92.7

2.72.82.62.62.42.5

Womenwhohead

families

4.94.44.4

5.47.37.27.07.0

10.010.09.38.5

9.59.59.89.49.09.4

9.19 8

10.29.39.27.8

8.27.78.7

10.19.38.8

9.88.08.07.57.77.7

Full-time

work-ers«

5.4

5.02.62.5

5.23.83.74.07.2

6.7

5.54.94.23.53.43.13.1

4.55.55.14.35.18.17.36.55.5

6.97.06.86.76.66.6

6.56 56.36.46.25.8

5 95.75.65.55.65.3

5.75.45.45.25.25.3

Blue-collarwork-ers <

4.28.0

7.23.93.63.47.25.85.16.2

10.27.6

7.89.27.47.36.35.34.24.44.13.9

6.27.46.55.36.7

11.79.48.16.9

8.68.88.58.18.08.0

8.08.27.67.97.57.07.37.27.26.76.76.6

6.76.96.86.86.46.8

Employment as percentof population5

Total

55.854.6

55.255.755.455.353.855.156.155.754.254.8

54.954.254.254.154.555.055.655.856.056.5

56.155.556.056.957.055.356.157.158.6

56.356.556.756.857.057.1

57.157.257.357.357.857.9

58.158.158.258.458.558.8

58.658.758.858.959.159.1

White

54.054.354.855.455.755.956.5

56.255.756.457.357.555.956.857.959.3

57.157.357.557.757.858.0

57.958.158.258.358.758.7

58.958.858.959.159.259.6

59.359.459.559.659.959.9

Blackand

other

55.256.156.857.256.956.656.7

55.553.753.053.953.050.050.651.153.3

50.850.950.850.950.751.2

50.850.751.050.951.552.6

52.4" 53.0

52.952.953.053.4

53.253.553.953.953.753.7

1 Unemployment as percent of civilian labo- force in group specified.2 Married men living with their wives. Data for 1949 and 1951-54 are for April; 1950, for March,s Data for 1949-61 are for May.* Includes craft and kindred workers, operatives, and nonfarm laborers. Data for 1948-57 are based on data for

January, April, July, and October.« Civilian employment as percent cf total noninstitutional population.

Note—See footnote 3 and Note, Table B-27.

Source: Department of Labor, Bureau of Labor Statistics.

217

T A B L E B—30.—Unemployment rate by demographic characteristic, 1948—78

[Percent»; monthly data seasonally adjusted]

Year or month

19481949

19501951195219531954

19551956195719581959

19601961 . . . .19621963 . . .1964

1965196619671968 .1969 . . .

19701971197219731974

1975197619771978

1977: JanFebMar. . . .Apr_. . .May. . . .J u n e . . .

July . . . .AugSept . . . .OctN o v . . . .D e c . . .

1978: JanF e b . . . .Mar. . . .A p r . . . .May. . . .J u n e . . .

July . . . .AugSept—.OctN o v . . . .D e c . . .

White

Total

3.55.6

4.93.12.82.75.0

3.93 63.86.14.8

4.96.04.95.04.6

4.13.33.43.23.1

4.55.45.04.35.0

7.87.06 25.2

6.86.86.66.46.36.4

6.06.16.05.95.85.4

5.55.45.35.25.35.0

5.25.25.25.15.05.2

Males

Total

4.8

3.73.43.66.14.6

4.85.74.64.74.1

3.62.82.72.62.5

4.04.94.53.74.3

7.26.45.54.5

6.16.25.95.75.75.7

5.35.35.15.15.04.7

4.84.84.84.54.44.2

4.44.44.54.54.24.5

16-19years

13.4

11.310.511.515.714.0

14.015.713.715.914.7

12.910.510.710.110.0

13.715.114.212.313.5

18.317.315.013.5

16.116.015.915.015.216.8

13.914.815.414.114.012.4

13.014.414.113.612.711.9

12.813.213.514.313.414.6

20yearsandover

4.4

3.33.03.25 54.1

4.25.14.03.93.4

7.92.27.12.01.9

3 74.03.62.93.5

6.25.44.63.7

5.25.34.94.94.84.6

4.54.44.24.34.14.0

4.03.93.93.73.73.5

3.63.63.63.53.43.5

Total

5.5

4.34 24.36.25.3

5.36.55.55.85.5

5.04.34.64.34.2

5.46.35.95.36.1

8.67 97 36 2

7.77.77.77.57.27.5

7.17.27.27.17.06.5

6.56.26.06.36.56.2

6.56.36.25.96.06.1

Female:

16-19years

10.4

9.19.79.5

12.712.0

12.714.812.815.114.9

14.012.111.512.111.5

13.415.114.213.014.5

17.416.415.914.4

17.716.616.916.716.815.9

15.314.716.015.615.412.8

14.614.814.714.715.012.9

14.514.414.813.714.313.8

>

20yearsandover

5.1

3.93.73.85.64.7

4.65.74.74.84.6

4.03.33.83.43 4

4.45.34.94.35.0

7.56.86.25.2

6.56.66.66.36.16.5

6.16.26.16.16.05.7

5.65.25.05.25.55.4

5.55.25.24.95.05.1

Black and other

Total

5.98.9

9.05.35.44.59.9

8.78.37.9

12.610.7

10.212.410.910.89.6

8.17.37.46.76.4

8.29.9

10.08.99.9

13.913.113.111.9

12.713.212.912.412.913.3

13.114.113.213.613.512.6

12.811.912.512.012.312.0

12.311.511.311.311.711.5

Males

Total

10.3

8.87.98.3

13.711.5

10.712.810.910.58.9

7.46.36.15.65.3

7.39.18.97.69.1

13.712.712.410.9

12.112.412.210.712.312.3

12.814.012.613.412.211.4

12.011.311.311.211.310.3

10.610.410.410.310.910.6

16-19years

14.4

13.415.018.426.825.2

24.026.822.027.324.3

n 321.323.922.1?1 4

?5 028.9?9 726.931.6

35.435.437.034.4

34.838.239.134.837.836.6

39.138.434.736.438.236.2

36.935.837.134.137.432.2

32.328.533.831.837.934.6

20yearsandover

9.9

8.47.47.6

12.710.5

9.611.710.09.27.7

6.04.94.33.93.7

5.67.26.85.76.8

11.710.610.08.6

10.010.09.88.6

10.010.0

10.211.410.511.29.68.9

9.68.88.88.98.88.2

8.38.78.28.38.38.4

Total

9.2

8.58.97.3

10.89.4

9.411.911.011.210.7

9.28.79.18.37.8

9.310.811.310.510.7

14.013.614.013.1

13.414.113.814.413.714.4

13.414.213.813.815.013.9

13.612.613.812.813.513.9

14.212.712.212.512.512.5

Females

16-19years

20.6

19.222.820.228.427.7

24.829.230.234.731.6

31.731.329.628.727.6

34.435.438.534.534.6

38.539.039.938.4

38.236.737.637.539.042.9

41.141.441.140.340.740.9

41.341.040.437.039.241.5

40.436.636.037.535.035.3

20yearsandover

8.4

7.77.86.49.58.3

8.310.69.69.49.0

7.56.67.16.35 8

6 98.78 88.28.4

11.511.311.710.6

11.212.211.812.311.711.6

10.911.711.311.312.611.4

11.110.011.310.610.911.1

11.410.310.010.110.310.2

i Unemployment as percent of civilian labor force in group specified.

Note.—See footnote 3 and Note, Table B-27.

Source: Department of Labor, Bureau of Labor Statistics.

218

TABLE B-31.— Unemployment by duration, 1947-78

[Monthly data seasonally adjusted ']

Year or month

194719481949

19501951195219531954

19551956195719581959

I9601961196219631964

19651966196719681969

1970 . . .1971197219731974

1975197619771978

1977:JanFebMarAprMay. _ _June. _

JulyAugSeptOctNovDec

1978: JanFebMarAprMayJune

JulyAugSeptOctNovDec

Total un-employ-

ment Less than5 weeks

Duration of unemployment

5-14weeks

15-26weeks

Thousands of persons 16 years of age and (

2,3112,2763,637

3,2882,0551,8831,8343,532

2,8522,7502,8594,6023,740

3,8524,7143,9114,0703,786

3,3662,8752,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,047

7,1157,2687,1516,9446,8967,008

6,7066,7956,6246,6546,6356,187

6,2926,0926,1536,0636,1565,864

6,1765,9405,9645,8365,8776,012

1 2101,3001,756

1,4501,1771,1351,1421,605

1,3351,4121,4081,7531,585

1,7191,8061,6631 7511,697

1,6281 5731,6341 5941,629

2,1372,2342,2232,1962,567

2,8942,7902,8562,793

2,8202,9282, 9133,0112,7273,115

2,7742,8392,7762,8222,8512,645

2,7422,6492,7892.7472,8622,772

2,9672,7952,7832,7192,8332,876

704669

1,194

1,055574516482

1,116

815805891

1,3961,114

1,1761,3761,1341,2311,117

983779893810827

1,2891,5781,4591,2961,572

2,4522,1592,0891,875

2,1532,1922,1681,9602,1702,045

2,0592,1522,0912,0811,9781,913

1,9031,8801,9091,8561,8421,908

1,8731,8951,8611,7891,7741,979

234193428

425166148132495

366301321785469

503728534535491

404287271256242

427665597475563

1,2901,003

896746

993954878822860850

891931882882890813

838894787809723674

668625663732685726

27 weeksand over

)ver

164116256

3571378478

317

336232239667571

454804585553482

351239177156133

235517562337373

1,1931,3361,015

633

1,1991,2021,1531,1191,059

978

965899924900871835

803665701677681592

646609605585511482

Average(mean)

durationin weeks

8.610.0

12.19.78.48.0

11.8

13.011.310.513.914.4

12.815.614.714.013.3

11.810.48.88.47.9

8.711.312. C10.09.7

14.115. J14.311. £

15.214. J14.514.515. C14.2

14.113. £13. S13.713.513.7

13.012.612.412.412.212. C

11.811.411.511.811.010.7

i Because of independent seasonal adjustment of the various series, detail will not add to totals.

Note.—See footnote 3 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.

219

TABLE B-32.—Unemployment by reason, 1967-78

[Monthly data seasonally adjusted *]

Year or month Totalunemployment

Joblosers

Jobleavers Reentrants New

entrants

Thousands of persons 16 years of age and over

196719681969

19701971197219731974

1975197619771978

1978: Jan..Feb..Mar.Apr-May.June

July.Aug.Sept.Oct.Nov.Dec.

196719681969

19701971197219731974

1975197619771978

1978:Jan..Feb.Mar.Apr..May.June.

July.Aug.Sept.Oct..Nov.Dec.

2,9752,8172,832

4,0884,9934,8404,3045,076

7,8307,2886,8556,047

6,2926,0926,1536,0636,1565,864

6,1765,9405,9645,8365,8776,012

1,2291,0701,017

1,8092,3132,0891,6662,205

4,3413,6253,1032,514

2,7112,5892,5622,5562,6142,379

2,5362,4592,3622,4562,3722,442

438431436

549587635674756

812886889851

861896858877828853

855840849812825871

945909965

1,2271,4661,4441,3231,441

1,8651,8951,9261,814

1,8121,8021,8781,7501,7931,785

1,8701,7431,9301,7211,7541,937

396407413

503627672642672

812882938867

915880912905892816

871875816825872826

Percent of civilian labor force

3.83.63.5

4.95.95.64.95.6

8.57.77.06.0

6.36.16.26.16.15.8

6.15.95.95.85.85.9

1.61.31.2

2.22.82.41.92.4

4.73.83.22.5

2.72.62.62.62.62.4

2.52.42.32.42.32.4

0.6.5

.7

.7

.7

1.21.21.2

1.51.71.71.51.6

2.02.02.01.8

1.81.8.9.8.8.8

.9

.71.91.71.71.9

0.5.5.5

•6.7.8

'.7

.9

.91.0.9

.9

.9

.9

.9

.9

.8

. 9

. 9

.8

.8

.9

.8

1 Because of independent seasonal adjustment of the various series, detail will not add to totals.

Note.—See footnote 3 and Note, Table B-27.

Source: Department of Labor, Bureau of Labor Statistics.

220

TABLE B-33.—Unemployment insurance programs, selected data, 1946-78

Yearor month

All programs

Coveredemploy-ment1

Insuredunem-ploy-ment

(weeklyaver-age)"

Totalbenefits

paid(millionsof dol-lars^*

State programs

Insuredunem-ploy-ment

Initialclaims

Ex-haus-tions*

Insuredunem-ploy-

ment aspercent ofcoveredemploy-

ment

Benefits paid

Total(mil-lions

ofdol-lars) *

Averageweeklycheck(dol-lars)*

Thousands Weekly average; thousands

1946...1947...1948...1949...

195019511952195319541955195619571958

I960....1961....1962....1963.-.1964...1965...1966...1967...1968...1969...

1970...1971...1972...1973...1974...1975...1976...1977 *..1978 p.

1977: Jan..Feb..Mar..

31,85633,87634,64633; 098

34,30836,33437,00638,07236,62240,01842,75143,43644,41145,728

46,33446,26647,77648,43449,63751,58054,73956,34257,97759,999

59,52659,37566,45869,89772 45171,03773,459

»76,419

June..

July..Aug...

§cf!;:Nov...Dec...

1978: Jan.-.Feb....Mar...May."June..

July..Aug..

SfcNov*.D

2,8041,7931 4462,4741,6051,0001,0691,0672,0511,3991,3231,5713,2692,099

2,0712,9941,946

U,9731,7531,4501,1291,2701,1871,177

2,0702,6082,1921,7932,5584,9373,8463,1112,640

4,4424,4483,9723,5063,1052,9393,0652,7512,6432,6492,8533,2263,7813,6383,2122,6592 3692,2972,5812,3942,0641,9992,1482,545

2,878.51785.51,328.72,269.81,467.6

862.91,043.51,050.62,291.61,560.21,540.61,913.04,290.62,854.3

3,022.84,358.13,145.13,025.92,749.22,360.41,890.92,221.52,191.02,298.6

4,209.36,154.05,491.14,517.36,933.9

16,802.412,344.810,998.9

1,212.01,214.51,317.2

998.5886.4883.4

784.5824.8712.2712.9795.8896.2

1,091.01,053.61,128.9

805.4753.9706.7663.8771.5595.6597.4

1,295997980

1,9731,513969

1,044990

1,8701,2651,2151,4462,5261,6841,9082,2901,783

M,8061,6051,3281,0611,2051 111lilOl1,8052,1501,8481,6322,2623,9862,9912,6552,356

2,8352,8112,6782,6652,6272,6232,6102,6512,6052,5702,5512,4872,4822,5182,4522,3072,2232,2472,3742,4482,2922,2342,2302,252

189187200340236208215218304226227270369277331350302

T298268232203226201200296295261247363478386375342

*410427354381384370374371364360353351346368339338331347364345326325338339

4.33.13.06.24.62.82.92.85.23.53.23.66.44.44.85.64.44.33.83.02.32.52.22.1

3.44.13.52.73.56.04.63.93.3*

4.34.24.24.03.93.9

3.83.93.83.83.73.63.63.63.53.33.23.23.43.53.23.03.03.1

1,094.9775.1789.9

1,736.01,373.1

840.4998.2962.2

2,026.91,350.31,380.71,733.93,512.72,279.02,726.73,422.72,675.42,774.72,522.12,166.01,771.32,092.32,031.62,127.9

3,848.54,957.04,471.04,007.65,974.9

11,754.78,974.58,357.2

955.3975.6

1,034.1763.7666.0658.3592.4671.3565.2525.8599.5703.0909.4918.8

1,001.5708.0639.8580.0557.0677.8521.0515.2

18.5017.8319.0320.4820.7621.0922.7923.5824.9325.0427.0228.1730.5830.4132.3733.8034.5635.2735.9237.1039.7541.2543.4346.17

50.3453.2356.7659.0064.2570.2375.1678.77

78.6180.4879.6078.6377.6976.9075.9177.1677.7479.6080.2381.5484.1085.8085.4884.3382.7081.6980.7781.5381.9083.43

* Monthly data are seasonally adjusted.1 Includes persons under the State, UCFE (Federal employee, effective January 1955), and RRB (Railroad Retirement

Board) programs. Beginning October 1958, also includes the UCX program (unemployment compensation for ex-servicemen).2 Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January 1960), and

SRA (Servicemen's Readjustment Act, September 1944-September 1951) programs. Also includes Federal and Stateextended benefit programs. Does not include FSB (Federal supplemental benefits) and SUA (special unemploymentassistance) programs.

3 Covered workers who have completed at least 1 week of unemployment.* Annual data are net amounts and monthly data are gross amounts.* Individuals receiving final payments in benefit year.* For total unemployment only.7 Programs include Puerto Rican sugarcane workers for initial claims and insured unemployment beginning July 1963.« Latest data available for all programs combined. Workers covered by State programs account for about 97 percent of

the total.Source: Department of Labor, Employment and Training Administration.

221

278-216 O - 79 - 15

TABLE B—34.—Wage and salary workers in nonagricultural establishments•, 1929-78

[Thousands of persons; monthly data seasonally adjusted]

Year ormonth

Totalwageand

salarywork-

ers

Manufacturing

TotalDura-

blegoods

Non-dura-

blegoods

Min-ing Con-

struc-tion

Trans-porta-tionandpub-

licutili-ties

Whole-saleand

retailtrade

Fi-nance,insur-ance,andreal

estate

Serv-ices

Government

Fed-eral

Stateandlocal

2,532

2,601

3,090

3,2063,3203,2703,1743,116

3,1373,3413,5823,7873,948

4,0984,0874,1884,3404,563

4,7275,0695,3995,6485,850

6,0836,3156,5506,8687,248

7,6968,2208,6729,1029,437

9,82310,18510,64911,06811,446

11,93712,13812,35212, 723

1929

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

1955195619571S581959

19601961196219631964

1965196619671968...1969

1970197119721973. __1974

197519761977.1978 v _

31,324

23,699

30,603

32,36136, 53940,10642, 43441,864

40,37441,65243,85744,86643, 754

45,19747,81948, 79350,20248, 990

50,64152,36952, 85351, 32453,268

54,18953,99955, 54956, 65358, 283

60,76563,90165,80367, 89270,384

70, 88071,21473,67576, 79078,265

76,94579,38282,25685,760

10,702

7,397

10, 278

10,98513,19215, 28017,60217,328

15, 52414,70315, 54515, 58214,441

15,24116,39316,63317,54916,314

16,88217,24417,17615,94516,675

16,79616,32616,85316,99517,274

18,06119,21319,44719,78120,167

19,36618,62319,15120,15420,077

18, 32318, 99719,64720, 331

4,715

5,3636,9688,82311,08410,856

9,0747,7428,3858,3267,489

8,0949,0899,34910,1109,129

9,5419,8339,8558,8299,373

9,4599,0709,4809,6169,816

10,40511,28211,43911,62611, 895

11, 20810, 63611,04911, 89111,925

10,68811, 07711, 57312,159

5,564

5,6226,2256,4586,5186,472

6,4506,9627,1597,2566,953

7,1477,3047,2847,4387,185

7,3417,4117,3217,1167,303

7,3377,2567,3737,3807,458

7,6567,9308,0078,1558,272

8,1587,9878,1028,2628,152

7,6357,9208,0748,172

1,087

744

854

925957992925892

836862955994930

901929898866791

792822828751732

712672650635634

632627613606619

623609628642697

752779809837

1,512

824

1,165

1,3111,8142,1981,5871,108

1,1471,6832,0092,1982,194

2,3642,6372,6682,6592,646

2,8393,0392,9622,8173,004

2,9262,8592,9483,0103,097

3,2323,3173,2483,3503,575

3,5883,7043,8894,0974,020

3,5253,5763,8334,213

3,916

2,672

2,936

3,0383,2743,4603,6473,829

3,9064,0614,1664,1894,001

4,0344,2264,2484,2904,084

4,1414,2444,2413,9764,011

4,0043,9033,9063,9033,951

4,0364,1584,2684,3184,442

4,5154,4764,5414,6564,725

4,5424,5824,6964,858

6,123

4,755

6,426

6,7507,2107,1186,9827,058

7,3148,3768,9559,2729,264

9,3869,74210,00410,24710, 235

10,53510,85810,88610,75011,127

11,39111,33711,56611,77812,160

12,71613,24513,60614,09914,705

15,04015,35215,94916,60716,987

17,06017,75518,49219, 392

1,494

1,280

1,447

1,4851,5251,5091,4811,461

1,4811,6751,7281,8001,828

1,8881,9562,0352,1112,200

2,2982,3892,4382,4812,549

2,6292,6882,7542,8302,911

2,9773,0583,1853,3373,512

3,6453,7723,9081,046, 148

^ 165i271t,452,676

3,425

2,861

3,502

3,6653,9054,0664,1304,145

4,2224,6975,0255,1815,240

5,3575,5475,6995,8355,969

6,2406,4976,7086,7657,087

7,3787,6207,9828,2778,660

9,0369,49810, 04510, 56711,169

11,54811,79712,27612,85713,441

13,89214, 55115,24915,976

533

565

905

9961,3402,2132,9052,928

2,8082,2541,8921,8631,908

1,9282,3022,4202,3052,188

2,1872,2092,2172,1912,233

2,2702,2792,3402,3582,348

2,3782,5642,7192,7372,758

2,7312,6962,6842,6632,724

2,7482,7332,7272,754

See next page for continuation of table.

222

TABLE B-34.—Wage and salary workers in nonagricultural establishments,1929-78—Continued

[Thousands of persons; monthly data seasonally adjusted]

Year ormonth

1976:Jan. . .Feb . . .Mar...Apr. . .May..June..

July...Aug.. .Sept . .Oct . . .Nov.. .Dec . . .

1977:Jan. . .Feb. . .Mar...Apr. . .May..June..

July...Aug.. .Sept . .Oct . . .Nov.. .Dec . . .

1978:Jan. . .Feb. . .Mar...Apr. . .May...June..

July...Aug.. .Sept...Oct. . . .NOVP. .Dec p . .

Totalwageand

salarywork-

ers

78,30578, 53078, 83179,16979,23679, 332

79,47879,59679,83679,80480,13380,306

80,48380,79681,26481, 65481,93482,277

82,45582,60382,97383,19983, 54983,719

83,87184,18884,72685,41885,61885,996

86,03386,14986,16386, 57387, 02087,270

Manufacturing

Total

18,70118,79918,90019,01519,00518,996

19,01319,02819,13619,02219,16019,190

19,28519, 34319,48119, 57519,64319,697

19,72219,69719,71519,76919,84919,984

20,06520,13920,23020,28220,29720, 316

20, 30220,27820,28620, 43620,60020, 724

Dura-ble

goods

10,81710,89010,97111, 04511,08711,092

11,10911,14011,19311,10211,22211,246

11,30811, 33611,44511,48711, 54111, 577

11,62311,62111,63711,69311, 74611, 851

11,91711,98612,04112,07612, 09312,109

12,13812,14612,16612, 30512,40912, 490

Non-dura-

blegoods

7,8847,9097,9297,9707,9187,904

7,9047,8887,9437,9207,9387,944

7,9778,0078,0368,0888,1028,120

8,0998,0768,0788,0768,1038,133

8,1488,1538,1898,2068,2048,207

8,1648,1328,1208,1318,1918,234

Min-ing

771771774774773777

785757790791793797

799807819825824835

810795830833840687

678684698867869879

882887887893902902

Con-struc-tion

3,5973,5763,5613,5863,5653,557

3,5723 5683,5633,5733,6013,592

3,5513,6543,7323,8053,8373,871

3,9023,8843,8963,9053,9283,955

3,9053,9013,9994,1644,1754,278

4,3174,2984,2984,3414,3684,413

Trans-porta-

tionand

pub-lic

utili-ties

4,5364,5464,5614,5684,5664,578

4,5904,5914,6024,5974,6094,636

4,6404,6524,6594,6734,6924,695

4,6984,6984,7274,7214,7364,749

4,7584,7824,8174,8474,8474,881

4,8274,8464,8554,9224,9454,965

Whole-saleand

retailtrade

17,41517, 51517, 59117,67617,74017,763

17,79717, 84817,90317,90517,93017,966

18,03018,12218, 22518,32518,39718,466

18,53118,60718,67218,73318,83018, 911

18,99119,07119,16919,25219, 33519,412

19,46919, 52319,54619,63219,69719,687

Fi-nance,insur-ance,andreal

estate

4,2144,2164,2294,2424,2484,264

4,2694,2744,2994,3154,3314,347

4,3644,3784,4034,4174,4264,443

4,4524,4684,4874,5084,5354,547

4,5634,5914,6054,6234,6374,670

4,6904,7074,7194,7374,7754,788

Serv-ices

14, 25314,29014,37014,45214,48314,544

14, 58914, 63414,67714,71414,77614,840

14,90314,94915,02515,09815,12315,187

15,22615,31515,44215, 51015, 56815,618

15, 59715,67015,77315, 86615,89615,963

15,98916,07416,12716,16916,26116,296

Government

Fed-eral

2,7492,7432,7352,7362,7322,728

2,7262,7292,7282,7272,7312,723

2,7222,7212,7282,7212,7252,735

2,7242,7302,7252,7282,7272,723

2,7362,7362,7392,7452,7532,772

2,7652,7652,7522,7602,7572,757

Stateandlocal

12,06912,07412,11012,12012,12412,125

12,13712,16712,13812,16012,20212,215

12,18912,17012,19212,21512,26712,348

12,39012,40912,47912,49212,53612, 545

12,57812,61412,69612,77212,80912,825

12,79212, 77112,69312, 68312,71512,738

Note—Data in Tables B-34 through B-36 are based on reports from employing establishments and relate to full- andpart-time wage and salary workers in nonagricultural establishments who worked during or received pay for any part ofthe pay period which includes the 12th of the month.

Not comparable with labor force data (Tables B-27 through B-32), which include proprietors, self-employed personsdomestic servants, and unpaid family workers; which count persons as employed when they are not at work because ofindustrial disputes, bad weather, etc., even if they are not paid for the time off; and which are based on a sample of theworking-age population, whereas the estimates in this table are based on reports from employing establishments.

For description and details of the various establishment data, see "Employment and Earnings."

Source: Department of Labor, Bureau of Labor Statistics.

223

TABLE B-35.—Average weekly hours and hourly earnings in selected private nonagriculturalindustries, 1947-78

[For production or nonsupervisory workers; monthly data seasonally adjusted]

Yearor

month

194719481949

1950 . .1951195219531954

19551956195719581959

I9601961196219631964

19651966196719681969

1970.1971197219731974

1975. .19761977..1978 v

1977: JanFeb.. .MarAprMayJune

JulyAugSeptOctNov. .Dec

1978: Jan.FebMar

May_"~..June

JulyAugSeptOctN O V P . . . .Dec*

Average weekly hours

Totalprivatenonag-ricul-tural i

40.340.039.4

39.839.939.939.639.1

39.639.338.838.539.0

38.638.638.738.838.7

38.838.638.037.837.7

37.136.937.036.936.5

36.136.136.035.8

35.836.136.136.136.136.0

36.035.935.936.136.035.9

35.535.736.036.135.935.9

35.935.835.835.935.835.8

Manu-factur-

ing

40.440.039.1

40.540.640.740.539.6

40.740.439.839.240.3

39.739.840.440.540.7

41.241.440.640.740.6

39.839.940.540.740.0

39.540.140.340.4

39.740.340.440.440.440.5

40.340.340.340.540.540.5

39.840.140.640.840.440.5

40.540.340.440.540.740.6

Con-struc-tion

38.238.137.7

37.438.138.937.937.2

37.137.537.036.837.0

36.736.937.037.337.2

37.437.737.737.337.9

37.337.236.536.836.6

36.436.836.536.7

35.437.337.037.036.836.4

36.536.136.236.336.436.2

34.335.636.937.336.637.3

37.337.137.036.936.736.9

Whole-saleand

retailtrade

40.540.440.5

40.540.540.039.539.5

39.439.138.738.638.8

38.638.338.238.138.0

37.737.136.636.135.7

35.335.134.934.634.2

33.933.733.332.8

33.333.433.433.333.433.2

33.333.233.233.433.133.1

32.732.733.033.032.932.8

32.932.832.832.932.832.7

Average gross hourly earningscurrent dollars

Totalprivate

non-agri-cul-

turali

$1.131,??5.?75

.335

.45

.52

.61

.65

.71

.80

.89

.952.02

2.092.142.222.282.36

2.462.562.682.853.04

3.233.453.703.944.24

4.534.865.245.68

5.075.105.145.185.205.23

5.275.275.315.365.395.41

5.465.495.545.615.625.66

5.715.735.775.825.865.90

Manu-factur-

ing

%\. 216.3?7.376

1.440.56.64.74.78

.85

.952.052.112.19

2.262.322.392.462.53

2.612.712.823.013.19

3.353.573.824.094.43

4.835.225.676.16

5.475.495.535.585.615.66

5.705.725.775.825.855.88

5.935.986.016.056.086.12

6.186.206.256.326.376.41

Con-struc-tion

$1,5401.7121.792

1.8632.022.132.282.39

2.452.572.712.822.93

3.083.203.313.413.55

3.703.894.114.414.79

5.245.696.066.416.81

7.317.708.098.62

7.997.978.018.038.038.09

8.088.118.158.198.208.24

8.308.358.478.478.598.65

8.668.728.758.778.838.89

Whole-saleand

retailtrade

$0.9401.0101.060

1.1001.181.231.301.35

1.401.471.541.601.66

1.711.761.831.891.97

2.042.142.252.412.56

2.722.883.053.233.48

3.733.974.274 66

4.144.164.194.224.244.26

4.294.304.334.364.394.42

4.514.504.554.604.604.63

4.674.704.734.774.814.83

Adjusted hourly earnings,total private nonagricultural 2

Index,1967=100

Cur-rentdol-lars

42.646.048.2

50.053.756.459.661.7

63.767.070.373.275.8

78.480.883.585.988.2

91.295.3

100.0106.2113.2

120.7129.2137.5146.0157.5

170.7183.0196.8212.6

191.1191.9193.0194.4195.5196.4

197.8198.3199.6201.5202.4203.5

206.0206.6208.3210.3211.0212.3

214.1214.6216.2218.0219.0220.2

1967dol-

lars 3

63.763.867.5

69.369.070.974.476.6

79.482.383.484.586.8

88.490.292.293.795.0

96.698.0

100.0101.9103.1

103.8106.5109.7109.7106.6

105.9107.3108.4

108.8108.2108.2108.1108.1108.0

108.4108.3108.6109.2109.3109.4

109.9109.5109.5109.6109.0108.7

109.0108.7108.7108.8108.7

Percentchangefroma year

earlier*

Cur-rentdol-lars

8 04.8

3.77.45.05.73.5

3.25.24.94.13.6

3.43.13.32.92.7

3.44.54.96.26.6

6.67.06.46.27.9

8.47.27.58 1

7.77.67.77.77.67.8

7.87.17.37.67.47.4

7.87.67.98.28.08.1

8.28.28.38.28.28.2

1967dol-lars

0.25.8

2.7—.42.84.93.0

3.73.71.31.32.7

1.82.02.21.61.4

1.71.42.01.91.2

.72.63.0.0

- 2 . 8

- . 71.31.0

2.41.51.2.9.8.9

1.0.4.6

1.0.6.6

1.01.11.21.4.9.6

.6

.4

.1- . 4- . 6

1 Also includes other private industry groups shown in Table B-34.2 Adjusted for overtime (in manufacturing only) and for interindustry employment shifts.3 Current dollar earnings index divided by the consumer price index (revised index for urban wage earners and clerical

workers used beginning 1978).* Monthly data are computed from indexes to two decimal places.Note-See Note,Table B-34.Source: Department of Labor, Bureau of Labor Statistics.

224

TABLE B-36.—Average weekly earnings in selected private nonagricultural industries, 1947-78

[For production or nonsupervisory workers; monthly data seasonally adjusted]

Year or month

194719481949

19501951195219531954..

195519561957-.19581959

1960-19611962.19631964

19651966196719681969

1970197119721973.1974

19751976.19771978*

1977: JanFebMarAprMayJune

JulyAugSeptOct.NovDec

1978: JanFebMarAprMayJune

JulyAugSept . . . .OctNov*Dec v

Average gross weekly earnings

Total privatenonagricultural i

Currentdollars

$45.5849.0050.24

53.1357.8660.6563.7664.52

67.7270.7473.3375.0878.78

80.6782.6085.9188.4691.33

95.4598.82

101.84107.73114.61

119.83127.31136.90145.39154.76

163.53175.45188.64203.34

181.51184.11185.55187.00187.72188.28

189.72189.19190.63193.50194.04194.22

193.83195.99199.44202.52201.76203.19

204.99205.13206.57208.94209.79211.22

1967dollars 2

$68.1367.9670.36

73.6974.3776.2979.6080.15

84.4486.9086.9986.7090.24

90.9592.1994.8296.4798.31

101.01101.67101.84103.39104.38

103.04104.95109.26109.23104.78

101.45102.90103.93

103.37103.84104.01103.95103.77103.56

104.01103.33103.72104.93104.77104.42

103.38103.86104.86105.59104.21104.04

104.43103.92103.91104.26104.11

Manu-facturing

$49.1353.0853.80

58.2863.3466.7570.4770.49

75.3078.7881.5982.7188.26

89.7292.3496.5699.63

102.97

107.53112.19114.49122.51129.51

133.33142.44154.71166.46177.20

190.79209.32228.50248.86

217.16221.25223.41225.43226.64229.23

229.71230.52232.53235.71236.93238.14

236.01239.80244.01246.84245.63247.86

250.29249.86252.50255.96259.26260.25

Con-struc-tion

Current dollars

$58.8365.2367.56

69.6876.9682.8686.4188.54

90.9096.38

100.27103.78108.41

113.04118.08122.47127.19132.06

138.38146.65154.95164.49181. 54

195.45211.67221.19235.89249.25

266.08283.36295.29316.35

282.85297.28296.37297.11295.50294.48

294.92292.77295.03297. 30298.48298.29

284.69297.26312.54315.93314.39322.65

323.02323.51323.75323.61324.06328.04

Wholesaleand retail

trade

$38.0740.8042.93

44.5547.7949.2051.3553.33

55.1657.4859.6061.7664.41

66.0167.4169.9172.0174.86

76.9179.3982.3587.0091.39

96.02101.09106.45111.76119.02

126.45133.79142.19152.85

137.86138.94139.95140.53141.62141.43

142.86142.76143.76145.62145.31146.30

147.48147.15150.15151.80151.34151.86

153.64154.16155.14156.93157.77157.94

Percent change from ayear earlier, total private

nonagricultural 3

Currentdollars

7.52.5

5.88.94.85.11.2

5.04.53.72.44.9

2.42.44.03.03.2

4.53.53.15.86.4

4.66.27.56.26.4

5.77.37.57.8

5.57.27.78.47.58.0

7.97.17.78.37.67.4

7.36.17.88.37.57.9

8.18.58.08.18.48.7

1967 dollars

- 0 23.5

4.7.9

2.64.3

5.42.9

- . 34.1

.81.42.91.71.9

2.7

.21.51.0

- 1 . 31.94.1

- . 0- 4 . 1

- 3 . 21.41.0

.41.21.31.5.7

1.0

1.1

1.11.7.8.5

.5- . 21.31.7.4.5

.3

.6

.2- . 6- . 4

1 Also includes other private industry groups shown in Table B-34.2 Earnings in current dollars divided by the consumer price index (revised index for urban wage earners and clerical

workers used beginning 1978).3 Based on unadjusted data.

Note.—See Note, Table B-34.

Source: Department of Labor, Bureau of Labor Statistics.

225

TABLE B-37.—Productivity and related data, private business economy, 1947-78

[1967=100; quarterly data seasonally adjusted]

Year or quarter

194719481949

1950..1951195219531954

19551956195719581959

I9601961196219631964

19651966196719681969

1970 . - .19711972 . .19731974 . .

1975197619771978 v

1976: 1IIIll .IV

1977: 1IIIII .IV

1978:1II .IllIV*

Output *

Privatebusi-ness

sector.

48.650.949.9

54.557.759.261.960.8

65.767.568.466.971.8

73.174.278.882.286.8

92.998.0

100.0105.1108.3

107.3110.3117.6124.5121.5

118.8126.5133.2139 0

125.0126.2127.1127.6

130.5132.5134.2135.5

135.3138.7139.7142.2

Non-farmbusi-ness

sector

47.549.648.7

53.356.758.560.859.6

64.666.567.565.971.1

72.273.378.181.686.4

92.698.1

100.0105.4108.6

107.4110.2117.8125.0121.9

118.8127.0133.6139 9

125.2126.9127.7128.1

131.0133.0134.6135.8

136.1139.8140.6143.0

Hours of allpersons3

Privatebusi-ness

sector

90.991.588.5

89 592.192 293.290.1

93.594 993.589.392.8

93.091.593.093.594.9

97.8100.1100.0101.8104.6

103.0102.4105.5109.6110.3

105.6108.7112.6117.1

108.3108.7108.5108.9

110.7112.9112.9113.9

115.0117.6117.4118.9

Non-farmbusi-ness

sector

79.180.477.3

79 883.584 386.483.5

87.089 188.785.088.8

89.388.390.291 293.2

96.699.8

100.0102.1105.5

104.2103.8107.0111.6112.4

107.5111.0115.4120.1

110.8110.9110.9111.5

113.3115.5115.8116.7

117.8120.6120.5121.9

Output perhour of all

persons

Privatebusi-ness

sector

53.555.656.5

60.962.764 266.467.5

70.371 173.174.977.4

78.681.184.788.091.5

95.098.0

100.0103.3103.5

104.2107.8111.4113.6110.1

112.4116.4118.2118.7

115.4116.1117.1117.2

117.9117.4118.9119.0

117.6118.0119.0119.6

Non-farmbusi-ness

sector

60.061.663.0

66.868.069.370.471.4

74.274.676.177.580.0

80.883.086.689.592.7

95.998.3

100.0103.2102.9

103.1106.3110.1112.0108.5

110.5114.4115.8116.5

113.0114.4115.2114.9

115.6115.2116.2116.4

115.5116.0116.6117.3

Compensationper hour *

Privatebusi-ness

sector

36.039.039.6

42.446.649.552.854.4

55.859.463.366.168.9

71.974.678.181.085.2

88.694.9

100.0107.6114.9

123.1131.4139.7151.1164.8

181.2197.0213.0232.9

190.9194.8199.3203.6

207.5210.5215.3218.8

225.2229.6235.4240.3

Non-farmbusi-ness

sector

38.441.642.9

45.449.352 155.056.7

58.762.365.868.371.0

74.176.679.782.586.3

89.394.8

100.0107.3114.1

121.7129.9138.3149.1162.7

178.8193.7209.3228.9

187.6191.7195.8199.9

203.9207.1211.2215.1

221.4225.8231.0236.1

Unit laborcost

Privatebusi-ness

sector

67.270.270.2

69 674.377 279.480.6

79.483 686.688.289.1

91.492.192.192.093.2

93.396.8

100.0104.1111.0

118.1122.0125.3133.1149.7

161.2169.3180.2196.3

165.4167.7170.1173.8

176.0179.3181.1183.9

191.4194.6197.8200.9

Non-farmbusi-ness

sector

63.967.668.1

67 972.675 178.179.4

79.183 486.588.288.7

91.792.392.092.193.1

93.296.4

100.0104.0110.9

118.1122.3125.6133.1150.0

161.8169.4180.8196.6

166.0167.5170.1173.9

176.4179.8181.7184.8

191.7194.7198.1201.3

Implicit pricedeflator

Privatebusi-ness

sector

65.270.769.9

70 976.077.577.978.6

79.882.284.986.488.2

89.489.990.791.592.7

94.297.2

100.0103.9108.8

113.9118.9123.1130.2143.0

157.4165.4174.9187.9

162.4164.5166.3168.5

170.6174.0176.3178.4

181.3186.6189.9193.4

Non-farmbusi-ness

sector

62.467.668.1

69 273.775 276.877.8

79.582 084.786.088.0

89.389.890.691.592.9

94.196.8

100.0104.010816

114.0119.1122.8127.9141.3

156.3164.8174.6186.8

161.8163.4165.7168.2

170.0173.6176.4178.1

180.6185.3188.9192.2

i Output refers to gross domestic product originating in the sector in 1972 dollars.» Hours of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based

primarily on establishment data.3 Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also

i ncludes an estimate of wages, salaries, and supplemental payments for the self-employed.< Current dollar gross domestic product divided by constant dollar gross domestic product.Source: Department of Labor, Bureau of Labor Statistics.

226

TABLE B-38.—Changes in productivity and related data, private business economy, 1948-78

[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]

Year or quarter

OutpuU

rivatebusi-ness

sector

Non-farmbusi-ness

sector

Hours ofall persons^

Privatebusi-ness

sector

Non-farmbusi-ness

sector

Output per hourof all persons

rivatebusi-ness

sector

Non-farmbusi-ness

sector

Compensationper hours

rivatebusi-ness

sector

Non-farmbusi-ness

sector

Unit laborcost

Privatebusi-ness

sector

Non-farmbusi-ness

sector

Privatebusi-ness

sector

Implicit pricedeflator <

Non-farmbusi-ness

sector

1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..

1965..1966..1967 _1968..1969..

1970..1971..1972..1973..1974..

1975.. .1976...1977...1978 P.

1976:1ItIllIV

1977:1IIIIIIV

1978: I.

ML.. .I V P

4.6-1 .8

9.25.92.54.6

-1 .7

8.02.81.3

-2 .27.3

1.81.56.24.45.6

7.05.52.05.13.0

- . 92.86.65.9

-2 .4

- 2 . 36.55.34.4

11.24.02.81.6

9.36.55.04.0

- . 610.53.07.1

4.4-1 .8

9.46.53.04.1

-2 .0

8.23.01.5

-2 .57.9

1.61.56.54.55.9

7.16.01.95.43.0

-1 .12.66.96.0

- 2 . 5

-2 .56.95.24.7

11.55.72.51.2

9.46.25.03.5

.711.6

2.17.1

0.7- 3 . 3

1.22.9

L0- 3 . 3

3.81.5

- 1 . 5- 4 . 5

3.9

- L 61.60.61.5

3.12.3

~L82.8

- 1 . 5- . 63.13.9.7

- 4 . 32.93.74.0

6.21.4

- . 81.6

6.68.3

- . 13.7

4.09.2

- . 45.0

1.7- 3 . 9

3.24.61.02.5

- 3 . 4

4.12.5

- . 5- 4 . 1

4.4

.6-1 .2

2.11.12.3

3.63.3.2

2.13.3

-1 .2- . 43.24.2.7

- 4 . 33.33.94.1

7.5.7

- . 22.1

6.87.71.33.0

3.99.8

4! 7

3.81.6

7.92.82.43.61.6

4.11.32.82.53.2

1.63.14.53.84.0

3.83.22.03.3.2

.73.43.41.9

-3 .0

2.13.51.6.4

4.72.63.6.1

2.5-1 .7

5.1.4

-4 .51.23.52.1

2.72.2

6.01.81.91.51.4

4.0.5

2.01.83.3

1.02.74.33.43.6

3.42.61.73.2

- . 3

.13.13.61.7

- 3 . 1

1.93.51.3.6

3.75.02.7

- . 9

2.4-1 .4

3.7.5

- 3 . 11.72.32.3

8.41.7

7.09.86.46.53.2

2.56.56.54.44.3

4.23.94.63.75.3

4.07.15.47.66.8

7.16.76.38.29.1

9.98.78.19.3

9.08.49.68.9

7.95.89.56.7

12.18.1

10.48.7

8.53.1

5.78.75.55.73.1

3.66.05.73.84.0

4.43.34.03.54.6

3.56.15.57.36.4

6.66.76.57.89.1

9.98 48.19.4

7.59.09.08.5

8.36.58.17.6

12.28.29.69.1

4.5.1

- . 96.83.92.81.5

- 1 . 55.23.61.91.0

2.6.7

0

.23.83.34.16.6

6.43.32.86.2

12.5

7.75.06.48.9

4.15.75.88.8

5.37.64.26.3

17.46.86.76.5

5.7

- . 36.83.54.01.6

- . 45.53.62.0.7

3.4.6

- . 3.1

1.0

3.'53.84.06.6

6.53.52.76.0

12.6

7.84.76.78.8

3.73.86.29.5

5.88.04.27.1

15.76.47.16.7

8.4- 1 . 1

1.57.31.9.6.9

1.53.03.21.92.0

1.4.6.9.9

1.4

1.63.22.93.94.7

4.74.43.65.89.8

10.15.15.77.5

3.25.24.45.4

5.28.25.24.9

6.712.17.37.7

8.3.8

1.66.52.12.11.3

2.13.23.31.52.4

1.4.6.8

1.01.5

1.32.93.34.04.5

4.94.53.14.1

10.5

10.65.45.97.0

4.94.15.86.1

4.48.76.54.0

5.810.88.17.1

1 Output refers to gross domestic product originating in the sector in 1972 dollars.2 H ours of all persons engaged in the sector, including hours of proprietors and unpaid family workers. Estimates based

pri marily on establishment data.3 Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Also

inc ludes an estimate of wages, salaries, and supplemental payments for the self-employed.* Current dollar gross domestic product divided by constant dollar gross domestic product.

Note.—Percent changes are based on original data and therefore may differ slightly from percent changes based onindexes in Table B-37.

Source: Department of Labor, Bureau of Labor Statistics.

227

PRODUCTION AND BUSINESS ACTIVITYTABLE B-39.—Industrial production indexes, major industry divisions, 1929-78

[1967=100; monthly data seasonally adjusted]

Year or month

1967 proportion _

192919331939

1940194119421943194419451946194719481949

19501951195219531954""" ._19551956 ._ . .1957 . -_19581959

19601961196219631964196519661967 __ _19681969 .

197019711972197319741975 ___ „19761977.19781

1977: JanFebMar . .AprMayJune

JulyAug.. __SeptOct _ . _ „Nov.Dec

1978: JanFebMarAprMayJ u n e " " : " " . : : : ' : : " " : :

JulyAugSeptSet — : ::Nov» _-Dec »

Totalindustrialproduction

100.00

21.613.721.7

25.031.636.344.047.440.735.039.441.138.8

44.948.750.654.851.958.561.161.957.964.8

66.266.772.276.581.789.897.8

100.0106.3111.1107.8109.6119.7129.8129.3117.8129.8137.1145.1

132.3133.2135.3136.1137.0137.8

138.7138.1138.5138.9139.3139.7

138.8139.2140.9143.2143.9144.9

146.1147.1147.8148.6149.5150.4

Total

87.95

22.814.021.5

25.432.437.847.050.942.635.339.440.938.7

45.048.650.655.251.558.260.561.257.064.2

65.465.671.575.881.089.797.9

100.0106.4111.0106.4108.2118.9129.8129.4116.3129.5137.1145.5

131.6132.6135.1135.8137.1137.8

138.5138.6139.0139.4139.9140.5

138.7139.4141.4143.5144.3145.5

146.7147.6148.7149.4150.3151.2

Manufacturing

Durable

51.98

22.59.1

17.7

23.531.439.954.259.945.231.637.739.335.7

43.548.951.958.751.859.261.161.653.961.9

62.961.868.673.178.389.098.9

100.0106.5110.6102.3102.4113.7127.1125.7109.3121.7129.5139.2

123.4124.0126.8128.0129.3130.5

131.6131.3131.7132.4132.7133.4

131.1131.5134.4136.9137.6139.0

141.1142.2142.8143.9145.0145.9

5

Nondurable

35.97

23.219.926.1

27.533.334.637.138.638.539.741.342.742.0

46.748.349.251.251.657.260.161.161.667.7

69.371.575.880.085.290i996.7

100.0106.2111.5112.3116.6126.5133.8134.6126.4140.9148.1154.7

143.4145.3147.0147.0148.5148.4

148.6149.4149.5149.6150.1150.9

149.8150.6151.4153.2154.0154.9

155.0155.6157.1157.5158.1158.9

Mining

6.36

43.130.642.1

46.849.751.352.556.255.154.261.364.457.1

63.870.069.471.269.977.982.082 175.378.7

80.380.883.186.489.993.298.2

100.0104.2108.3112.2109.8113.1114.7115.3112.8114.2117.8124.2

112.8116.3120.6119.2119.5122.8

119.8115.4118.0119.6118.8113.4

115.0114.4119.3127.2126.7128.0

127.1126.0124.1127.7127.9128.0

Utilities

5.69

7.46 7

10.7

11.813.314.916.517 517.818.620.122.423.9

27.231.033.736.539.343.948.251.553.959.3

63.467.072.077.083.688.795.5

100.0108.4117.3124.5130.5139.4145.4143.7146.0151.0156.5161.0

163.8160.3154.8154.0156.7156.8

161.4155.7154.1154.0154.2156.7

162.3163.5159.5156.0157.0158.6

159.9160.8162.3162.4162.6163.3

1 Preliminary estimates by Council of Economic Advisers.Source: Board of Governors of the Federal Reserve System, except as noted.

228

TABLE R-40.—Industrial production indexes, market groupings, 1947-78

(1967=100; monthly data seasonally adjusted]

Year ormonth

Totalindus-trialpro-duc-tion

Final products

Total

Consumer goodsl

TotalAuto-motiveprod-ucts

Homegoods

Equipment 2

Total Busi-ness

Inter-mediate

prod-ucts

Materials»

TotalDura-

blegoods

Non-dura-

blegoods

1967 pro-portion. __

1947..1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..

1965..1966..1967..1968.1969.,

1970.1971.1972.1973.1974.

1975.1976.1977.

1977: Jan.Feb..Mar.Apr..May.June.

July..Aug..Sept.Oct..Nov.Dec..

1978: Jan..Feb..Mar.Apr..{/fay.June.

July..Aug..Sept..Oct...Now.Dec

100.00

39.441.138.8

44.948.750.654.851.9

58.561.161.957.964.8

66.266.772.276.581.7

89.897.8

100.0106.3111.1

107.8109.6119.7129.8129.3

117.8129.8137.1

132.3133.2135.3136.1137.0137.8

138.7138.1138.5138.9139.3139.7

138.8139.2140.9143.2143.9144.9

146.1147.1147.8148.6149.5150.

47.82 27.68 2.83 5.06 20.14 12.63 12.89 39.29 20.35

38.640.038.8

43.747.250.754.151.3

55.458.660.357.663.2

65.365.871.475.579.7

87.695.9

100.0106.2109.6

105.3106.3115.7124.4125.1

118.2127.2134.9

130.8131.6133.3134.1134.7135.4

136.8136.3136.8136.5137.0137.6

134.9136.4138.9140.5140.5141.1

142.2143.3143.7143.9144.8145.6

42.443.743.4

49.649.150.253.252.9

59.061.262.662.168.1

70.772.277.181.3

92.697.3

100.0105.9109.8

109.0114.7124.4131.5128.9

124.0136.2143.4

139.9140.5142.9142.9143.1143.8

145.4144.7144.9144.9145.2145.8

141.8143.8145.9147.5147.0147.0

147.7148.4149.0149.1149.8150.5

45.347.447.0

59.152.347.159.555.4

73.660.663.550.563.3

72.566.180.187.791.9

113.3112.8100.0119.4118.1

124.4141.4153.0132.8

125.8154.8174.2

164.2161.7178.3173.9172.8179.8

184.8177.2177.0179.4173.6172.4

157.5162.8175.8184.3180.0179.9

182.2182.1178.3186.2189.6186.3

37.539.136.2

49.943.043.048.644.9

53.055.754.551.459.0

59.461.366.571.878.4

88.997.9

100.0106.4113.2

110.2115.6129.5142.5136.8

118.8133.9141.3

134.8137.3137.9138.8140.6142.3

142.9142.1143.6144.2145.0146.6

140.3144.6147.2149.2148.9149.7

148.9150.0150.2148.5147.6149.6

30.632.228.7

31.143.351.956.349.3

50.455.357.551.556.5

58.157.363.767.571.4

80.794.0

100.0106.5109.3

100.194.7

103.8114.5120.0

110.2114.6123.2

118.4119.2120.0122.1123.2124.1

124.8124.9125.6125.0125.8126.2

125.4126.2129.1130.8131.6133.0

134.7136.3136.4136.9137."138.8

38.039.534.5

37.045.251.253.346.8

50.858.861.151.557.9

59.457.762.765.873.7

84.497.7

100.0105.5112.5

107.0104.1118.0134.2142.4

128.2136.3149.2

142.3143.5144.8147.1148.9150.1

151.2151.1152.1152.6153.5154.0

152.6154.2157.4159.3160.2161.8

163.8165.4165.8166.9167.9169.3

41.944.342.0

48.851.350.954.554.3

61.764.464.463.069.5

70.071.475.779.985.2

90.696.2

100.0106.3112.9

112.9116.7126.5137.2135.3

123.1137.2145.1

142.2141.6141.8142.3143.5144.7

146.3146.1146.5147.8148.4150.4

151.6151.4151.4152.1152.6154.7

155.6156.4157.0158.1159.160.5

39.541.237.6

45.049.850.556.151.8

61.362.862.856.565.2

66.166.272.176.782.9

92.4100.7100.0106.5112.5

109.2111.3122.3133.9132.4

115.5130.6136.9

131.1132.7135.5136.5137.8138.7

138.9137.6137.9138.9139.0138.8

139.2138.6139.9143.7145.1146.4

147.9148.6149."151.3152.2152.9

38.339.435.3

44.450.551.660.352.0

63.763.963.853.764.0

64.863.370.475.181.9

93.8103.3100.0106.2112.1

103.8104.9117.7134.6132.7

109.1126.8134.5

127.4128.4131.9133.8135.2136.4

136.8135.4135.7137.1137.2138.7

138.2137.0138.6142.7143.9145.4

148.7150.4152.1153.7154.6155.8

10.47

45.9

52.554.954.754.462.1

63.265.871.375.682.2

90.397.5

100.0108.8115.7

115.4120.2132.9142.2142.6

126.6146.3153.5

144.8150.4153.3153.7155.4154.7

154.1155.1153.9154.4155.4155.3

155.0158.5160.5162.0163.5164.1

162.5162.7164.4165.4166.5166.8

1 Also includes clothing and consumer staples, not shown separately.* Also includes defense and space equipment, not shown separately.1 Also includes energy materials, not shown separately.

Source: Board of Governors of the Federal Reserve System.

229

TABLE B-41.-—Industrial production indexes, selected manufactures, 1947-78

(1967= 100; monthly data seasonally adjusted]

Yearor

month

1967 proportion.

194719481949

19501951195219531954

19551956 .195719581959

19601961196219631964

19651966196719681969

19701971 —197219731974

19751976 „ __1977

1977: Jan.FebMarAprMayJune

JulyAug.SeptOctNovDec

1978: JanFebMar.. . .

May'.IIIIJune

J u l y . . . . .AugS e p t . . . .OctNov P . . . .Dec P . . . .

Durable manufactures

Primary metals

Total

6.57

63.365.855.4

69.775.869.278.563.5

82.582.078.562.372.7

72.471.176.382.392.8

102.1108.4100.0104.3113.8

106.6100.2112.1126.7123.1

96.4108.9110.2

100.8100.2108.3112.2117 1114.7

114.4112.5109.0113.5111.2111.0

107.4106.2106.1114.3115.5117.5

123.0126.0127.9128.4128.9129.3

Ironandsteel

4.21

70.1

93.291.588.266.576.5

77.774.277.384.395.9

105.2108.4100.0103.2112.6

104.796.1

107.1122.3119.8

95.8104.9103.4

89.791.397.9

103.9111.0109.2

110.9110.6104.6107.7104.3103.8

99.596.396.4

109.0110.5114.5

119.0120.9123.2123.8123.9

Fabri-catedmetalprod-ucts

5.93

49.950.845.8

56.159.958.566.059.4

67.868.870.663.371.0

71.169.475.477.882.6

90.897.2

100.0105.6107.9

102.4103.5112.1124.7124.2

109.9123.3130.9

125.7125.8127.5127.6128 2130.8

132.0134.0133.6133 8135.8136.4

136.9136.9138.1139.5140.4142.3

144.0145.8146.3146.3146 8147.9

Non-elec-tricalma-

chin-ery

9.15

39.039.233.4

37.547.751.954.046.1

50.658.057.948.656.7

56.955.462.166.375.6

85.098.8

100.0101.8109.3

104.4100.2116.0133.7140.1

125.1135.0144.8

139.9139.8139.8142.9142 6144.0

145.7145.2147.4148.9149.7151.7

150.1150.1151.5152.2152.9154.6

156.1157.3158.7159.8160.7162.2

Elec-tricalma-

chin-ery

8.05

22.223.021.6

29.629.834.039.034.7

39.943.142.839.247.6

51.654.862.964.768.4

81.797.9

100.0105.5111.9

108.1107.7122.2143.1143.8

116.5131.6141.9

134.0137.6137.6139.6141.8142.6

143.6143.9144.6144 2146.0147.3

144.0146.4149.5152.3152.9154.1

157.9156.9158.3157.9159 2160.9

Transportationequipment

Total

9.27

31.834.834.9

41.846.654.268.059.2

68.066.070.755.863.2

65.461.571.178.080.0

95.1102.0100.0111.1108.4

89.597.9

108.2118.3108.7

97.4110.6121.1

113.5113.4120.5119.8120.3123.7

125.6124.3125.5124.3122.0122.2

116.2118.4126.5130.5130.1130.4

132.1133.4132.8136.9139 3138.6

Motorve-

hiclesand

parts

4.50

60.5

81.265.869.051.066.2

74.765.579.888.390.7

115.9113.9100.0120.3116.5

92.3118.6135.8148.8128.2

111.1140.7159.7

145.5145.4161.2158.1157.7163.2

166.2164.4165.6168.4163.0161.8

146.6153.1165.1171.7168.3167.7

169.7171.0168.9177.1181 3178.5

Lum-berand

prod-ucts

1.64

58.961.354.1

65.765.564.768.468.0

75.975.068.869.979.3

74.778.282.586.392.7

96.3100.0100.0105.5107.9

105.6113.8120.8126.0116.2

107.6125.1133.4

132.7132.2132.1130.6133.0132.4

132.9131.8137.1135.7137.5138.1

138.5135.5136.5136.9136.5138.7

138.1136.9139.2140.2141.6

Nondurable manufactures

AnAp-parelprod-ucts

3.31

57.860.359.7

64.363.166.367.266.4

73.375.074.972.880.1

81.782.285.589.192.2

97.499.9

100.0102.9106.7

101.4104.7109.4117.3114.3

107.6122.2124.2

123.0124.4122.2121.4123.5122.1

121.1124.1127.7129.0125.1125.8

118.6121.1122.8126.1125.8126.8

124.5127.2130.9130.6

Print-ingandpub-

lishing

4.72

43.345.446.6

48.949.749.752.054.1

59.563.265.463.968.2

71.071.373.977.882.6

87.994.6

100.0103.2107.4

107.0107.1112.7118.2118.2

113.3120.6124.7

124.7122.4124.8123.4124.4124.1

124.9125.0124.2125.7126.2127.5

129.9128.3129.1128.6128.2128.7

130.3129.5131.0130.3131.9132.9

Chem-icalsand

prod-ucts

7.74

19.721.321.0

26.229.731.133.634.1

39.842.745.246.654.3

56.459.265.771.878.8

87.895.7

100.0109.5118.4

120.4125.9143.6154.5159.4

147.2169.3180.7

172.2174.9180.0180.6182.8183.5

182.6182.6181.3182.3183.1183.0

184.4183.7185.2185.5188.1191.1

192.3192.2194.2195.8196.8

Foods

8.75

55.855.255.9

57.959.060.261.462.7

66.370.171.172.976.5

78.680.983.486.490.4

92.496.0

100.0102.6106.1

108.9112.8116.8120.9124.0

123.4132.3137.9

134.2136.4138.7138.0138.3136.9

138.3139.3138.3137.3139.4140.4

139.3140.8141.1143.1142.8141.8

142.9144.0144.4143.5144.1

Source: Board of Governors of the Federal Reserve System.

230

TABLE B-42.—Capacity utilization rate in manufacturing, 1948—78[Percent; quarterly data seasonally adjusted]

Year orquarter

FRB series *

Totalmanu-fac-

turing

Primaryproc-essing

Ad-vanced

proc-essing

Commerce series *

Totalmanu-

fac-turing

Dur-able

goods

Non-dur-able

goods

Pri-mary-proc-essedgoods

Ad-vanced

proc-essedgoods

Wharton series»

Totalmanu-

fac-turing

Dur-able

goods

Non-dur-able

goods

19481949

19501951195219531 9 5 4 . . . .

1955195619571 9 5 8 . . . .1 9 5 9 . . . .

19601961. . ._196219631964

19651966196719681969

19701971197219731974

1975197619771978 P . . .

1973: I

III."IV..

1974: I

IV....

1975: I

III."!IV...

1976: I . . . .I I . . .M L .I V . .

1977: I . . . .I I . . .I I I . .I V . .

1978: L . _ .II —I I I . .

82.574.2

85.885.489.280.1

87.086.183.675.081.6

80.177.381.483.585.7

89.591.186.987.086.2

79.278.083.187.584.2

73.680.282.484.2

87.187.687.887.7

85.785.885.579.7

70.971.375.376.9

79.180.380.880.6

81.282.783.082.9

82.184.085.085.7

87.376.2

88.590.284.989.480.6

92.089.484.775.483.0

79.877.981.583.887.8

91.091.485.787.688.6

82.882.088.092.487.7

73.882.284.386.6

91.892.192.793.0

90.690.189.380.7

69.970.476.378.6

81.082.583.182.2

82.385.184.984.6

83.886.387.8

80.073.2

79.883.485.989.380.0

84.284.483.174.981.1

80.577.281.683.484.6

88.991.187.686.885.0

77.375.980.584.982.2

73.579.181.582.9

84.585.285.085.0

83.083.383.579.1

71.371.974.875.9

78.079.179.579.7

80.581.481.982.0

81.182.783.584.2

88.990.388.492.482.9

91.490.887.977.584.0

82.179.182.584.086.8

92.496.693.595.095.2

87.886.491.897.192.9

80.487.490.192.8

96.497.197.497.4

94.694.794.587.8

77.377.982.383.9

86.387.888.187.6

88.390.290.891.0

90.092.593.894.8

83.887.286.093.379.5

90.289.086.070.878.6

77.072.977.779.682.8

90.696.091.893.794.0

84.282.388.996.691.9

77.184.788.292.0

95.496.497.197.4

93.393.593.886.9

74.874.778.880.0

82.785.186.085.0

85.688.389.289.6

88.491.593.494.6

96.194.891.891.287.7

93.193.490.887.492.0

89.888.589.890.792.8

95.397.596.097.097.1

93.492.896.297.994.5

85.792.093.394.2

98.098.397.797.5

96.796.795.689.1

81.383.188.190.4

92.192.391.691.9

92.993.693.593.4

92.994.294.495.1

1 For description of the series, see "Federal Reserve Measures of Capacity and Capacity Utilization," February 1978.2 Quarterly data are for last month in quarter. Annual data are averages of the four indexes, except for 1965 (December

index) and 1966-67 (averages of June and December indexes). For description of the series, see "Survey of Current Busi-ness," July 1974.

3 Annual data are averages of quarterly indexes. For description of the series, see F. Gerard Adams and Robert Summers,"The Wharton Index of Capacity Utilization: A Ten Year Perspective," 1973 Proceedings of the Business and EconomicStatistics Section, American Statistical Association.

Sources: Board of Governors of the Federal Reserve System, Department of Commerce (Bureau of Economic Analysis),and Wharton School of Finance.

231

TABLE B-43.—New construction activity, 1929-78

[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]

Year or month

1929._

1933

1939

194019411942 .1943 . . .1944

19451946 . . .

New series

1947..L948L949

19501951. ._ " . .1952 . .1 9 5 3 . . .1954

1955 . .19561957 . .1 9 5 8 . . .1959

I 9 6 0 . . .19611962 _19631964

1965196619671968 .1969

19701971 .19721973 . .1974

197519761977

Totalnewcon-

struc-tion

10.8

2.9

8.2

8.712.014.18.35.3

5.814.3

20.026.126.7

33.635.436.839.141.4

46.547.649.150.055.4

54.756.460.264.867.7

73.776 478.187.193.9

94.9110.0124.1137.9138.5

134.5148.8172.6

Private construction

Total

8.3

1.2

4.4

5.16.23.42.02.2

3.412.1

16.721.420.5

26.726.226.027.929.7

34.834.935.134.639.3

38.939.342.345.547.3

51.752.452.559.566.0

66.880.193.9

105.4100.2

93.7110.5134.7

Residentialbuildingsl

Total *

3.6

.5

2.7

3.03.51.7.9.8

1.36.2

9.913.112.4

18.115.915.816.618.2

21.920.219.019.824.3

23.023.125.227.928.0

27.925.725.630.633.2

31.943.354.359.750.4

46.560.581.0

Newhous-

ingunits

3.0

.3

2.3

2.63.01.4

.6

.74.8

7.810.510.0

15.613.212.913.414.9

18.216.114.715.419.2

17.317.119.421.721.8

21.719.419.024.025.9

24.335.144.950.140.6

34.447.365.7

Nonresidential buildings and otherconstruction *

Total

4.7

.8

1.7

2.12.71.71.11.4

2.15.8

6.98.28.0

8.610.310.211.311.5

12.914.716.114.815.1

15.916.217.217.619.3

23.826.727.028.932.8

34.936.839.645.749.8

47.249.953.8

Com-mer-cial

1.1

.1

.3

.3

.4

.2

.0

.1

.21.2

1.01.41.2

1.41.51.11.82.2

3.23.63.63.63.9

4.24.75.15.05.4

7.89.4

9.811.613.515.515.9

12.812.814.8

In-dus-trial

0.9

.2

.3

.4

.8

.3

.2

.2

.61.7

1.71.41.0

1.12.12.32.22.0

2.43.13.62.42.1

2.92.82.82.93.6

6.06.8

6.55.44.76.27.9

8.07.27.7

Other*

2.6

.5

1.2

1.31.51.2.9

1.1

1.33.0

4.25.55.9

6.16.76.87.37.2

7.38.09.08.89.0

8.98.79.29.7

10.3

15.116.6

18.619.821.524.025.9

26.430.031.3

Public construction

Total

2.5

1.6

3.8

3.65.8

10.76.33.1

2.42.2

3.34.76.3

6.99.3

10.811.211.7

11.712.714.115.516.1

15.917.117.919.420.4

22.124.025.527.628.0

28.129.930.232.538.3

40.938.337.8

Fed-eral

0.2

.5

.8

1.23.89.35.62.5

1.7.9

.81.21.5

1.63.04.24.13.4

2.82.73.03.43.7

3.63.93.94.03.9

4.04.03.53.43.3

3.34.04.44.95.3

6.36.87.4

Stateand

local*

2.3

1.1

3.1

2.42.01 3.7.6

.71.4

2.53.54.8

5.26.36.67.18.3

8.910.011.112.112.3

12.213.314.015.416.5

18.020.022.124.224.7

24.825.925.827.733.0

34.631.630.4

See next page for continuation of table.

232

T A B L E B-43.—New construction activity, 1929-78— Continued

[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]

Year or month

1977: JanF e b . . -M a r -A p r - . . .M a y -J u n e . . .

July—

SeptOctNov."'"Dec...

1978: Jan....Feb...M a r . . .

May"."-".J u n e . . .

July—Aug.._Sept-O c t —Nov*._

Totalnewcon-

struc-tion

152.5160.1165.3169.3173.4175.8

176.4176.4177.8176.7178.1179.0

171.4177.6185.4195.0201.3206.3

210.2208.7209.2209.9212.8

Private construction

Total

118.6123.6128.1131.8134.6136.6

137.3137.6138.3139.2140.6142.3

134.9141.9147.7153.5156.2161.1

161.8160.6161.3161.9165.5

Residentialbuildings i

Total s

67.071.975.879.081.982.6

82.982.983.084.285.287.4

79.485.388.192.294.395.4

95.995.094.293.695.8

NewFinitenous-ing

units

52.558.161.563.565.966.6

67.167.167.669.370.772.8

65.070.972.574.475.176.6

77.777.176.876.979.3

Nonresidential buildings and other

Total

51.751.752.252.852.753.9

54.454.755.455.055.454.9

55.656.659.661.361.965.7

65.965.667.068.369.7

construction i

Com-mer-cials

12.812.813.413.814.015.2

15.715.716.215.915.914.9

15.015.216.217.218.519.2

19.518.818.919.420.4

In-dus-trial

7.16.87.37.67.57.6

7.78.18.18.28.47.9

7.47.79.29.28.7

11.3

11.212.012.612.612.7

Other*

31.832.031.531.431.231.2

31.030.931.230.931.132.1

33.233.834.134.934.635.1

35.334.735.436.336.6

Public construction

Total

33.836.437.337.538.839.2

39.138.839.437.437.436.8

36.435.737.741.545.145.2

48.448.248.047.947.3

Fed-eral

7.37.67.47.57.46.7

8.07.98.66.67.37.3

8.18.18.08.57.87.4

9.49.69.87.78.5

Stateand

locals

26.528.829.930.031.432.5

31.130.930.830.830.129.4

28.327.629.633.137.337.8

39.038.538.240.238.8

1 Beginning I960, farm residential buildings included in residential buildings; prior to 1960, included in nonresidentialbuildings and other construction.

2 Total includes additions and alterations and nonhousekeeping units, not shown separately.3 Office buildings, warehouses, stores, restaurants, garages, etc.* Religious, educational, hospital and institutional, miscellaneous nonresidential, farm (see also footnote 1), public

utilities, and all other private.« Includes Federal grants-in-aid for State and local projects.

Source: Department of Commerce (Bureau of the Census).

233

TABLE B-44.—New housing units started and authorized, 1959-78

[Thousands of units]

Year or month

New housing units started

Private andpublic »

Total(farmandnon-

farm)

Non-farm

Private»

Total (farm and nonfarm)

Total

Type of structure

Oneunit

2 to 4units

5 unitsor

more

New private housing unitsauthorized»

Total

Type of structure

Oneunit

2 to 4units

5 unitsor more

1959

I9601961196219631964

19651966196719681969

19701971197219731974

1975197619771978

1977: JanFebMar....AprMay.June

JulyAug..SeptOct....NovDec.

1978: JanFebMar

May.".".""""June

JulyAugSeptOctN O V PDec*

1,553.7

1,296.11,365.01,492.51,634.91,561.0

1,509.71,195.81,321.91 545.41,499.5

1,469.02,084.52,378.52,057.51,352.5

1,171.41, 547.61,989.82,021.5

81.5112.7173.6182.4201.3197.8

189.8194.2177.8193.2155.9129.4

88.6101.3172.3197.5211.1216.1

192.3190.9181.1192.1157.7120.5

1,531.3

1,274.01,336.81,468.71,614.81,534.0

1,487.51,172.81,298.81,521.41,482.3

1,517.0

1,252.21,313.01,462.91,603.21,528.8

1,472.81,164.91,291.61, 507.61,466.8

1,433.62,052.22,356.62,045.31,337.7

1,160.41, 537.51,987.12,018.5

1,234.0

994.7974.3991.4

1,012.4970.5

963.7778.6843.9899.4810.6

812.91,151.01,309.21,132.0

888.1

892.21,162.41,450.91,432.7

283.0

257.4338.7471.5590.8

108.4 450.0

86.661.171.680.985.0

84.8120.3141.3118.368.1

64.085.9

121.7125.7

422.5325.1376.1527.3571.2

535.9780.9906.2795.0381.6

204.3289.2414.4460.2

1,208.3

998.01,064.21,186.61,334.71,285.8

1,239.8971.9

1,141.01,353.41,323.7

1,351.51,924.62,218.91, 819.51,074.4

939.21,296.21,690.01,658.4

938.3

746.1722.8716.2750.2720.1

709.9563.2650.6694.7625.9

646.8906.1

1, 033.1882.1643.8

675.5893.6

1,126.11,077.6

77.1

64.667.687.1

118.9100.8

84.861.073.084.385.2

88.1132.9148.6117.064.3

63.993.1

121.3124.0

192.9

187.4273.8383.3465.6464.9

445.1347.7417.5574.4612.7

616.7885.7

1,037.2820.5366.2

199.8309.5442.7456.8

Seasonally adjusted annual rates

1,3931,7512,0901,8991,9821,931

2,0722,0382,0122,1392,0962,203

1,5481,5692,0472,1652,0542,124

2,1192,0252,0752,1062,1552,125

1,0111,3621,4891,4331,4691,406

1,4531,4541,5081,5321,5441,574

1,1561,1031,4291,4921,4781,441

1,4531,4401,4631,4551,5581,533

104116114118120113

124119124127134153

1017912614289148

135139111139156133

278273487348393412

495465380480418476

291387492531487535

531446501512441459

,4541,5381,6631,6551,6561,739

1,6781,7701,6951,7811,8221,778

1,5261,5341,6471,7401,597L,821

1,632L, 5631,7311,7191,7241,680

9911,0591,138L.0881,0991,114

1,1141,1481,1391,1861,2181,188

1,032957

1,0371,1571,0581,123

1,0351,0201,0921,1271,1141,158

116113113113112119

120136123129144122

101107127117112156

107125125133131148

347366412454445506

444486433466460468

393470483466427542

490418514459479374

1 Units in structures built by private developers for sale upon completion to local public housing authorities under theDepartment of Housing and Urban Development "Turnkey" program are classified as private housing. Military housingstarts, including those financed with mortgages insured by FHA under Section 803 of the National Housing Act, are includedin publicly owned starts and excluded from total private starts.

2 Authorized by issuance of local building permit: in 14,000 permit-issuing places beginning 1972; 13,000 for 1967-71;12,000 for 1963-66; and 10,000 prior to 1963.

3 Not available separately beginning January 1970.

Note.—Only the series on private and public nonfarm housing units started is available prior to 1959. See 1976 "Eco-nomic Report" for this earlier series.

Source: Department of Commerce, Bureau of the Census.

234

TABLE B-45.-—Business expenditures for new plant and equipment, 1947-79 1

[Billions of dollars; quarterly data at seasonally adjusted annual rates|

Yearor quarter Total

Manufacturing Nonmanufacturing

TotalDura-

blegoods

Non-durablegoods

Total Mining

Transportation

Rail-road Air Other

Publicutili-ties

Com-muni-cation

Com-mer-cialand

others

194719481949

19501951195219531954

19551956195719581959

196019611962 „19631964

19651966196719681969

19701971197219731974

19751976 _.1977.1978319793

1976: l___.II...III...IV...

1977: l____II...III...IV...

1978: I....II...III...IV 3..

1979: 13...II3--

19.3321.3018.98

20.2125.4626.4328.2027.19

29.5335.7337.9431.8933.55

36.7535.9138.3940.7746.97

54.4263.5165.4767.7675.56

79.7181.2188.4499.74

112.40

112.78120.49135.80153.09170.20

114.72118.12122.55125.22

130.16134.24140.38138.11

144.25150.76155.41161.24

163.34167.82

8.449.017.12

7.3910.7111.4511.8611.24

11.8915.4016.5112.3812.77

15.0914.3315.0616.2219.34

23.4428.2028.5128.3731.68

31.9529.9931.3538.0146.01

47.9552.4860.1667.6576.99

49.2150.6454.7854.44

56.4359.4663.0261.41

61.5767.2067.7573.20

73.0276.28

3.253.302.45

2.944.825.215.314.91

5.417.457.845.615.81

7.236.316.797.539.28

11.5014.0614.0614.1215.96

15.8014.1515.6419.2522.62

21.8423.6827.7731.7536.89

21.6322.5424.5925.50

26.3027.2629.2328.19

28.7231.4032.2534.19

34.1335.89

5.195.714.68

4.455.896.246.566.33

6.487.958.686.776.95

7.858.028.268.70

10.07

11.9414.1414.4514.2515.72

16.1515.8415.7218.7623.39

26.1128.8132.3935.9040.11

27.5828.0930.2028.93

30.1332.1933.7933.22

32.8635.8035.5039.02

38.8940.40

10.8912.2911.86

12.8214.7514.9816.3415.95

17.6420.3421.4319.5120.78

21.6621.5823.3324.5527.62

30.9835.3236.9639.4043.88

47.7651.2257.0961.7366.39

64.8268.0175.6485.4493.20

65.5167.4867.7670.78

73.7474.7877.3676.70

82.6883.5687.6688.04

90.3191.53

0.69.93.88

.841.111.211.251.28

1.311.641.691.431.36

1.301.291.401.271.34

1.461.621.651.631.86

1.892.162.422.743.18

3.794.004.504.845.31

3.833.834.214.13

4.244.494.744.50

4.454.814.995.23

4.94

0.911.371.42

1.181.581.501.42.93

1.021.371.58.86

1.02

1.16.82

1.021.261.66

1.992.371.861.451.86

1.781.671.801.962.54

2.552.522.803.223.83

2.082.642.692.63

2.712.573.202.80

3.353.093.383.14

4.05

0.17.10.12

.10

.14

.24

.24

.24

.26

.35

.41

.37

.78

.66

.73

.52

.401.02

1.221.742.292.562.51

3.031.882.462.412.00

1.841.301.622.362.66

1.181.441.121.41

1.621.431.691.76

2.672.082.202.61

3.05

1.131.17.76

1.091.331.23.29.22

u 301.31.301.061.33

.30L23.65.58.50

.68

.64

.48

.59

.23

.38

.46

.662.12

3.183.632.512.392.67

3.294.163.443.49

2.962.961.962.32

2.442.232.472.40

2.99

1.542.543.10

3.243.563.744.343.99

4.034.525.675.525.14

5.245.004.904.985.49

6.137.438.74

10.2011.61

13.1415.3017.0018.7120.55

20.1422.2825.8029.1632.56

21.9121.8521.6723.46

25.3525.2926.2226.23

27.9228.4629.6230.59

30.70

1.401.741.34

1.141.371.611.781.82

2.112.823.192.792.72

3.243.393.854.064.61

5.306.026.346.838.30

10.1010.7711.8912.8513.96

12.7413.3015.4518.04

46. 7

5.054.424.24

5.225.675.456.026.45

7.638.327.607.488.44

8.759.139.99

10.9912.02

13.1914.4814.5915.1416.05

16.5918.0520.0721.4022.05

20.6020.9922.9725.42

12.5412.6213.6414.30

14.1915.3216.4015.82

17.0718.1818.90

44.07

44.59

20.6820.9420.9921.36

22.6722.7323.1423.27

24.7624.7126.09

1 Excludes agricultural business; real estate operators; medical, legal, educational, and cultural services; and nonprofitorganizations. These figures do not agree precisely with the nonresidential fixed investment data in the gross nationalproduct estimates, mainly because those data include investment by farmers, professionals, nonprofit institutions, andreal estate firms, and certain outlays charged to current account.

2 Commercial and other includes trade, service, construction, finance, and insurance.3 Planned capital expenditures as reported by business in late October-December 1978. Plans are adjusted when

necessary for systematic bias.Source: Department of Commerce, Bureau of Economic Analysis.

235

TABLE B-46.—Sales and inventories in manufacturing and trade, 1947-78

[Amounts in millions of dollars; monthly data seasonally adjused]

Year or month

1947..1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957..1958..1959..

I960..1961.1962..1963..1964..

1965..1966..1967..1968..1969..

1970..1971..1972..1973..1974..

1975..1976..1977..

1977:JanFebMar

May~_~_II I IJune

JulyAugSeptOctNovDec

1978: JanFebMarAprMayJune

JulyA u g - . _ - _SeptOctNov p . . . .Dec*

Total manufacturingand trade

Sales i

35,26033,788

38,59643, 35644,84047,98746,443

51,69454,06355,87954, 20159,729

60,82761,15965,66268, 99573,682

Inven-tories 2

52,50749,497

59,82270,24272,37776,12273,175

79, 51687,30489,05287,09392,129

94,71395, 594101,063105,480111,503

80,283 120,90787,187 136, 79090, 348 145,30098,206 156, —105,190 169,

107,698 178,279116, 351 188, 508130,049-203,088151, 6471233,749175,200 285,064

179,621283,614200,760 309,238223, 793 334, 785

211,652 311,237216, 210 313, 488221,612 316,976220,835 320, —221, 559 322,222, 589 324,

230,294 337,238,165 340,242,627250,606 350i251, 869 354,252, 639

250, 853 359,:258, 306 •258,311265, 295268," —

0,2732, 250!4,051

221,991224, 404 327,225,305 330,228, 450 330,231, 550 333,186237,017

324,990-"', 639

1,3451,832J, 186

334,785

',6761,396

345, 839"~l, 545

i,226356,920

I, 301362, 815

258,311364,747— 295 367, 382

123 371,479

Ratios

1.421.53

3655585860

4755596050

5654504947

4547565455

6258504447

584844

474543454546

46464745

1.1.411.41

1.431.401.411.381.39

Manufacturing

Salss i

15,51317,31616,126

18,63421,71422, 52924,84323,355

26,48027,74028.73627,24730, 286

30, 87930,92333,35735,05837, 331

40,99544,87046,48750,26853,540

52, 832 101>55,925 102,63,04372, 95484, 821

86,61698,809 169;111,256 179,

105, 303 170,107,184111, 090 172|109,521 "109,641111,003

109, 827112,019112, 586114,091114,342117,938

44 114

114,322118,982

.. 43 121,10140 124, 537

123, 566124, 839

123,106127, 871127,919130, 614132,459

Inven-tories 2

25,89728,54326, 321

31,07839,30641,13643,94841,612

45,06950,64251,87150,24152,945

53,78054,88558,18660,04663, 403

68,18577,95284,62490, 55098,161

,609!,622

108,223124, 545157,811

157, 878'"1,886

1,714

,554171,575172, 536174,015175,716176, 468

177,297178, 082179,011179, 301179, 840179,714

180, 977182,393183,860185, 715187,689189, 557

191,167192,882194,063194, 735196, 525

Ratio 3

1.581.571.75

1.481.661.781.761.81

1.621.731.801.841.70

1.751.741.701.691.64

1.601.621.761.741.77

1.901.831.671.581.65

1.831.661.58

1.621.601.551.591.601.59

1.611.591.591.571.571.52

1.581.531.521.491.521.52

1.551.511.521.491.48

Merchant wholesalers

Sales.

6,8086,514

7,6958,5978,7829,0528,993

9,89310,51310,47510,25711,491

11,65611,98812,67413,38214, 529

15,61116,98719, 44820, 84622, 609

23,94326,25729, 58436, 82245, 836

44,63348,40853, 509

50,67851, 85752, 67253, 38553, 86653,73553, 49553, 20853, 30753, 63955, 55857,266

55, 98557, 63558, 87762,15264,01163, 235

63, 40464, 57364, 04567, 29267,483

7,9577,706

9,2849,88610,21010,68610,637

11,67813,26012,73012, 73913,879

14,12014,48814,93616,04817,000

18, 31720, 76525,37726,60429,114

32, 80335,82339, 78646, 25456, 537

55,11361,30767, 998

62,12363, 06264, 30065, 30164, 83864,947

64, 21065,09566,11966, 20967, 04767, 998

68, 99170, 36172, 88274, 86775, 47475, 820

75, 66476, 25377, 02078, 34679, 024

Ratios

1.131.19

1.071.161.121.171.18

1.131.191.231.241.15

1.221.201.161.151.14

1.151.151.251.251.23

1.291.301.271.171.12

1.241.211.21

1.231.221.221.221.201.21

1.201.221.241.231.211.19

1.231.221.241.201.181.20

1.191.181.201.161.17

Retail trade

Sales i

10,20011,13511,149

12,26813, 04613,52914,09114, 095

15,32115,81116,66716,69617,951

18, 29418, 24919,63020, 55621, 823

23,67725, 33024, 41327,09229,041

30, 92434,16937, 42241, 87144, 543

48, 37053,54259, 029

55,67157,16957, 85057,92958, 05257, 851

58,66959,17759, 41260, 72061,65061,813

59, 98761, 54862,64963,91764, 29264, 565

64, 34365, 86266,34767, 38968,18168, 889

Inven-tories ^

14, 24116,00715,470

19,46021,05021,03121,48820,926

22, 76923,40224,45124,11325,305

26,81326, 22127,94129,38631,094

34,40538, 07335, 29938, 94542,517

43, 86750,06355, 07962,95070,716

70,62378,04587,073

78,56078, 85180,14080,95781, 69682,636

83, 48384, 46285,21585, 32286, 29987,073

87, 70887, 64289, 09789, 96391, 06391, 543

92, 47093, 68093,66494, 301S5, 930

Ratio s

i Monthly average for year and total for month.3 Seasonally adjusted, end of period.3 Inventory /sales ratio. For annual periods, ratio of weighted average inventories to average monthly sales; for monthly

data, ratio of inventories at end of month to sales for month.

Note.—Earlier data are not strictly comparable with data beginning 1958 for manufacturing and beginning 1967 forwholesale and retail trade.

1 he inventory figures in this table do not agree with the estimates of change in business inventories included in the grossnational product since these figures cover only manufacturing and trade rather than all business, and show inventories interms of current book value without adjustment for revaluation.

Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).

236

T A B L E B—47.—Manufacturers' shipments and inventories, 1947—78

[Millions of dollars; monthly data seasonally adjusted]

Year or month

1947.1948.1949.

1950.1951.1952.1953.1954.

1955.1956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965.1966.1967.1968.1969.

1970.1971197219731974

1975.19761977

1977: Jan...Feb..Mar..Apr..May..June..

July..Aug..Sept..Oct...Nov..D e c .

1978: Jan....Feb...Mar...Apr..,May...June...

July...Aug...Sept—Oct....Nov p..

Shipments1

Total

15,51317, 31616,126

18, 63421,71422, 52924,84323, 355

26,48027, 74028,73627, 24730,286

30,87930,92333, 35735,05837, 331

40,99544, 87046, 48750,26853, 540

52,83255,92563,04372,95484,821

86, 61698,809111,256

105, 303107,184111,090109, 521109,641111,003

109, 827112,019112, 586114,091114,342117,938

114, 32L118,982121,101124, 537123, 566124, 839

123,106127,871127,919130, 614132, 459

Dura-ble

goodsindus-tries

6,6947,5797,191

8,84510, 49311,31313, 34911,828

14,07114,71515, 23713, 56315,609

15,88315,61617, 26218, 28019,637

22.22124,64925,26727, 69829,477

28,21529,97334,04339,70444,253

43,67850,69758, 266

54, 53255,62058,42856,99957, 27358,049

57,46358,64959, 28560, 31660,22862,130

59,97363,07764,45766,49365, 41766,293

65.22268,68468,91670, 29271, 567

Nondurablegoodsindus-tries

8,8199,7388,935

9,78911,22111,21611,49411,527

12, 40913, 02513,49913,68414,677

14,99615, 30716,09516,77817,694

18,77420,22021, 22022, 57024,064

24,61725,""28,33,25040, 568

42,93948,11252,990

50,77151, 564

52, 52252,""52,

52, 364 177,53,37053, 30153,77554,11455,808

54, 34955,90556,64458,04458,14958, 546 189;

Inventories2

Total

25,89728, 54326,321

31, 07839, 30641,13643, 94841,612

45,06950,64251, 87150, 24152,945

53,78054, 88558,18660,04663,409

68,18577,95284,62490, 55098,161

101,609952 102,622999 108,223

124, 545157,811

157, 878 101169, 886179, 714

170, 554 109,1171,575

52, 662 172, 536"",522 174,015, 368 175, 716

1,609110,242110, 579111,133112,071

954 176,468 112,536

,297178,082179,011179, 301179,840 115i179,714

180,977182, 393183,860 118;185, 715187, 689 121"1,557

191,167192, 882

57, 88459,18759,003 194,' 06360,3221194,73560, 892 196, 525

Durable goods industries

Total

13,06114,66213,060

15, 53920,99123,73125, 87823, 710

26, 40530, 44731, 72830, 25832,077

32,37132, 54434,63235,86638, 506

42,25749,92054,97858,82564, 705

66,75266,27170,24481, 333101, 790

,580108, 968115,424

113,160113,917114,467114,448

•,212115,424

116,278117,511118,725119,848121,471122,688

123, 830125,206126,176

735 126, 784128, 293

Mate-rialsandsup-plies

8,9667,894

9,19410, 41710, 60810,03210,776

10, 35310,27910, 81011,06811,970

13, 32515, 48916, 44117, 36518,692

19,18419,76320, 87726,03935,221

33, 59936,54038, 719

36,62436,71037, 10437, 30438,21438,675

38, 54038,90139,07239,01138, 79338,719

38,17738, 53538, 54738, 79439, 48439,667

39, 72740, 34341,13340, 91641,125

Workin

process

10,7209,721

10,75612,31712, 83712,38713,063

12,77213, 20314,15914,87116,191

18,07521,93925,00527, 30230, 373

29,82428,63930, 78635, 50442,634

42,80444, 73546, 864

45,13845, 48945, 29645,67045, 21644, 884

45, 45245,91146, 22745,99646, 51546,864

47, 78548,69649, 49150, 33050, 96651, 684

52,76353, 29653, 37554, 21054, 849

Fin-ishedgoods

6,2066,040

6,3487,5658,1257,8398,239

9,2459,0639,6629,92510, 344

10, 85412, 49113, 53414,15715,639

17, 74517, 87118, 57719, 78823,934

25.17727,69329, 843

27, 84728, 04328.17828,16028, 64328,98029,16629,10729,16929, 44129, 90629, 843

30, 31630, 28030, 68730, 72431,02131, 337

31, 34031, 56731,66831,65832, 319

Nondurable goods industries

Total

12,83613.88113,261

15, 53918,31517,40518,07017.902

18, 66420,19520,14319,98320,868

21,40922, 34123,55424,18024.903

25,92828,03229,64631,72533, 456

34, 85736, 35137,97943,21256,021

56, 29860, 91864,290

60,94561, 33361,95762, 88263,64563,932

64,13764,16564, 54464, 85364,62864,290

64,69964.88265,13565, 86766,21866, 869

67, 33767,67667, £8767,95168, 232

Mate-rialsandsup-plies

8,3178,167

8,5568,9718,7758,6629,T"

9,0829,4939,8139,97810,131

10,44811,15511,70912,28312, 721

13,14713,67814,67218,11423,661

23,12324, 94525,102

24,85725,20025, 56425,99926,06326,162

25,85125,78725,72725,62325,29725,102

25,19025, 33225, 73025, 74225, 82526, 314

26,14526,02426,10826,17126, 393

Workin

process

2,4722,440

2,5712,7212,8642,8282,944

2,9463,1103,2963,4063,511

3,8064,2044,4204,8455,119

5,2715,6665,9826,7088,175

8,6759,55710,116

9,5529,5879,7849,8249,9189,862

9,9609,91910,01110,17810,16510,116

10,14510, 25810, 20810,35210, 35410, 277

10, 34810, 35210,48410, 75410, 644

Fin-ishedgoods

7,4097,415

7,6668,6228,6248,4918,845

9,3809,73810, 44410, 79611,261

11,67412,67313, 51814, 59915,612

16,44117,00417,32418, 38924,185

24,49926, 41629,071

26,53526, 54826,60827,05427,66327,909

28, 32428,46028,80529, 05429,16629, 071

29, 36429, 29229,19729, 77330, 03930, 278

30, 84431, 30031, 29531,02631,195

1 Monthly average for year and total for month.2 Book value, seasonally adjusted, end of period, except as noted.Note.—Data beginning 1958 are not strictly comparable with earlier data.Source: Department of Commerce, Bureau of the Census.

237

278-216 O - 79 - 16

TABLE B-48.—Manufacturers* new and unfilled orders, 1947-78

(Amounts in millions of dollars; monthly data seasonally adjusted]

Year or month

194719481949

19501951195219531954

19551956195719531959

19601961196219631964

19651966196719681969

19701971197219731974

197519761977

1977: Jan..Feb..Mar-Apr..May.June.

July.Aug.Sept.Oct..Nov.Dec.

1978: Jan..Feb..Mar.Apr..May.June.

July.Aug.Sept.Oct-.NOVP

New orders >

Total

15,25617,69315,614

20,11023,90723,20423,58622,335

27,46528,36827,55927,00230, 724

30,23531,10433, 43635, 52438, 357

42,10046, 40247,06250,68454, 004

52,07856,01664,20176,22487, 200

85,05899,134112,842

107,256108,047112,190111,269111, 102112,141

108,868112,615113,680117, 331117, 024122,128

117,899122,544125,801128,175128, 450127, 580

123, 279130,952131,840137,162137, 520

Durable goodsindustries

Total

6,3888,1266,633

10,16512,84112,06112,14710, 768

14,99615,36514,11113, 29016, 003

15, 30315,75917,37418,70920, 652

23,27826,17725,83128,11329,925

27, 42930,03035,09842, 89446, 783

41,93350,99759,795

56, 35856,42659, 29458, 80058,83559, 111

56, 36759, 26960, 36463, 55662,82166,165

63, 33566,68169,01670,03370,04568, 840

65,18771, 58272, 64576,98476, 437

Capitalgoodsindus-tries,non-

dtfense

\-

7,0707,779

6,8077,5358,83211,11412,691

10, 78112,50115, 201

14, 67414, 31514,61114, 68714,89315, 490

13,93614, 52716,12416,09716,09016,988

16,51117, 88217, 50717, 40918,12418,155

17,07419, 34420,14922, 21920, 256

Non-dura-

blegoodsindus-tries

8,8689,5668,981

9,94511,06611,14311,43911,566

12,46913, 00313,44813, 71214, 720

14,93215, 34516,06116,81517, 705

18,82320, 22521, 23222, 57124,079

24,64925,98629,10433,32940, 417

43,12548,13753,047

50,89851, 62152, 89652, 46952, 26753,030

52,50153, 34653, 31653, 77554, 20355, 963

54, 56455, 86356,78558,14258, 40558,740

58, 09259, 3705C, 19560,17861, 083

Unfilled orders 2

Total

34,47330,73624,045

41,45667,26675,85761,17848,266

60,00467,37553,18347, 37052,732

45,08047,40748, 57754,32766, 882

80,07198, 401104,989109, 330115, 654

106, 519107,657121, 709161,194189, 678

170,686174, 553193, 659

176, 506177, 369178, 469180,217181, 678182, 816

181,857182, 453183, 547186,787189, 469193,659

197, 235200, 798205, 500209,133214,010216, 754

216,922219,999?23,921230,464235, 528

Dura-ble

goodsindus-tries

28,57926,61919,622

35,43563,39472,68058,63745,250

56,24163,88050,35244, 55949, 373

42,51444, 37545,96551,27063,691

76,29894, 575101,024105, 359111,487

101,931102, 633115,377Ib3, 824184,155

162,872166, 440184, 834

168,266169,072169,938171, 739173,301174, 363

173,267173, 887174,966178,206180, 799184, 834

188,194191, 798196, 359199, 895204, 516207, 067

207,026209, 922213, 650220, 341225, 213

Non-dura-ble

goodsindus-tries

5,8944,1174,423

6,0213,8723,1772,5413,016

3,7633,4952,8312,8113,359

2,5663,0322,6123,0573,191

3,7733,8263,9653,9714,167

4,5885,0246,3327,3705,523

7,8148,1138,825

8,2408,2978,5318,4788,3778,453

8,5908,5668,5818,5818,6708,825

9,0419,0009,1419,2389,4949,687

9,89610, 07710, 27110,12310, 315

Unfilled orders-shipments ratio 3

Total

3.42

3.633.873.353.093.01

2.782.632.692.803.10

3.333.813.713.823.76

3.663.403.333.924.16

3.723.223.15

3.263.233.113.173.193.17

3.173.123.113.143.173.15

3.333.223.233.183.283.29

3.333.223.283.333.35

Dura-ble

goodsindus-tries

4.124.274.554.003.693.54

3.373.133.243.373.72

3.954.554.424.614.50

4.414.083.934.645.00

4.473.853.75

3.903.853.693.793.803.78

3.783.733.703.733.773.75

3.963.823.833.773.943.90

3.963.793.843.923.94

Non-dura-ble

goodsindus-tries

0.96

1.121.04.85.86.94

.72

.79

.68

.73

.72

.76

.73

.69

.69

.77

.77

.88

.92

.63

.83

.74

.73

.75

.75

.75

.73

.73,73

.75

.73

.73

.73

.73

.73

.77

.74

.74

.72

.72

.76

.77

.77

.81

.77

.78

1 Monthly average for year and total for month.2 Seasonally adjusted, end of period.* Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfitlsd orders. Annual

figures relate to seasonally adjusted data for December.

Note.—Data beginning 1958 are not strictly comparable with earlier data.

Source: Department of Commerce, Bureau of the Census.

238

PRICESTABLE B-49.—Consumer price indexes by expenditure classes, 1929—78

11967 = 1001

Year or month

1929 . .19331939194019411942....19431944194519461947194819491950.1951195219531954195519561957195819591960196119621963.196419651966196719681969197019711972197319741975197619771977:Jan

FebMarAprMayJuneJulyAugSeptOctNovDec

1978:Jan.FebMarAprMayJune

JulyAugSeptOctNov

Allitems

51.338 841 642 044.148.851 852.753.958.566.972.171.472.177.879 580 180 580 281 484 386 687 388.789.690 691.792.994 597.2

100.0104.2109.8116.3121.3125.3133.1147.7161.2170.5181.5175.3177.1178.2179.6180.6181.8182.6183.3184.0184.5185.4186.1187.2188.4189.8191.5193.3195.3196.7197.8199.3200.9202.0

Food andbeverages

Total i

100.0103.6108.8114.8118.3123.2139.5158.8172.1177.4188.0179.9183.8184.6186.8187.5189.3190.2190.8190.2190.1191.2191.9194.6197.3199.5202.6205.2208.5209.7210.1210.3211.6212.5

Food

48.330 634 635.238.445.150.349.650.758.170.676.673.5

74.582.884.383 082.881 682.284 988.587 188.089.189 991.292 494.499.1

100.0103.6108.9114.9118.4123.5141.4161.7175.4180.8192.2183.4187.7188.6190.9191.7193.6

194.6195.2194.5194.4195.6196.3199.2202.0204.2207.5210.3213.8215.0215.4215.6216.8217.8

Housing

Total 2

52 252.453.756.256.858.159.160.665.269.870.9

72.877.278.780 881.782 383.686 287.788 690.290.991 792.793 894.997.2

100.0104.0110.4118.2123.4128.1133.7148.8164.5174.6186.5180.3181.4182.6183.7184.6186.0187.4188.3189.5190.4191.4192.4193.8195.0196.7198.3199.9202.0203.8205.2207.5209.5210.6

Rent,resi-den-tial

76.054 156 056.257.258.558.558.658.859.261.165.168.0

70.473.276.280 383.284 385.987 589.190 491.792.994 095.095 996.998.2

100.0102.4105.7110.1115.2119.2124.3130.6137.3144.7153.5149.5150.2150.8151.6152.2152.9153.6154.4155.3156.1157.0157.9158.8159.7160.5161.5162.7163.6164.2165.1166.4167.4168.5

Homeowner-

ship

75 076.3V 078.381 783.584 486.386.987 989.090 892.796.3

100.0105.7116.0128.5133.7140.1146.7163.2181.7191.7204.9196.7198.1199.3201.0202.3203.9

206.2207.4209.1210.0211.5213.0215.0216.4218.3220.4222.5225.3228.3230.6234.2237.0238.8

Fueland

otherutili-ties a

83.083.585.187.389.991.793.895.997.197.398.298.498.398.8

100.0101.3103.6107.6115.0120.1126.9150.2167.8182.7202.2194.8196.4198.5199.4200.2201.8203.5204.5205.5206.8207.4207.6208.5210.6212.6213.9215.5217.5

218.0218.1218.8220.1218.5

Ap-parelandup-keep

48.536 942 442.844.852.354.658.561.567.578.283.380.1

79.086.185.384 684.584 185.887 387.588 289.690.490 991.992.793.796.1

100.0105.4111.5116.1119.8122.3126.8136.2142.3147.6154.2150.0150.8151.7152.3153.4153.9153.4154.8156.2157.2158.5158.2155.7154.5156.5158.4159.8159.9

158.0159.6161.9163.3164.1

Trans-porta-tion

43 042.744.248.147.947.947.850.355.561.866.4

68.272.577.379.578.311A78.883 386.089 689.690.692 593.094.395.997.2

100.0103.2107.2112.7118.6119.9123.8137.7150.6165.5177.2172.2173.2174.7176.7178.1179.1179.2178.8178.4178.6178.7178.8179.0179.4179.9181.1183.2185.5187.2188.1188.7189.7191.4

Medicalcare

36 736.837.038.039.941.142.144.448.151.152.753.756.359.361 463.464 867.269 973.276 479.181.483 585.687.389.593.4

100.0106.1113.4120.6128.4132.5137.7150.5168.6184.7202.4194.1195.8197.6199.1200.5201.8

203.5204.9206.3207.2208.1209.3211.2213.3214.5215.7216.9217.9219.4221.4222.6224.7227.0

Enter-tain-ment

100.0105.7111.0116.7122.9126.5130.0139.8152.2159.8167.7164.0164.8165.3165.5166.6167.7168.0168.6169.7170.3170.4171.0171.9172.9174.1175.6176.2176.2177.0177.4178.3179.3179.5

Othergoodsand

services

100.0105.2110.4116.8122.4127.5132.5142.0153.9162.7172.2168.3168.8169.2169.8170.4171.1171.7172.2174.4176.0177.2177.8178.5179.0179.3179.8180.4181.0183.1184.0187.8188.3188.8

1 Includes alcoholic beverages, not shown separately.2 Includes other items, not shown separately. Series beginning 1967 not comparable with series for earlier years.3 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and other utilities and public services.Note.—Beginning January 1978 data are for all urban consumers; earlier data are for urban wage earners and clerical

workers.

Source: Department of Labor, Bureau of Labor Statistics.

239

TABLE B-50.—Consumer price indexes by commodity and service groups, 1939-78[1967 = 1001

Year ormonth

1939

1940194119421943194419451946194719481949

19501951195219531954195519561957...19581959..

196019611962 .196319641965.. . . . . .19661967..1968...1969

197019711972..1973197419751976___1977

1977: JanFebMarAprMayJune

J u l y . . . .AugSeptOctNovDec

1978: JanFebMarAprMayJune

JulyAugSeptOctNov

Allitems

41.6

42.044 148.851.852.753.958 566.972.171.4

72.177 879.580 180.580.281.484.386 687.3

88.789.690.691.792.994.597.2

100.0104.2109.8

116.3121.3125.3133.1147.7161.2170.5181.5

175.3177.1178.2179.6180.6181.8

182.6183.3184.0184.5185.4186.1

187.2188.4189.8191.5193.3195.3

196.7197.8199.3200.9202.0

Commodities

Allcom-modi-ties

40.2

40.643 349.654.054.756.362 475.080.478.3

78.885 987.086 785.985.185.988.690 690.7

91.592.092.893.694 695.798.2

100.0103.7108.4

113.5117.4120.9129.9145.5158.4165.2174.7

168.7170.9171.8173.3174.3175.4

175.8176.3176.6177.0177.9178.3

179.2180.2181.6183.5185.5187.5

188.6189.3190.5191.8192.9

Food

34.6

35.238 445.150.349.650.758 170.676.673.5

74.582.884.383 082.881.682.284.988.587.1

88.089.189.991.292.494.499.1

100.0103.6108.9

114.9118.4123.5141.4161.7175.4180.8192.2

183.4187.7188.6190.9191.7193.6

194.6195.2194.5194.4195.61S6.3

199.2202.0204.2207.5210.3213.8

215.0215.4215.6216.8217.8

Commodities less food

All

47.7

48.050.456.058.461.664.168 176.882.781.5

81.487.588.388.587.586.987.890.591 592.7

93.193.494.194.895 696.297.5

100.0103.7108.1

112.5116.8119.4123.5136.6149.1156.6165.1

160.6161.6162.6163.6164.7165.4

165.6166.0166.7167.4168.1168.4

168.6168.8170.0171.3173.0174.4

175.4176.3177.8179.1180.3

Dura-ble

48.5

48.151.458.460.365.970.974 180.386.287.4

88.495.196.495.793.391.591.594.495 997.3

96.796.697.697.998 898.498.5

100.0103.1107.0

111.8116.5118.9121.9130.6145.5154.3163.2

158.9159.7160.8162.2163.4163.9

164.3164.3164.5165.0165.5165.9

166.6167.2168.3169.9172.0173.9

175.3175.9177.2178.8180.0

Non-dura-

ble

44.3

44.746.751.653.856.658.662 972.277.876.3

76.282.082.483.183.583.585.387.688.289.3

90.791.291.892.793.594.897.0

100.0104.1108.8

113.1117.0119.8124.8140.9151.7158.3166.5

161.9163.1163.9164.7165.7166.6

166.6167.3168.4169.2170.1170.3

169.7lby.6170.7171.8172.8173.7

174.1175.4177.1178.1179.1

Services

Allservices

43.5

43.644 245.646.447.548.249 151.154.356.9

58.761.864.567.369.570.972.775.678.580.8

83.585.286.888.590.292.295.8

100.0105.2112.5

121.6128.4133.3139.1152.1166.6180.4194.3

187.4188.7190.0191.2192.2193.7

195.3196.3197.7198.5199.5200.5

202.0203.5204.9206.5208.0209.9

211.7.213.4215.6217.6218.6

Rent

56.0

56.257.258.558.558.658.859 261.165.168.0

70.473.276.280.383.284.385.987.589.190.4

91.792.994.095.095.996.998.2

100.0102.4105.7

110.1115.2119.2124.3130.6137.3144.7153.5

149.5150.2150.8151.6152.2152.9

153.6154.4155.3156.1157.0157.9

158.8159.7160.5161.5162.7163.6

164.2165.1166.4167.416 \ 5

Serv-iceslessrent

38.1

38.138.640.342.144.245.146.749.051.954.5

56.059.362.264.866.768.270.173.376.479.0

81.983.985.587.389.291.595.3

100.0105.7113.8

123.7130.8135.9141.8156.0171.9186.8201.6

194.3195.6197.0198.4199.4201.1

202.8203.8205.3206.2207.2208.2

209.8211.4213.0214.6216.2218.3

220.4222.2224.6226.7227.8

Special indexes

Allitemslessfood

47.2

47.348 752.153.655.756.959 464.969.670.3

71.175.777.579.079.579.781.183.885 787.3

88.889.790.892.093.294.596.7

100.0104.4110.1

116.7122.1125.8130.7143.7157.1167.5178.4

172.9174.0175.1176.2177.3178.4

179.1179.8180.9181.6182.5183.1

183.8184.7185.9187.4189.0190.6

192.0193.3195.1196.7197.8

Allitemsless

shel-ter

39.7

39.942 4M.I51.352.253.659 068.573.972.6

73.179 280.881.081.080.681.784.486 987.6

88.989.990.992.193.294.697.4

100.0104.1109.0

114.4119.3122.9131.1146.1159.1168.3179.1

173.0175.0176.1177.5178.4179.6

180.2180.8181.2181.7182.5183.0

183.8185.0186.3188.1189.9191.8

192.7193.5194.5195.8196.7

Non-dura-

blecom-mod-ities

38.4

38.941.647.651.852.253.759.671.977.274.9

75.482.583.483.283.282.583.786.388.688.2

89.490.290.992.093.094.698.1

100.0103.9108.9

114.0117.7121.7132.8151.0163.2169.2178.9

172.4175.0175.9177.4178.3179.7

180.1180.8181.0181.4182.4182.9

183.9185.1186.8188.8190.7192.7

193.6194.4195.4196.6197.5

Note.—Beginning January 1978 data are for all urban consumers; earlier data are for urban wage- earners andclerical workers.

Source: Department of Labor, Bureau of Labor Statistics.

240

TABLE B-51.—Consumer price indexes, selected commodities and services, 1939-78[1967=100]

Year ormonth

Durable commodities Nondurable commodities less food

Total iNewcars

Usedcars Total

Ap-parelcom-mod-ities

Other

Total i

Gaso-line,

motor

cool-ant,etc.

Fueloil

coal,andbot-tledgas

Services less rent

Total i

Gas(piped)

andelec-tric-ity

Trans-porta-tion

serv-ices

Wedical-careserv-ices

Ener-gy2

1939 . . .

1940 . . .1941 . . .1942 . . .1943 . . .1944 . . .1945. . .1946. . .1947. . .1948 . . .1949 . . .

1950 . . .1951 . . .1952 . . .1953 . . .1954. . .1955 . . .1956. . .1957 . . .1958._.1959 . . .

1960 . . .1961 . . .1962 . . .1963 . . .1964 . . .1965. . .1966. . .1967. . .1968 . . .1969 . . .

1970. . .1971 . . .1972197319741975. . . .1976. . . .1977 . . .1977:

Jan . .Feb..Mar.Apr.Vlay.June..July...Aug...Sept..Oct . . .Nov...Dec.. .

1978:J a n . . .Feb.. .Mar.. .Apr. . .May...June..July...Aug...Sept..Oct . . .Nov...

A p r . . . .May . . . .

48.548.151.458.460.365.970.974.180.386.287.488.495.196.495.793.391.591.594.495.997.396.796.697.697.998.898.498.5

100.0103.1107.0111.8116.5118.9121.9130.6145.5154.3163.2

158.9159.7160.8162.2163.4163.9164.3164.3164.5165.0165.5165.9

175.3175.9177.2178.8180.0

43.243.346.6

69.275.682.883.487.494.995.894.390.993.598.4

101.5105.9104.5104.5104.1103.5103.2100.999.1

100.0102.8104.4

107.6112.0111.0111.1117.5127.6135.7142.9

141.1140.7140.9140.6141.4141.7141.6141.6141.1145.7148.2150.5

166.6167.2168.3169.9172.0173.9

150.9151.2151.1151.2152.5153.5153.9153.8153.5155.5158.5

44.3

44.746.751.653.56.658.6

43.0

43.545.853.5

62.972.277.876.3

55.959.863.0

46.346.848.451.1

3.580.485.482.0

53.254.755.58.266.272.372.4

89.275.971.869.177.480.289.583.686.994.896.0

100.199.497.0

100.0

104.3110.2110.5117.6122.6146.4167.9182.8

177.7179.1182.7187.8191.4192.2190.6186.4182.5178.0175.0170.7

169.8170.0172.3177.3184.6191.5195.9196.7195.9195.4194.7

76.282.082.483.183.583.585.387.688.289.390.791.291.892.793.594.897.0

100.0104.1108.8

113.1117.0119.8124.8140.9151.7158.3166.5

161.9163.1163.9164.7165.7166.6166.6167.3168.4169.2170.1170.3

169.7169.6170.7171.8172.8173.7174.1175.4177.1178.1179.1

81.188.787.7

5.786.385.887.388.288.289.090.390.891.292.092.893.696.0

100.0105.6111.9116.5120.1122.7127.1136.1141.2145.8151.6

147.6148.5149.3149.8150.9151.3150.6152.1153.5154.6155.9155.3

152.3150.7152.8154.8156.1156.1153.9155.5157.9159.3160.0

72.977.579.081.081.882.184.187.488.389.690.991.392.193.193.995.597.5

100.0103.3107.0111.2115.2118.2123.4143.8157.9165.7175.3

170.5171.8172.6173.5174.5175.6176.1176.3177.2177.9178.6179.3

179.7180.3181.0181.7182.6183.8185.5186.6188.0188.8190.0

90.689.490.593.092.092.692.491.394.496.8

100.0101.7105.1106.2107.3108.8118.8158.9169.7176.6186.7

180.0182.0183.4185.4187.5188.8189.2189.1188.9188.5188.4188.7

188.6188.2188.1188.9190.5193.0195.7198.3200.0200.4201.9

37.138.240.543.145.247.148.051.358.468.670.372.776.578.081.581.282.385.990.388.789.889.291.091.593.292.794.697.0

100.0103.1105.6110.1117.5118.5136.0214.6235.3250.8283.4

271.7278.3281.4282.0282.6283.1283.7284.1285.1287.2289.9291.9

295.2296.9297.2296.6295.6295.1294.5294.2295.7300.1306.1

38.138.138.640.342.144.245.146.749.051.954.5

56.059.362.264.866.768.270.173.376.479.0

81.983.985.587.389.291.595.3

100.0105.7113.8123.7130.8135.9141.8156.0171.9186.8201.6

194.3195.6197.0198.4199.4201.1202.8203.8205.3206.2207.2208.2

209.8211.4213.0214.6216.2218.3220.4222.2224.6226.7227.8

82.982.181.481.080.680.379.677.477.179.181.081.281.582.684.285.387.588.489.392.494.798.699.499.499.499.499.499.6

100.0100.9102.8107.3114.7120.5126.4145.8169.6189.0213.4

204.2205.4208.5209.8210.9213.0216.0217.4218.0219.3219.5218.9

219.7223.3226.6229.2232.5236.5237.2236.9237.9240.0234.9

36.136.136.338.238.238.238.239.040.344.950.0

53.358.362.466.469.269.470.573.878.581.2

83.385.386.687.589.692.996.8

100.0104.0111.3123.1133.0136.0136.9141.9152.7174.3188.4

182.9183.3184.8186.7187.4188.7189.4190.0191.0191.3192.0192.9

193.7194.7194.9195.3195.5196.2196.9197.3198.7200.4202.2

32.532.532.733.735.436.937.940.143.546.448.149.251.755.057.058.760.462.865.568.772.0

74.977.780.282.684.687.392.0

100.0107.3116.0124.2133.3138.2144.3159.1179.1197.1216.7

207.6209.4211.5213.1214.6216.0217.9219.6221.1222.0223.0224.2

226.5228.7229.9231.3232.5233.5235.4237.7239.1241.5244.1

90.190.391.894.294.494.795.094.696.397.8

100.0101.5104.2107.0111.2114.3123.5159.7176.6189.3207.3

199.1201.3203.5205.1206.6208.1209.6210.1210.3210.9211.2211.3

211.8213.0214.3215.7217.7220.7222.4223.7225.1226.5225.9

1 Includes other items not shown separately.2 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and gasoline, motor oil, coolant, etc.3 Not available.Note.—Beginning January 1978 data are for all urban consumers; earlier data are for urban wage earners and clerical

workers.Source: Department of Labor, Bureau of Labor Statistics.

241

TABLE B—52.—Consumer price indexes for commodity groups, seasonally adjusted, 1975-78[1967=100, seasonally adjusted]

Year andmonth

1975: JanFebMar . . .AprMayJune

JulyAug__SeptOctNovDec

1976:JanFebMarApr.__MayJune __ .

JulyAugSeptOctNov - .Dec

1977-JanFeb. . . __MarAprMayJune

July ._AugSeptOctNovDec

1978-JanFeb.MarApr.. .MayJune

JulvAugSeptOct .Nov

Allcom-mod-ities

153.8154.5155.1155.8156.6157.8

159.5159.9160.3161.4161.9162.6

162.9162.7162.7163.4164.4165.0

165.4166.0166.5167.1167.3168.0

169.3171.3172.3173.7174.4175.1

175.2175.7176.2176.7177.5178.3

179.9180.8182.3184.0185.6187.2

187.9188.7190.1191.5192.7

Food

170.9171.2170.9171.3172.6174.8

177.6177.3177.7179.4180.2181.1

180.8179.6178.6179.7181.0181.2

181.1181.6181.7182.1181.5182.0

183.5187.4188.6191.5192.6193.8

193.5194.3194.7195.0196.0196.7

199.2201.6204.3208.1211.2214.0

213.9214.5215.6217.3218.0

Commodities less food

Total

144.5145.6146.6147.4147.9148.6

149.8150.4151.0151.6152.0152.6

153.2153.6154.1154.6155.4156.2

156.9157.6158.3159.0159.7160.5

161.7162.7163.4164.1164.6165.1

165.4165.7166.2166.8167.6168.4

169.5169.9170.9171.8172.8173.9

174.9175.7177.2178.5179.9

Durable commodities

Total i

140.0141.4143.0144.0144.7145.3

146.2146.8147.7148.3148.7149.3

149.9150 6151.4152.3153.4154.1

155.0155.7156.3157.2157.6158.4

159.9161.1161.9162.6163.3163.3

163.4163.6163.9164.4165.1166.0

167.6168.7169.5170.4171.8173.2

174.4175.2176.7178.1179.6

Newcars

122.0123.6126.8127.3l?7.0127.4

127.6128.3129.2129.3130.1132.5

132.8133.5134.0134.3134.8135.0

135.6136.1137.0138.4138.4138.5

139.6139.9140.4140.5141.7142.3

142.9143.5144.1145.0146.9148.4

149.3150.3150.5151.0152.8154.1

155.3155.8156.8154.7157.1

Usedcars

140.7142.3142.6142.1141.8143.9

147.2149.7150.5151.5151.6151.5

151.4154.8159.1164.0167.1169.0

170.2171.9173.0174.4177.0180.8

186.3191.3192.5193.1190.3187.2

182.7178.3175.3172.8173.3173.7

178.0181.6181.6182.2183.5186.5

187.8188.2188.2189.7192.8

Nondurables less food

Total i

147.9148 6149.1149.9150 4151.0

152 5153.0153.3154 1154.4155.0

155.5155 7156.0156.3157 0157.7

158.4159 0159.8160.4161.1161.8

162 8163.7164 5165.0165.8166.4

166.9167.2167.8168.6169.4169.9

170.6170.1171.2172.1172.8173.5

174.4175.2176.6177.4178.4

Apparelcom-mod-ities

140.1140 4140.5140.6140.6140.6

141 2141.9141.5141 8142.2142.5

143.1143.5143.9144.4144.9145.4

145.9146.8147.6147.5147.8148.4

149.3149.9150.2150.4150.8151.8

152.2152.7152.6152.9153.5153.8

154.0152.1153.6155.3156.0156.5

155.4156.1157.0157.6157.6

Gasoline,motor

oil, cool-ant, etc.

161.0161 3161.9163.2164 8167.8

173 5174.7175.8177 1177.2177.1

176.7174 8172.9171.9172.9175.3

176.1177.1178.2180.1181.3181.8

182.1184.0185.8187.3188.0186.8

186.0185.5186.3187.9189.4190.7

190.9190.3190.6190.8191.1190.9

192.4194.6197.2199.8202.9

Fuel oil,coal, andbottled

gas

225.0224 5225.0227.5230 2232.2

236 6239 6243.1246 1246.4246.6

245.0244 4244.5245.6246.7249.3

250.7253.0254.9255.4257.6262.2

267.7272.9278.2281.1283.4285.7

286.6288.1289.5289.5289.5289.6

290.8291.1294.0295.7296.5297.8

297.5298.4300.2302.5305.8

i Includes other items not shown separately.Note.—Beginning January 1978, data are for all urban consumers; earlier data are for urban wage earners and clerical

workers.Source: Department of Labor, Bureau of Labor Statistics.

242

TABLE B-53.—Consumer price indexes for service groups and selected expenditure classes,seasonally adjusted, 1975-78

Yearand month

1975: Jan . . .Feb . .Mar...Apr. . .May...June..

July...Aug...Sept. .Oct . . .Nov...Dec—

1976: Jan . . .Feb. . .Mar...Apr.. .May...June..

July...Aug.__Sept. .Oct . . .Nov...Dec . . .

1977: J a n . . .Feb . . .Mar...Apr. . .May...June..

July...Aug.. .Sept . .Oct . . .Nov.. .Dec . . .

1978: J a n . . .Feb. . .Mar...Apr. . .May...June..

July...Aug.. .Sept . .Oct . . .Nov.. .

[1967=100, seasonally adjusted, except as notedj

Services

Allservices

161.0162.3163.1164.2165.0166.2

167.0167.8169.1170.1171.8172.8

174.6175.8177.2177.9179.0180.0

181.1182.3183.3184.2185.0185.6

187.3188.4190.0191.4192.9194.3

195.7196.8197.9198.7199.5200.3

201.5203.0204.7206.6208.7210.5

212.2214.0215.7217.5218.3

Rent,resi-

dential

134.3134.8135.3135.8136.4136.9

137.5138.1138.5139.3140.0140.5

141.1141.9142.6143.1143.8144.5

145.2145.7146.3147.0147.5148.2

149.4149.9150.7151.5152.2153.0

153.8154.6155.5156.2157.1157.9

158.8159.4160.3161.5162.7163.6

164.4165.3166.6167.6168.7

Total i

165.8167.2168.1169.3170.2171.4

172.3173.1174.7175.6177.5178.7

180.7182.0183.4184.2185.4186.4

187.6188.9190.0190.9191.7192.4

194.1195.4197.0198.6200.2201.7

203.3204.4205.6206.3207.1208.0

209.2210.9212.8214.8217.0219.0

220.9222.8224.7226.6227.3

Services less rent

Gas(piped)

andelectricity

159.4161.6162.8165.3166.8169.4

170. 8172.2175.0175.8177.4178.8

178.8180.8182.4183.4185.8187.9

189.9191.4193.2196.1196.7201.1

203.4204.2207.1208.8210.7213.0

216.4218.7219.1221.2220.2218.6

218.8222.0225.0228.1232.3236.5

237.7238.3239.1242.2235.6

Trans-porta-tion

services

146.1146.8147.7148.9149.6150.6

151.5152.5156.5157.4161.7163.1

166.5168.4170.6171.1172.3173.5

175.3176.4178.0179.3180.2180.4

181.3182.7184.2185.9187.4189.1

190.2191.0191.9191.8192.0192.5

193.2194.0194.2194.2195.5196.5

197.6198.4199.7201.0202.2

MoHiralivieuicai

careservices

170.7172.6174.3175.8177.1178.5

180.2181.3182.9184.7184.3186.0

188.1190.1192.1193.4194.8196.0

197.6199.0200.3201.9204.7206.0

207.7209.1211.1213.0214.8216.3

217.5219.1220.8222.2223.2224.7

226.6228.4229.6231.3232.7233.9

235.0237.3238.9241.8244.5

Selected expenditures classes

Homeowner-

ship

174.8176.8178.2179.9180.8182.0

182.5182.9183.5184.1186.1187.0

188.2188.3188.9189.3190.4191.2

192.3193.5194.0194.2194.2194.2

196.2197.8199.5201.5203.1204.5

206.4207.4208.7209.4210.9212.3

214.5216.0218.5220.9223.4226.0

228.6230.9233.9236.6238.3

Fueland

otherutili-ties2

159.5160.9161.9163.8165.3167.2

168.7170.0172.1173.3174.6175.6

175.5176.7177.8178.6180.2181.8

183.2184.8186.2188.0188.6191.7

193.9195.0197.4198.7200.4202.3

204.4205.8206.7208.1207.6207.1

207.7209.4211.5213.2215.5217.8

218.8219.4219.9221.5218.6

House-hold

furnish-ingsand

opera-tion

146.9147.9148.6149.5150.1150.7

151.1151.7152.5153.3153.8154.3

156.4157.3158.3158.9159.3159.8

160.4160.8161.4161.9162.6163.3

164.0164.7165.2165.7166.4167.3

167.9168.6169.1169.5170.0171.0

171.8172.2173.5174.6175.8177.5

178.3179.3180.4181.9182.8

Energy3

167.2168.5169.0170.9172.7175.9

180.1181.2182.9183.0183.7184.4

184.5184.6184.0183.9185.7188.7

190.5191.5192.5193.6194.6197.2

199.1201.3203.5205.1206.6208.1

209.6210.1210.3210.9211.2211.3

211.8213.0214.3215.7217'.7220.7

222.4223.7225.1226.5225.9

1 Includes other items not shown separately.2 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and other utilities and public services.3 Gas (piped) and electricity; fuel oil, coal, and bottled gas; and gasoline, motor oil, coolant, etc. Index is not seasonally

adjusted.Note.—Beginning January 1978 data are for all urban consumers; earlier data are for urban wage earners and clerical

workers.

Source: Department of Labor, Bureau of Labor Statistics.

243

TABLE B-54.—Changes in consumer price indexes, major groups, 1948-78(Percent change]

Year ormonth

19481949

1950 . .19511952 . „19531954

1955 .19561957 .19581959 .

1960 .1961196219631964

19651966196719681969

19701971197219731974

197519761977

1977: Jan..Feb..Mar.

June.

July.Aug.Sept.Oct..Nov.Dec .

1978:Jan..Feb..Mar.Apr..May.June.

July.Aug.Sept.Oct..Nov.

All items

Dec.to

Dec.1

2.7- 1 . 8

5.85.9.9.6

- . 5

.42.93.01.81.5

1.5.7

1.21.61.2

1.93.43.04.76.1

5.53.43.48.8

12.2

7.04.86.8

Yearto

year

7.8- 1 . 0

1.07.92.2.8.5

- . 41.53.62.7.8

1.61.01.11.21.3

1.72.92.94.25.4

5.94.33.36.2

11.0

9.15.86.5

Food

Dec.to

Dec.'

- 0 . 8- 3 . 7

9.67.4

- 1 . 1- 1 . 3- 1 . 6

- . 93.12.82.2

- . 8

3.1- . 91.51.91.4

3.43.91.24.37.2

2.24.34.7

20.112.2

6.5.6

8.0

Yearto

year

8.5- 4 . 0

1.411.11.8

- 1 . 5- . 2

- 1 . 4

3.34.2

- 1 . 6

1.01.3.9

1.41.3

2.25.0.9

3.65.1

5.53.04.3

14.514.4

8.53.16.3

Commodities lessfood

Dec.to

Dec.i

5.3- 4 . 8

5.74.6

.2- 1 . 4

02.52.2.8

1.5

- . 3.6.7

1.2.4

.71.93.13.74.5

4.82.32.55.0

13.2

6.25.14.9

Yearto

year

7.7- 1 . 5

- . 17.5.9.2

- 1 . 1

- . 71.03.11.11.3

.4

.3

.7

.7

.8

.61.42.63.74.2

4.13.82.23.4

10.6

9.25.05.4

Services

Dec.to

Dec.i

6.13.6

3.65.24.64.21.9

2.33.14.52.73.7

2.71.91.72.31.8

2.64.94.06.17.4

8.24.13.66.2

11.3

8.17.37.9

Yearto

year

6.34.8

3.25.34.44.33.3

2.02.54.03.82.9

3.32.01.92.01.9

2.23.94.45.26.9

8.15.63.84.49.3

9.58.37.7

All itemsless food

Dec.to

Dec.t

5.5- . 8

4.15.01.71.70

.92.63.21.62.3

1.01.11.21.61.0

1.63.33.54.95.7

6.53.13.05.6

12.2

7.16.26.3

Yearto

year

7.21.0

1.16 52.41.9.6

.31 83.32.31.9

1.71.01.21.31.3

1.42.33.44.45.5

6.04.63.03.99.9

9.36.66.5

Change from preceding month

Un-adjusted

0.61.0.6.8.6.7

.4

.4

.4

.3

'A

.6

.6

.7

.9

.91.0

.7

.6

.8

.8

.5

Sea-sonally

adjusted

0.81.0.6.8.6.5

.3

.4

.4

.3

.4

.4

.8

.6

.8

.9

.9

.9

.5

.6

.8

.8

.5

Un-adjusted

0.92.3

L2.4

1.0

.5

.3- . 4

~'.S.4

1.51.41.11.61.31.7

.6

.2

.1

.6

.5

Sea-sonally

adjusted

0.82.1.6

!6.6

- . 2.4.2

.'5

.4

1.31.21.31.91.51.3

.0

.3

.5

.8

.3

Un-adjusted

0.0.6.6.6.7.4

.1

'.A. 4.4.2

.1

.1

.7

.81.0.8

.6

.5

.9

.7

.7

Sea-sonally

adjusted

0.7.6.4.4.3

.2

!3.4.5.5

.7

.2

.6

.5

.6

.6

.6

.5

.9

.'8

Un-adj usted

0.9.7.7.6.5.8

.8

'.7.4.5.5

.7

.7

.7

.8

.7

.9

.9

.81.0.9.5

Sea-sonally

adjusted

0.9.6.8.7.8.7

.7

.6

.6

.4

.4

.4

.6

.7

.8

.91.0.9

.8

.8

.8

.8

.4

Un-adjusted

0.4.6.6.6.6.6

.4

.4

.6

.4

.5

.3

.4

!6.8.9.8

.7

.7

.9

.8

.6

Sea-sonally

adjusted

0.8.6.6.6.5.5

.4

.4

.4

.3

.4

.4

.8

.5

.7

.7

.8

.7

.7

.7

'.%.6

i Changes from December to December are based on unadjusted indexes.Note.—Beginning January 1978 data are for all urban consumers; earlier data are for urban wage earners and clerical

workers.Source: Department of Labor, Bureau of Labor Statistics.

244

T A B L E B—55.—Producer price indexes by stage of processing, 1947—78

[1967=100]

Year or month

194719481949

1950195119521953 .1954

195519561957 . .1958.. .1959

196019611962 .19631964

19651966 . _.196719681969

19701971197219731974.

1975197619771978

1977: JanFebMarAprMayJune.. _

JulyAugSeptOctNovDec

1978: JanFeb.MarAprMay..June

JulyAugSept . . .OctNovDec

Finished goods

Totalfinishedgoods

74.079.977.6

79.086.586.085.185.3

85.587.991.193.293.0

93.793.794.093.794.1

95.798.8

100.0102.9106.6

110.3113.7117.2127.9147.5

163.4170.3180.6194.6

175.1176.6177.5178.8180.3180.5

181.3181.3181.9183.9184.6185.5

187.0188.5189.1191.5193.1194.5

196.0195.6196.9199 7200.6202.4

Consumer foods

Total

82.890.483.1

84.795.294.389.488.7

86.586.389.394.590.1

92.191.792.591.491.9

95.4101.6100 0103.7110.0

113.5115.3121.7146.4166.9

181.0180.2189.1206.8

181 5185.0186.6188.5192.3190.7

192.1189.9190.0189.9190.6192.9

195.0199.6200.2204.5206.8209.5

210.4205.9209.4212 5212.0215.8

Crude

99.4107.1101.3

92.2105.9112.8105.294.7

98.898.797.4

103.594.3

100.696.197.095.598.2

98.6104.8100.0107.5116.0

116.3115.8121.2160.7180.8

181.2194.8201.8216.5

220 0229.1223.6213.1200.0184.2

192.5191.2193.4189.9196.2188.6

197.9210.2207.5220.2212.0211.7

234.1212.8214.8220.1227.2230.0

Pro-cessed

80.287.680.1

83.493.291.386.787.6

84.484.387.993.189.5

90.790.991.790.790.8

94.9101.0100.0103.0108.9

113.1115.1121.7143.9164.6

181.3177.4186.4204.1

176.9179.9182.0184.9189.9189.4

190.2188.1188.0188.1188.4191.5

192.9196.9197.8201.4204.4207.3

206.6203.4207.1209.9208.9212.7

Finished goods excluding consumer foods

Total

100.0102.6105.4

109.1113.1115.4120.1139.3

156.2165.5176.2188.9

171 4172.2173.0174.0174 8175.6

176.1176.8177.6180.3180.9181.4

182.7183.2183.8185.6186.9188.0

189.6190.4191.1193 8195.1196.2

Consumer goods

Total

79.084.082.2

83.589.588.389.189.4

90.192.394.694.795.9

96.396.296.096.095.9

96.698.1

100.0102.1104.6

107.7111.4113.4118.5138.6

153.1161.8172.1183.7

167 4168.3169.2170.4171.1172.0

172.5173.0173.7175.5175.8176.2

177.4177.8178.3180.5181.9182.9

184.8185.6186.0188.6189.5190.8

Durable

74.679.781.8

82.788.288.989.690.3

91.294 397.198.499.6

99.298 898.397.898 2

97.998.5

100.0102.2104.0

106.9110.8113.2115.8126.3

138.2144.4152.2165.9

149 0149.3149.7150.6150.8151.4

151.5152.2152.2156.1156.4156.9

158.5158.3159.0163.2165.0165.3

167.7168.4168.3171.7172.1172.8

Nondurable

80.785.882.3

83.690.087.888.688.9

89.491 193.292.694.0

94.794 794.895.194.8

95.997.8

100.0102.2105.0

108.3111.7113.6120.5146.8

163.0173.3185.4195.4

179.6181.0182.3183.6184.8185.9

186.6187.0188.1188.5188.8189.1

189.9190.7191.1191.8192.9194.4

195.9196.9197.7199.6200.9202.6

Capitalequip-ment1

55.460.463.4

64.971.272.473.674.5

76.782.487.589.891.5

91.791.892.292.493.3

94.496.8

100.0103.5106.9

112.0116.6119.5123.5141.0

162.5173.2184.5199.0

179.6180.2180.7181.6182.4183.1

183.8184.8185.6189.8190.8191.6

193.0193.7194.6195.6196.9198.1

199.2200.0201.0204.1205.9206.9

con-sumer

finishedgoods

80.586.582.5

83.991.890.789.289.1

88.589.892.494.493.6

94.594.394.694.194.3

96.199.4

100.0102.7106.6

109.9112.9116.6129.2149.3

163.6169.0178.9192.6

173.2175.0176.1177.5179.4179.4

180.2179.8180.3181.4181.9183.0

184.4186.2186.8189.7191.4193.0

194.6193.6195.1197.8198.3200.3

See next page for continuation of table.

245

TABLE B-55.—Producer price indexes by stage of processing, 1947-78—Continued

[1967=1001

Year or month

194719481949

19501951195219531954

19551956195719581959

19601961196219631964

19651966196719681969

19701971.197219731974

1975197619771978

1977: JanFebMarAprMayJune

JulyAugS e p t . . . .Oct .NovDec

1978:JanFeb .MarAprMayJune

JulyAugSeptOctNovDec

Total

72.478.375 2

78.688.185.586 086.5

88.192.094 194.395 6

95.695 094.995.295 5

96 899.2

100.0102.3105.8

109.9114.1118.7131.6162.9

180.0189.3201.7215.5

195.0196.6198.7201.2202.1202.1

202.6203.4204.2204.4204.9205.4

207.2208.9210.7212.5213.9215.1

216.0217.3218.7220.7221.8222.8

Intermediate materials, supplies,

Foodsand

feeds

100.099.4

102.7

109.1111.7118.5168.4200.2

195.3186.6191.0201.0

192.3194.8198.3212.0211.0202.1

82.9177.7174.6173.186.286.4

89.689.997.900.600.801.9

01.598.803.407.607.412.3

Other

70.076.174.2

77.787.084.385.385.7

88 392.695.094 896 4

96.895 595.395.095.6

96 998.9

100.0102.6106.1

109.9114.3118.9128 1159.5

178 6189.5202.4?16.4

195.396.798.7

200.7201.6202.2

203.8204.9206.0206.3206.006.6

08 210.111.513.314.715.9

16.818.419.621.522.723.5

Materials andcomponents

Formanu-

fac-turing

72.177.874.5

78.188.584.886.286.3

88 492.694.895 296 5

96.595 394.794.995.9

97 499.3

100.0102.2105.8

110.0112.8117.0127 7162.2

178 7185.6195.5208.2

189.7190.8192.7194.6195.8195.5

196.6197.3197.8198.0198.2198.9

200 0202.1203.5205.5206.5207.4

208.2210.1211.7213.8214.7215.4

Forcon-

struc-tion

66.073.173.2

77.084.383.785.185.5

88.993.594.094.096 6

95.994 694.294.595.4

96 298.8

100.0104.9110.8

112.6119.7126.2136 7161.6

176 4188.0202.9224.4

195.1195.9197.8199.4200.3201.3

204.1206.1208.8208.5208.3209.5

212 7216.3218.3220.8222.5224.3

226.2228.3229.1230.2231.8232.5

and components

Proc-essedfuelsand

lubri-cants

85.596.988.2

89.993.992.893.493.3

93 396.3

101.996.0l 5 6

98.299 499.098.196.0

97 499.2

100.097.798.7

105.0115.2118.9131 5199.1

233 0250.8283 8296.4

262.7271.2276 3282.0283.9286.1

289.0291.9291.3292 4289.2289.3

291 2291.7294.3294.8297.3299.9

298.1296.7296.7297.9297.9299.9

Con-tain-ers

66.869.870.1

72.084.579.980.081.5

82 688.692.594.794 2

95.594 795.994.794.0

95 898 4

100.0102 4106.3

111.4116.6121.9129 252.2

171 4181.5193 i212.4

84.184.389 093.392.993.5

94.094.497.198.198.298.2

02 204.305.706.609.311.7

13.514.616.520.721.622.4

Sup-plies

77.581.076.3

78.988.888.884.386.3

84 887.188.090 091 2

90.791 893.895.294.3

95 299 4

100.0101.2102.8

108.0111.0115.6140 6154.5

168 1179.1188 096.9

186.6187.4188 5192.5191.9190.9

185.984.685.2

185.189.088.7

90 589.892.794.095.195.8

97.196.998.901.903.505.8

Crude materials for further processing

Total

101.2110.996.0

104.6120.1110.3101.9101.0

97 197.699.8

102 099 4

97.096 597.595.494.5

99 3105 7100.0101 6108.4

112.3115.1127.6174 0196.1

196 9205.1214 3240.2

208.1215.5219 9226.1224.4215.4

212.9207.7207.8207.6210.6215.5

19 625.030.539.041.2

245.4

45.440.244.949.948.652.4

Food-stuffsandfeed-stuffs

111.7120.8100.3

107.6124.5117.2104.9104.9

95.193.197.2

103.096 2

95.193 895.792.990.8

97 1105.9100.0101 3109.3

112.0114.2127.5180 0189.4

191 8190.1190 9215.4

189.7194.0197 1203.7201.8192.0

191.2181.3182.0182.7185.5190.0

194 0201.3206.3216.3219.1223.7

222.0213.2218.5224.4221.3224.7

Other

Total

100.0102.2106.8

112.7117.0128.0162 5208.9

206 9?33.6258.4?87.0

242.9256.0263 0268.5267.3259.5

253.9257.4256.4254.6257.9263.7

67 869.7

276.2281.6282.6286.1

289.791.694.998.200.605.1

Fuel

66.678.778.3

77.979.479.982.779.0

78.884.489.290.391.9

92.892.692.193.292.8

93.596.3

100.0102.3106.6

22.6139.048.7

164 5219.4

271 5314.7400.4464.0

342.8377.8383 9392.3404.5399.4

403.2412.3415.4416.2424.5432.0

430 3431.7441.9454.7458.3465.8

471.8470.8478.683.585.394.9

Other

90.6100.791.6

104.7120.7104.6100.198.2

103.8107.6106.2102.2105.8

101.4102.5102.0100.7102.4

104.5106.7100.0102.1106.9

109.8110.7121.9161.5205.4

188.3210.2217.3235.4

214.1220.8228.0232.7227.6219.0

210.6212.5210.3207.7209.5214.9

220.7222.7228.1231.4231.7234.0

236.4239.1241.1244.0246.5249.5

1 Formerly called producer finished goods.2 Intermediate materials for food manufacturing and manufactured animal feeds.Source: Department of Labor, Bureau of Labor Statistics.

246

TABLE B-56.—Producer price indexes by stage of processing, seasonally adjusted^ 1975-78

(1967 = 100, seasonally adjusted]

Year andmonth

1975: J a n . —Feb.—Mar....Apr.._.May. . .June

July . . .AugSept—Oct .—Nov. . . .D e c . . .

1976: J a n . —Feb.—Mar....A p r —May. . .J u n e -

July . . .AugSept—Oct .—Nov.. . .D e c . . .

1977: Jan . . . .Feb. . . .Mar. . .

May'."."June.. .

Ju ly . . .A u g . . .Sept . . .Oct . . . .N o v . . .D e c . . .

1978: J a n . . . .Feb. . . .Mar. . .Apr. . . .May. . .June.. .

Ju ly . . .A u g . . .Sept . . .Oct . . . .N o v . . .D e c . . .

Totalfin-

ishedgoods

158.6158.8159.0160.1161.4162.8

164.2165.0166.3167.5168.1168.2

168.4168.2168.3169.4169.6170.0

170.3170.0171.0171.5172.2173.8

174.8176.6178.0179.2180.6180.8

181.1181.5182.1183.2184.5185.3

186.6188.6189.6192.0193.4194.8

195.8195.8197.2198.9200.4202.1

Con-sum-

erfin-

ishedfoods

175.6174.6173.1175.3178.2181.1

183.7183.9186.0187.1186.6185.2

183.3180.8180.1183.1183.4182.0

180.3177.1177.4176.5177.0180.7

181.3185.9188.3189.6192.2190.3

189.9189.3189.2189.5191.9192.6

194.8200.7202.1205.8206.7209.1

208.1205.2208.6212.1213.4215.4

Finished goods

Finished goods excluding consumerfnn/lo

Total

151.6152.4153.3153.9154.5155.2

156.1157.1158.2159.4160.5161.3

162.0162.6163.0163.4163.6164.6

165.5166.2167.3168.3169.0169.9

171.0172.0173.0174.3175.2176.0

176.5177.2178.2179.5180.3181.2

182.2183.0183.9185.8187.3188.4

190.0190.8191.7192.9194.5196.0

IUUUO

Consumer goods

Total

149.1149.7150.2150.6151.1152.0

152.9154.2155.2156.4157.4158.3

158.8159.2159.3159.5159.6160.6

161.6162.5163.7164.2165.2165.6

167.2168.1169.2170.7171.5172.4

172.6173.2174.1174.8175.4176.1

177.1177.6178.4180.8182.3183.2

185.0185.9186.6187.8189.1190.7

Dur-able

135.0135.8136.6136.9137.1137.6

138.0138.6139.2140.1141.1141.5

142.0142.5142.8143.0143.3144.0

144.3144.9146.0146.0146.6146.9

148.0148.7149.4150.6151.3151.9

152.4153.7154.0154.9155.5156.1

157.4157.7158.7163.2165.5165.8

168.7170.1170.3170.3171.1171.9

Non-dura-ble

158.4158.8159.1159.7160.4161.4

162.7164.4165.8167.0168.2169.2

170.1170.3170.2170.4170.6172.0

173.3174.4175.5176.3177.6178.2

180.0181.2182.7184.2185.2186.1

186.2186.3187.5188.1188.8189.5

190.3190.9191.5192.4193.3194.6

195.5196.1197.1199.2200.9203.0

Capi-tal

equip-ment i

156.9158.2159.7160.7161.4162.0

162.9163.3164.5165.9166.8167.7

168.8169.7170.5171.2171.7172.5

173.3173.7174.9176.5177.0178.5

178.9179.9180.7181.7182.8183.7

184.5185.4186.4188.9189.9191.3

192.3193.5194.6195.7197.3198.7

199.9200.7201.8203.0205.0206.6

Totalcon-

sumerfin-

ishedgoods

159.1158.9158.7159.9161.3162.9

164.5165.3166.8167.9168.4168.3

168.0167.5167.4168.5168.6168.9

168.9168.4169.3169.3170.2171.8

173.0175.2176.8178.1179.6179.5

179.5179.7180.3180.8182.1182.7

184.2186.4187.5190.4191.6193.1

194.0193.6195.1197.1198.5200.2

Intermediate materi-• als, supplies, and

components

Total

179.5179.2178.4178.8178.3177.8

178.9180.0180.4182.3182.8183.2

184.3185.2186.0186.6187.3188.4

190.0190.1191.7192.4193.4194.4

195.7197.3199.3201.1202.0201.6

202.2202.6203.5204.3205.2206.0

207.9209.7211.3212.4213.7214.6

215.5216.4217.9220.6222.2223.5

Foodsand

feeds 2

218.7209.1197.4198.9192.0184.4

193.4195.8192.4192.3186.6180.5

180.7181.2183.1180.5188.5193.2

202.4184.1188.7184.9184.6187.0

189.7196.2201.9212.5216.9199.9

185.3176.2172.9172.8185.4183.3

187.2191.0201.1201.2206.4200.8

204.0197.1201.5207.1206.4208.8

Other

175.9176.4176.6177.0177.2177.3

177.6178.6179.3181.4182.5183.5

184.7185.6186.3187.1187.2188.3

189.4190.4192.0192.9193.9194.9

196.2197.5199.1200.5201.2201.8

203.2204.2205.3206.1206.4207.4

209.2210.9212.0213.1214.2215.4

216.2217.6218.9221.4223.2224.4

Crude materUfurther proce

Total

190.4187.4182.2189.9196.0195.2

199.6201.6204.3206.7204.8203.2

203.1202.3199.6205.2204.1208.2

208.6204.2203.7203.6208.6209.5

210.2219.0221.0222.5222.3213.4

209.8206.3205.7207.4214.4217.2

221.6228.7231.7238.5238.9243.1

241.7238.6242.3249.6253.3254.4

Food-stuffs

_ _ J

anafeed-

stuffs

183.5179.1172.6183.7191.1190.0

196.4199.3200.9204.2201.4196.5

195.3194.6188.2195.7193.1195.6

190.8187.1186.0181.6183.4188.3

192.0198.2198.7204.3200.0189.9

185.8180.2179.8182.2189.9191.1

196.4205.6208.0217.0217.1221.3

215.7211.9215.9223.7226.5226.1

ils forssing

Other

203.5203.9200.8201.7205.4205.5

205.9206.6210.8211.5211.1215.8

218.2216.6220.0223.4224.9232.2

242.8236.7236.9245.5255.9248.8

244.6258.8263.4265.5264.1257.9

255.4255.6254.4254.9260.9266.3

269.4272.1276.5278.8279.8284.2

291.0289.5292.5298.6304.1308.1

1 Formerly called producer finished goods.2 Intermediate materials for food manufacturing and manufactured animal feeds.Source: Department of Labor, Bureau of Labor Statistics.

247

TABLE B-57.—Producer price indexes by major commodity groups, 1929—78[1967=100]

Year or month

1929

1933

1939

1940 . .194119421943 . .194419451946 . .1947... . .19481949

19501951—19521953.1954...195519561957...19581959

19601961...196219631964...1965.1966...1967...19681969

1970197119721973197419751976 .19771978

1977: Jan..FebMarApr. _MayJune

JulyAug..SeptOctNov. .Dec__

1978: JanFeb. . . _Mar _.AprMayJune.. .

July__AugSeptOct.NovD e c -

Farm products and processedfoods and feeds

Total

94 3101.589.6

93.9106 9102 796.095 791.290 693 798.193.5

93.793 794.793 893 297.1

103.5100 0102 4108.0

111 7113.9122 4159.1177 4184.2183 1188 8206 7

184.8188.4190 9195.9196 8191 5

188.7184.3184.0184.0187.0189.4

192 2196.8200.0205 5207.6210.4

210.3205 3209.5213.6212.5216.1

Farmproducts

64.1

31.4

40.0

41.450.364.875.075.578 590.9

109.4117.5101.6

106.7124.2117.2106.2104.798.296.999.5

103.997.5

97.296.398.096.094.698.7

105.9100.0102 5109.1

111.0112.9125.0176.3187.7186.7191.0192.5212.7

193.5199.1202.5208.2204.3192.8

190.2181.8182.0182.0185.6188.3

192.2198.9204.2213.7215.8219.5

219.9210.3215.3220.7219.2222.4

Proc-essedfoodsand

feeds

82.988.780.6

83.492 791.687.488 985.084 987.491.889.4

89.591.091.992 592.395.5

101.2100.0102 2107.3

112 1114.5120.8148.1170 9182.6178.0186 1202.6

179.3181.9183.9188.5191.9190.1

187.2184.9184.4184.3186.9189.3

191.5194.9196.9200.2202.4204.6

204.2201.8205.5209.0208.1211.9

Industrial commodities

Total

48.6

37.8

43.3

44.047.350.751.552.353.058.070.876.975.3

78.086.184.184.885.086.990.893.393.695.3

95.394.894.894.795.296.498.5

100.0102.5106.0

110.0114.1117.9125.9153.8171.5182.4195.1209.4

188.4190.0191.7193.3194.2194.7

195.9196.9197.8199.1199.3200.0

201.6202.9204.1206.1207.4208.7

210.1211.4212.4214.7216.0217.0

Textileproducts

andapparel

103.6108.198.9

102.7114.6103.4100.898.698.798.798.897.098.4

99.597.798.698.599.299.8

100.1100.0103.7106.0

107.1109.0113.6123.8139.1137.9148.2154.0159.7

150.8151.7152.4153.7154.0154.6

154.5154.6155.1155.2155.3155.8

156.5157.0157.4157.9158.6159.2

160.0160.5161.1162.2163.0163.5

Hides,skins,

leather,and

relatedproducts

48.9

36.3

42.8

45.248.452.852.752.252.961.183.384.279.9

86.399.180.181.3

77 381.982.082.994.2

90.891.792.790.090.394.3

103.4100.0103.2108.9

110.3114.1131.3143.1145.1148.5167.8179.3200.1

175.3176.9177.9179.9181.9179.4

180.0180.2179.6179.2180.0181.5

185.8187.2187.9191.9193.6195.3

197.3205.1211.0213.3216.0216.5

Fuelsand

relatedproducts,

andpower1

59.4

47.6

52.3

51.454.656.257.859.560.164.476.990.586.2

87.190.390.192.691.391.294.099.195.395.3

96.197.296.796.393.795.597.8

100.098.9

100.9

106.2115.2118.6134.3208.3245.1265.6302.2322.5

278.8289.1293.7298.8302.4304.3

307.0309.5309.9310.7310.5312.0

312.8312.9315.3317.3319.7323.2

324.5324.9327.0328.9329.9334.1

Chemicalsand alliedproducts1

47 4

51.5

52.457.063.364.164.865.270.593.795.987.6

88.9101.796.597.798.998.599.1

101.2102.0101.6

101.8100.799.197.998.399.099.4

100.099.899.9

102.2104.1104.2110.0146.8181.3187.2192.8198.7

188.9190.1191.2192.9194.0193.9

193.6193.6193.2193.7193.9194.1

194.1195.2196.1196.9198.6198.9

199.8199.5200.2201.5202.3202.2

See next page for continuation of table.

248

TABLE B-57.—Producer price indexes by major commodity groups, 1929-78—Continued11967=100]

Year or month

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

197019711972 .197319741975._197619771978- - - .

1977: JanFeb..MarAprMayJune

JulyAugSeptOctNovDec

1978: Jan .FebMar..AprMayJune

July.AugSeptOctNovDec

Rubberand

plasticproducts

59.4

40.2

61.2

57.161.571.673 672.770.570 870.572.870.5

85.9105.495.589.190.4

102.4103.8103.4103.3102.9

103.199.296.396.895.595.997.8

100.0103.4105.3

108.3109.1109.3112.4136.2150.2159.2167.6174.7

164.6164.2164 6165.7166.3167.5

168.9169.3169.5170 2170.2170.0

170.2170.2171.4172.8173.8174.5

174.9175.7176.6178.0179.2179.6

Lumberand

woodproducts

25.0

19.0

24.8

27.432.735.637 740.641.247.273.484.077.7

89.397.294.494.392.697.198.593.592.498.8

95.391.091.693.595.495.9

100.2100.0113.3125.3

113.6127.3144.3177 2183.6176.9205.6236.3275.9

222.8224.4229.0229.8229.5228.8

235.6242.7252.9247.8243.3249.2

256.4263.7266.2269.6273.4278.5

277.5281.6282.8284.1288.5288.7

Industrial commodities—Continue*

Pulp,paper,and

alliedproducts

72.575.772.4

74.388.085.785.585.587.893.695.496.497.3

98.195.296.395.695.496.298.8

100.0101.1104.0

108.2110.1113.4122.1151.7170.4179.4186.4195.5

182.9183.0183 6185.3186.2187.3

187.8187.8188.1188.7188.2187.6

188.0188.6189.7191.9193.2193.5

195. 5195.8199.1202.2203.7204.9

Metalsand

metalproducts

40.2

30.7

37.6

37.838 539.139 039 039.644 354.962.563.0

66.373.873.976.376.982.189.291.090.492.3

92.491.991.291.393.896.498.8

100.0102.6108.5

116.6118.7123.5132.8171.9185.6195.9209.0227.1

202.1203.2206.5208.2208.5207.7

210.6211.7212.6211.8212.0213.3

215.2219.1221.1223.9224.6225.9

227.3231.0231.5234.0235.4236.6

Machin-ery andequip-ment

41 3

41.442 142.842 442 142.246 453 758.261.0

63.170.570.672.273.475.781.887.689.491.3

92.091.992.092.292.893.996.8

100.0103.2106.5

111.4115.5117.9121.7139.4161.4171.0181.7196.0

176.7177.5178.2178.9180.0180.7

181.8182.8183.8185.6186.8187.5

189.3190.3191.6192.7193.9195.3

196.5197.5198.7200.4202.5203.6

Furni-ture andhouse-

holddurables

55.8

44 6

52 6

53.857 261.861 463 163.267 177.081.682.9

84.791.890.191.992.993.395.898.399.199.3

99.098.497.797.097.496.998.0

100.0102.8104.9

107.5110.0111.4115.2127.9139.7145.6151.5160.1

148.8149.1149.6150.1150.6151.5

151.4152.6152.7153.0153.8154.2

156.5156.7157.7158.4159.2159.5

161.4161.8161.3162.2162.9163.7

i

Nonme-tallic

mineralproducts

51.2

47 2

49 1

49.150 252.352 453 555.759 366 371.673.5

75.480 180.183.385.187.591.394.895.897.0

97.297.697.697.197.397.598.4

100.0103.7107.7

112.9122.4126.1130.2153.2174.0186.3200.5222.8

192.4193.6195.1198.6199.3200.6

201.7202.5204.3205.4205.7206.6

212.9215.1215.9218.4219.3222.0

224.7227.2227.8229.0229.8230.9

Trans-portation

equip-ment:Motor

vehiclesand

equip-ment2

41 9

34 8

39 1

40 443 247 247 247 548 356 064 170.875.7

75.379 484.083.683 886.391.295.198.1

100.3

98.898.698.697.898.398.598.6

100.0102.8104.8

108.7114.9118.0119.2129.2144.6153.8163.7175.9

159.2159.4160.7161.0161.4161.9

161.9163.2163.9170.7170.7170.9

171.3171.8171.9172.9174.6175.0

175.5175.8175.8181.3182.1182.5

Miscel-laneousproducts

73 576.578.0

79.283 983.485.686.486.587.690.292.092.2

93.093.393.794.595.295.997.7

100.0102.2105.2

109.9112.9114.6119.7133.1147.7153.7164.3184.7

160.2160.6161.0162.5163.1163.5

163.9164.2166.0168.4168.9169.7

171.6171.3172.6181.4182.6184.3

189.7191.3191.7193.5193.0193.8

* Prices for some items in this grouping are lagged and refer to 1 month earlier than the index month.2 Index for total transportation equipment is not shown but is available beginning December 1968.

Source: Department of Labor, Bureau of Labor Statistics.

249

TABLE B-58.—Changes in producer price indexes for finished goods, 1948-78

[Percent change]

Year or month

19481949 - -

19501951195219531954

1955195g195719581959

I9601961196219631964

19651966196719681969

19701971197219731974.

1975197619771978

1977: JanFebMarAprMayJune

JulyAug _-Sept.Oct . -NovDec

1978: JanFebMarAprMayJune

JulyAugS e p t . . .OctNov.Dec

Totalfinished

goods

Dec.to

Dec.*

3.0-4.6

10.42.9

-2.2.5

- . 1

1.24.23.2

- . 4

1.8

.1- . 2

.5

3.32.21.63.14.8

2.23.23.8

11.818.3

6.63.36.69.1

Yearto

year

8 0-2.9

1.89.5

- . 6-1.0

.22.83.62.3

- . 2

.80

3.4

1.73.21.22.93.6

3.53.13.19.1

15.3

10.84.26.07.8

Consumerfinished

foods

Dec.to

Dec*

-2 .4-7.4

13.35.3

-5.9-2.2-1.9

-2.93.65.3

-3 .7

5.2-1 .8

.5-1 .3

.4

9.11.4

4.88.2

-2 .55.98.0

22.513.0

5.5-2.5

6.611.9

Yearto

year

9 2-8 .1

1.912.4- . 9

-5 .2- . 8

-2 .5- . 23.55.8

-4.7

2.2

.9-1 .2

3.86.5

-1.63.76.1

3.21.65.6

20.314.0

8.4- . 44.99.4

Finished goods excluding consumer foods

Total

Dec.to

Dec.*

2.43.4

4.32.12.06.7

21.2

7.25.56.68.2

Yearto

year

2.62.7

3.53.72.04.1

16.0

12.16.06.57.2

Consumergoods

Dec.to

Dec*

4 0—4.5

8.2.9

-1 .11.6.3

1.72.51.7.2.8

.4- . 3

.1

.91.72.12.02.9

3.92.02.07.4

20.5

6.74.96.18.3

Yearto

year

6 3-2 .1

1.67.2

-1 .3.9.3

.82.42.5

1.3

.4- . 1- . 20

- . 1

.71.61.92.12.4

3.03.41.84.5

17.0

10.55.76.46.7

Capitalequipment

Dec.to

Dec*

10 4—.6

10.33.4

82.31 i

5 68.34 31.31.0

.1

.2

.3

.5

.9

1.53.93.13.04.6

4.92.42.05.3

22.6

8.26.47.28.0

Yearto

year

9.05.0

2.49.71.71.71.2

3.07.46.22.61.9

.2

.4

.21.0

1.22.53.33.53.3

4.84.12.53.3

14.2

15.26.66.57.9

Change from preceding month

Unad-justed

0.6.9

'.7.8.1

.40.3

1.1.4.5

.8

.8

.31.3.8.7

.8- . 2

l'.4.5.9

Sea-sonally

ad-justed

0.61.0.8

.'8

.1

.2

.2

.3

.6

.7

.4

.71.1

L3.7.7

0*.7.98

.8

Unad-justed

0.31.9.9

1.02.0

- . 8

.7-1 .1

.1- . 1

.41.2

1.12.4.3

2.11.11.3

-2! l1.71.5

- 21.8

Sea-sonally

ad-justed

0.32.51.3

L4-1.0

- . 2- . 3_ . l

.21.3.4

1.13.0

i.sL2

- . 5-1.4

1.71.7

6.9

Unad-justed

0.7.5

.'6

'.5

.3

.45

1.53

.3

7.3.3

1.0

!6

.9

.4

.41.4

.6

Sea-sonally

ad-justed

0.6.6.6.8.5.5

.3

.4

.6

.74

.5

.6

.4

.51.0.8.6

.8

.4

'.68

.8

Unad-justed

0.8.5.5

!4.5

.3

*41.0

2.2

7.2

\\l.8.5

1.0.4.2

1.4

.7

Sea-sonally

ad-justed

1.0.5.7.9.5.5

.1

!5.43

.4

6.3

L3.8.5

1.0.5.4. 6

7.8

Unad-justed

0.5.3.3.5.4.4

.4

.5

.42.3.5.4

.7

.4

.5

.5

!6

.6

.4

.51.5

9

Sea-sonally

ad-justed

0.2.6.4.6.6.5

.4

.5

.51.3.5.7

.5

.6

.6

.6

.8

.6

.4

".61.0.8

1 Changes from December to December are based on unadjusted indexes.

Source: Department of Labor, Bureau of Labor Statistics.

250

MONEY STOCK, CREDIT, AND FINANCET A B L E B-59.—Money stock'measures, 1953-78

[Averages of daily figures; billions of dollars, seasonally adjusted, except as noted]

Year andmonth

1953: Dec1954: Dec1955: Dec1956: Dec1957: Dec1958: Dec1959: Dec...

1960: Dec1961: Dec1962: Dec""1963: Dec...1964: Dec1965: Dec .11966: Dec1967: Dec".".:1968: Dec...1969: Dec...

1970: D e c .1971: D e c .1972: D e c .1973: D e c .1974: D e c .1975: D e c .1976: D e c1977: D e c .1978: D e c .

1977: Jan . .Feb. .Mar..Apr..May..June.

July..Aug..Sept..Oct . .Nov..D e c .

1978: Jan.. .Feb...Mar..Apr...May..June..

July..Aug. .

S::Nov..Dec p.

(

Mi

128.8132.3135.2136.9135.9141.1143.4

144.2148.7150.9156.5163.7171.4175.8187.4202.5209.0

219.7234.0255.3270.5282.9295.2313.5338.5361.1

315.9317.3319.5323.2323.7325.6

328.7330.5333.0335.9336.2338.5

341.7341.8342.9348.5350.6352.8

354.2356.7360.9362.0360.6361.1

)verall measures i

Mi+

280.7297.7301.8

317.3345.8378.9397.7419.0456.4516.8560.2584.1

523.1527.0531.1536.8538.3540.3

544.6549.4553.7557.5557.7560.2

564.6565.0566.2572.6575.2577.1

577.8582.0587.9588.8585.3584.1

Mi

210.9

217.1228 6242.9258.9277.1301.4318.2350.0383.3392.5

423.7471.9525.3571.4612.2664.7740.5809.5872.0

747.4753.1759.2766.1769.8775.5

784.2789.2795.1801.4805.4809.5

815.9819.1822.6830.3835.2840.6

846.2853.5862.4867.4870.5872.0

M3

303.8

319.3342.1369.2400.3434.4471.8495.5544.0589.9607.4

656.3745.2844.4919.2981.2

1,092.51,236.51, 376.11,498.5

1,249.61,260.71,271.71,283.41,292.21, 303.3

1,318.51,331.31, 344.91,357.91, 367.11,376.1

1,386.61,393.11,400.31,411.41,419.91,429.8

1,441.01,455.11, 472.11,483.91,492.11,498.5

Components and related items

Cur-rency

27.727.427.828.228.328.628.9

29.029 630.632.534.336.338.340.443.446.1

49.152.656.861.567.873.780.788.697.5

81.381.982.483.183.884.2

85.185.586.387.187.788.6

89.490.190.791.292.192.8

93.394.095.296.096.797.5

Deposits at commercial banks

De-mand

101.1104.9107.4108.7107.6112.6114.5

115.2119.1120.3124.1129.5135.1137.5147.0159.0162.9

170.7181.5198.4209.0215.1221.5232.8249.9263.6

234.6235.4237.1240.0240.0241.4

243.6245.0246.6248.7248.5249.9

252.2251.7252.3257.3258.5259.9

260.9262.8265.7266.1263.9263.6

Time and savings

Total

44.548.350.051.957.465.467.4

72.982 797.6

112.0126.2146.4157.9183.3204.3194.4

229.2271.1313.5363.9418.3450.9489.7545.0607.8

494.6499.0502.0504.5508.9513.2

518.3521.9525.9531.9540.1545.0

550.6556.7561.7565.2571.6574.5

579.4583.0589.7593.6605.3607.8

Time

LargeCDs 3

2.85.79.6

12.816.415.520.623.510.9

25.333.343.563.089.081.362.774.097.0

63.163.362.261.662.963.3

62.863.263.866.470.974.0

76.379.482.083.487.186.7

87.486.388.188.295.497.0

Other

Sav-ings a

67.4

727992

102113130142

69.485.690.7

106.5126.2146.5173.9193.5209.1225.1251.5290.6

225.7227.5229.7230.9233.0236.9

241.4241.7243.3246.0249.7251.5

253.6256.4258.7260.1262.6266.1

271.1274.3277.4281.5288.0290.6

.9

.9

.0

.3

.4

.0

.493.395.292.8

97.4111.6123.5127.0135.8160.5201.9219.6220.2

205.8208.3210.1212.0213.0213.0

214.1217.0218.8219.6219.4219.6

220.7220.9221.0221.6222.0221.7

220.9222.4224.2223.9221.8220.2

De-positsat non-

bankthrift

institu-tions *

92.9

102.3113.4126.4141.4157.3170.4177.3194.0206.7214.9

232.6273.3319.2347.8369.1427.8496.0566.6626.5

502.2507.6512.5517.3522.4527.8

534.3542.1549.8556.5561.7566.6

570.7574.0577.7581.2584.7589.2

594.7601.6609.6616.5621.6626.5

Othercheck-

ablede-

posits(unad-

justed) «

0.1

.'3

.4

.71.42.12.8

1.41.41.51.61.61.7

1.81.81.92.02.12.1

2.22.32.32.52.62.6

2.72.82.82.82.82.8

U.S.Govern-

mentde-

posits(unad-justed)'

3.85.03.43.43.53.94.9

4.74.95.65.15.54.63.45.05.05.6

7.36.97.46.34.94.14.45.1

10.2

3.94.24.35.43.65.0

3.63.45.03.73.55.1

4.34.34.85.04.06.2

4.53.66.24.38.0

10.2

1 Mi is currency plus demand deposits; Mi+ is Mi plus savings deposits at commercial banks and checkable deposits atnonbank thrift institutions; M2 is Mi plus time and savings deposits at commercial banks other than large certificates ofdeposit (CDs); and M3 is M2 plus deposits at nonbank thrift institutions.

2 Negotiable time certificates of deposit (CDs) issued in denominations of $100,000 or more by large weekly reportingcommercial banks.

3 Includes negotiable order of withdrawal (NOW) accounts at commercial banks.4 Average of the beginning and end-of-month deposits of mutual savings banks, savings capital at savings and loanassociations, and credit union shares.

«Includes negotiable order of withdrawal (NOW) accounts at thrift institutions, credit union share draft accounts, anddemand deposits at mutual savings banks.

(Deposits at all commercial banks. Includes Treasury note balances beginning November 1978.Source: Board of Governors of the Federal Reserve System.

251

TABLE B-60.—Commercial bank loans and investments, 1930-78[Billions of dollars]

End of yearor month *

1930:June1933: June1939194019411942194319441945194619471948

194819491950195119521953195419551956195719581959 3

I960196119621963196419651966196719681969 5

1970197119721973 _197419751976...19771978 "1978: Jan. .

FebMarAprMay __June._ .

July P . _Aug pSept *>Oct pNov vDec p

Total loansand invest-

ments'

48.930.440.743.950.767.485.1

105.5124.0114.0116.3114.2

Loans

Total a

34.516.317.218.821.719.219.121.626.131.138.142.4

Commercialand

industrial

Investments

U.S. Treasurysecurities

5.07.5

16.317.821.841.459.877.690.674.869.262.6

Othersecurities

9.46.57.17.47.26.86.16.37.38.19.09.2

Loans plusloans sold to

bank affiliates 2

Seasonally adjusted

113 0118.7124.7130.2139 1143.1153.1157 6161.6166.4181.2188.7197.4212.8231.2250.2272.3300.1

* 316.1352.0390.2401.7435.5485.7558.0633.4691.1721.8785.1870.6967.3881.2887.7894.1909.0921.7932.2

940.7944.6952.4960.9966.5967.3

41.542.051.156.562.866.269.180.688.191.595.6

110.5116.7123.6137.3153.7172.9198.2

«213.9231.3258.2279.4292.0

8 320.9378.9449.0500.2496.9538.9617.0709.0625.1628.4637.2647.6659.7667.8

675.1680.2687.3696.8706.8709.0

39.442.143.947.652.158.469.578.686.295.9

105.7110.0116.2130.4156.6183.5176.2179.7201.4228.9203.8205.8209.8212.4217.9219.0

220.8222.8224.6227.0228.9228.9

62.366.461.160.462.262.267.660.357.256.965.157.759.965.364.761.560.757.153.559.460.751.257.860.662.654.551.180.198.095.688.496.599.496.198.397.9

100.2

100.697.997.295.290.388.4

9.210.312.413.414.214.716.416.816.317.920.520.520.823.929.235.038.744.8

M8.761.371.371.185.7

8104.2116.5129.9139.8144.8148.2158.0169.9159.6159.9160.8163.1164.1164.2

165.0166.5167.9168.9169.4169.9

110.5116.7123.6137.3153.7172.9198.2

* 213. S231.3258.2283.3294.7

«323.7381.5453.3

1505.0501.3542.7621.9712.8629.9633.0641.7652.1664.1672.3

679.7684.9691.9700.7710.5712.8

1 Data are for last Wednesday of month or year (except June 30 and December 31 call dates).2 Adjusted to exclude all interbank loans beginning 1948 and domestic interbank loans only beginning January 1959.* Beginning January 1959, loans and investments are reported gross, without valuation reserves deducted, rather than

net of valuation reserves, as in earlier periods.* Effective June 1966, balances accumulated for payment of personal loans (then about $1.1 billion) are excluded from

loans at all commercial banks, and certain certificates of CCC and Export-Import Bank (then about $1 billion) are includedin.other securities rather than in loans.

« Beginning June 1969, data include all bank-premises subsidiaries and other significant majority-owned domesticsubsidiaries; earlier data include commercial banks only.

e Beginning June 1971, Farmers Home Administration insured notes (then about $0.7 billion) are classified as othersecurities rather than as loans.

7 Beginning August 1974, reflects new definition of affiliates included and different group of reporting banks. Amount oftotal loans sold was reduced by $0.1 billion.

Note.—In addition to footnoted changes affecting comparability of the data, comparability may also be affected by bankmergers, liquidations, loan ^classifications, etc.

Source: Board of Governors of the Federal Reserve System.

252

TABLE B-61.—Liquid asset holdings of private domestic nonfinancial investors, 1952-78

[Average outstanding; billions of dollars, seasonally adjusted]

Yearand

month

1952: Dec...1953: Dec1954: Dec

1955: Dec1956: Dec1957: Dec1958: Dec...1959: Dec

1960: Dec1961: D e c1962: Dec1963: Dec1964: D e c . _

1965: Dec1966: Dec1967: Dec1968: Dec1969: D e c .

1970: D e c1971: Dec __.1972: Dec1973: Dec1974: Dec _._

1975: Dec ____1976: Dec1977: Dec _1978: Dec p .

1977:JanFebMar..Apr..May..__ _ _June

JulyAug.SeptOct..Nov.Dec

1978: Jan.Feb.Mar. .Apr.MayJune

JulyAugSeptOct...Nov... .Dec »>.._

Totalliquidassets

269.1284.5295.2

314 7325.3337 9354.2373.2

386.6410.4441.8479.1515.2

559.4587 0638.1696 6722.5

769.7852.5967 2

1, 085.31,170.2

1, 290.61,424 61,591.01,757.0

1,438.11,453 01, 463.91, 476 21, 485.71,496.5

1,512.91, 527.01,542.71,561.21, 576.51,591.0

1,607.71,619.21,631.01,647.41, 662.31,674.2

1, 686. 21,699.21,720. 31,732.61,747. 51,757.0

Currency and deposits

Total

200.9211.0223.9

235.4246.2257.2277.4290 7

305.7326.2352.2382.2414.6

451.2474.4521.1565.6582.9

632.7719.0816.6887.7945.0

1,055.31,195.21,328.31,451.8

1, 206.91,217.91,228.31 240.31, 248.11,258.0

1,272.61, 284.01,297.81,311.21,319.21,328.3

1,339.11, 345.61,352.81,363.51,371.51,381.6

1, 393.81,407.81 424.31, 436.71,445.21,451.8

Cur-rency i

27.327.727.4

27 828.228 328.628.9

29.029.630.632.534.3

36.338.340.443.446.1

49.152.656 861.567.8

73.780.788.697.5

81.381 982.483 183.884.2

85.185.586.387.187.788.6

89.490 190.791.292.192.8

93.394.095 296.096.797.5

De-mand

de-posits i

91.692.896.2

98 599.597 9

102.2104.2

104.6106.3106.5109 7114.3

119.4121 9130.5141 2145.2

152.0161.8176 1183.7187.1

192.4200.0213.9226.4

201.4202 1203.4206 8206.0206.5

208.4208.5210.3213.0212.1213.9

216.6216.0216.3221.5222.1223.1

224.5226.2228 4228.5226.3226.4

Time deposits

Com-mer-cial

banksl

39.141.945.1

46 949.054 661 864.7

69.977.088.898.6

108.8

125.1136 9156.2174 3176.8

198.9233.6264 3294.4321.1

360.6417.3459.2501.6

422.0426 3430.0433 1436.0439.4

444.8447.8451.4454.6457.6459.2

462.4465 5468.1469.6472 5476.5

481.3486.1491 0495.7500.5501.6

Non-bankthrift

institu-tions 2

42.848.655.2

62 369.576 484.892.9

102.3113.4126.4141.4157.3

170.4177.3194.0206.7214.9

232.7271.1319 3348.1369.1

428.6497.3566.6626.4

502.2507 6512.5517 3522.4527.8

534.3542.1549.8556.5561.7566.6

570.7574.0577.7581.2584.7589.2

594.7601.6609 6616.5621.6626.4

U.S. Treasurysecurities

Sav-ings

bonds3

49 249.349.9

50 250 148 347.846.1

45.746.546.948.149.0

49.650 251.151 851.7

52.054.357.660.463.3

67.271.976.680.6

72.372 673.073 473.874.2

74.775.175.375.876.276.6

77.077.477.878.278.678.9

79.379.579.880.180.480.6

Short-term

market-ablesecu-rities *

18 423.120.1

27 727 430 627 635.5

32.432.033.435 033.0

35.837.734.740 953.2

41.931.534 343.447.1

66.366.577.682.7

66.970 070.470 168.967.9

69.271.773.375.577.177.6

79.580.179.880.781.681.7

80.180.783 683.182.182.7

Nego-tiablecertifi-catesof de-posit s

2.75.39 0

11.6

15.114 318.721 78.3

21 827.636 253.870.4

58.443 252.368.5

43.944 142.941 942.943.4

43.243.744.046.150.052.3

53.454.856.558.662.361.7

61.759.660 760.266.968.5

Otherprivatemoneymarketinstru-ments •

0 71.11.2

1 41 61 81 4

9

2.83.14.04 86.9

7.610 412.416 626.4

21.320.122 540.044.4

43.347.856.373.4

48.048 549.350.451.852.9

53.252.552.152.654.056.3

58.761.464.166.468.370.4

71.371.672.072.573.073.4

i Money stock components (see Table B-59) after deducting foreign holdings and holdings by domestic financial institu-tions. The three columns add to M2 held by domestic nonfinancial sectors.

* As published in money stock statistics.3 Series E and H savings bonds, other savings bonds, and savings notes held by individuals.* Short-term marketable U.S. Treasury securities excluding official, foreign, and financial institution holdings.«Certificates over $100,000 at weekly reporting banks, except foreign holdings.* Commercial paper, bankers' acceptances, Federal funds, security repurchase agreements, and money market mutual

fund shares held outside banks and other financial institutions.Source: Board of Governors of the Federal Reserve System.

253

278-216 O - 79 - 17

TABLE B-62.—Total funds raised in credit markets by nonfinancial sectors, 1970-78

[Billions of dollars]

Item

Total funds raised

U.S. Government

Treasury issuesAgency issues and mortgages

Foreign

Corporate equities

Debt instruments

Private domestic nonfinancial sectors

Corporate equitiesDebt instruments

Debt capital instruments

State and local government obli-gations.

Corporate bondsMortgages _

Home...Multi-family residentialCommercialFarm

Other debt instruments

Consumer credit.Bank loans n.e.c.Open-market paperOther

By borrowing sector: Total

State and local governmentsHouseholds _Nonfinancial business._

FarmNonfarm noncorporateCorporate

Total funds advanced to nonfinancial sectors

Financed directly or indirectly by:

Private domestic nonfinancial sectors

Deposits

Demand deposits and currency,.Time and savings accounts

At commercial banksAt savings institutions

Credit market instruments, net.

U.S. Government securitiesPrivate credit market instru-

ments _Corporate equities.Less security debt

Other sources:

Foreign fundsAt banksDirect..

Change in U.S. Government cashbalance

U.S. Government loansPrivate insurance and pension re-

serves.Other

See next page for continuation of table.

1970 1971 1972 1973 1974 1975 1976

100.6

11.9

12.9-1 .0

2.7

2! 7

86.0

5.780.3

60.2

11.219.829.214.46.97.1

20.1

5.96.82.64.8

86.0

11.324.949.82.36.8

40.7

100.6

63.4

64.2

8.955.338.716.6

- 7 . 3

7.2-1 .6- . 9

4.2-6 .911.1

2.82.8

21.95.6

153.5

24.9

26.0-1 .1

5.2

.05.2

123.5

11.4112.0

86.8

17.418.850.528.6

9.79.82.4

25.3

13.18.1

- . 44.4

123.5

17.745.260.64.5

11.644.5

153.5

85.9

92.8

13.779.139.539.6

-6 .9

-10.7

11.0-5 .1

2.1

23.1-4 .127.2

3.22.8

24.414.2

176.0

15.1

14.3.8

4.0

- . 44.4

156.9

10.9146.0

102.3

14.712.275.442.612.716.53.6

43.7

17.118.9

.86.9

156.9

14.564.378.15.8

14.158.3

176.0

116.4

105.0

21.283.838.345.4

11.5

3.9

17.6-5 .7

4.3

15.54.6

10.8

- . 31.8

26.116.4

203.8

8.3

7.9.4

6.2

- . 26.4

189.3

7.9181.4

105.0

14.79.2

81.246.410.418.95.5

76.4

23.839.82.5

10.3

189.3

13.280.995.29.7

12.872.7

203.8

140.7

90.6

14.476.147.728.5

50.1

19.2

33.6-6 .9- 4 . 2

9.35.83.5

-1 .72.8

30.622.0

188.8

11.8

12.0- . 2

15.3

- . 215.6

161.6

4.1157.5

98.0

16.519.761.934.86.9

15.15.0

59.6

10.229.06.6

13.7

161.6

15.549.297.07.97.4

81.8

188.8

116.5

75.7

8.966.745.021.8

40.8

17.5

24.6- 2 . 2

28.616.811.7

- 4 . 69.7

33.25.4

208.1

85.4

85.8- . 4

13.2

.213.0

109.5

9.999.6

97.8

15.627.255.039.5

.011.04.6

1.8

9.4-14.0-2 .6

9.0

109.5

13.248.647.78.72.0

37.0

208.1

137.8

96.8

12.084.825.359.4

41.0

23.0

21.9-3 .6

.2

11.7.9

10.7

2.915.1

39.61.1

272.5

69.0

69.1- . 1

20.7

.320.4

182.8

10.5172.3

126.8

19.022.885.063.7

1.813.46.1

45.5

23.63.54.0

14.4

182.8

18.589.974.411.05.2

58.2

272.5

166.2

128.8

16.6112.243.768.5

37.5

19.6

24.6- 3 . 4

3.3

23.05.1

17.9

3.28.9

48.223.0

1977

340.5

56.8

57.6- . 9

12.3

.411.9

271.4

2.7268.7

181.1

29.221.0

131.096.47.4

18.48.8

87.6

35.030.62.9

19.0

271.4

25.9139.6106.014.712.678.7

340.5

197.7

144.3

24.2120.151.069.1

53.4

24.6

36.0-5 .1

2.0

53.811.642.2

1.111.8

57.019.1

254

TABLE B-62.— Total funds raised in credit markets by nonfinancial sectors, 1970-78—Continued[Billions of dollars]

Item

1978 unadjustedquarterly flows

III

1978 seasonallyadjusted annual rates

III

Total funds raised

U.S. Government

Treasury securities.—

Agency issues and mortgages

Foreign

Corporate equities

Debt instruments

Private domestic nonfinancial sectors

Corporate equities

Debt instruments

Debt capital instruments

State and local government obligationsCorporate bondsMortgages

HomeMulti-familyCommercialFarm

Other debt instrumentsConsumer creditBank loans n.e.cOpen-market paperOther

By borrowing sector: Total

State and local governmentsHouseholdsNonfinancial business

Farm _Nonfarm noncorporateCorporate

Total funds advanced to nonfinancial sectors..

Financed directly or indirectly by:

Private domestic nonfinancial sectors

Deposits

Demand deposits and currencyTime and savings accounts

At commercial banksAt savings institutions..

Credit market instruments, net

U.S. Government securitiesPrivate credit market instrumentsCorporate equities...Less security debt

Other sources:

Foreign funds..At banksDirect

Change in U.S. Government cash balance...U.S. Government loansPrivate insurance and pension reservesOther...

80.2

20.8

21.1- . 3

2.1

- . 32.5

57.2

.357.0

36.9

3.84.4

28.719.22.44.82.4

20.1

2.49.51.86.4

57.2

3.524.829.02.73.7

22.6

80.2

40.8

17.4

-16.834.217.716.5

23.4

13.71.1.3

14.4-2 .116.4

-6 .45.6

13.312.4

95.4

2.6

2.7- . 1

4.3

- . 0

4.4

88.6

.288.453.6

10.95.2

37.525.22.46.93.0

34.8

15.714.11.03.9

88.6

7.943.637.16.95.0

25.2

95.4

51.1

40.3

13.726.612.014.6

10.8

- . 114.2

-2 .01.3

- . 1.7

11.43.4

16.213.4

87.7

15.1

15.6- . 6

.6

- . 0.7

72.0

.271.8

53.4

10.14.5

38.826.12.87.02.9

18.4

13.52.5.8

1.7

72.0

9.637.425.04.44.2

16.4

87.7

40.8

21.5

-2 .524.17.6

16.4

19.3

11.99.8

- . 91.4

6.91.45.4

4.85.0

15.314.9

380.4

66.1

67.5-1 .4

13.3

- 1 . 314.6

301.0

1.0299.9

171.4

22.214.9

134.492.210.522.29.5

128.5

38.061.35.3

23.9

301.0

20.7142.7137.611.723.6

102.2

380.4

217.3

118.4

11.9106.554.252.3

99.0

44.755.3

.11.1

62.71.7

61.0

-19.328.752.638.3

362.4

51.5

51.9- . 5

14.3

K6

296.6

.7295.9

194.0

35.821.9

136.390.58.9

26.810.2

101.9

51.632.95.1

12.3

296.6

23.4152.8120.419.817.882.8

362.4

204.5

140.6

25.2115.457.957.5

63.9

22.955.1

-8 .85.3

2.12.4

- . 4

27.99.8

65.352.8

355.7

59.3

61.6- 2 . 3

5.1

- . 25.3

291.3

.8290.5

205.4

37.623.5

144.393.911.027.711.7

85.2

43.424.25.6

12.1

291.3

35.4142.1113.917.716.080.2

355.7

211.6

143.4

21.9121.548.573.0

68.2

37.943.5

- 7 . 55.7

21.64.0

17.5

12.216.659.534.4

I

Source: Board of Governors of the Federal Reserve System.

255

TABLE B-63.—Federal Reserve Bank credit and member bank reserves, 1929-78[Averages of daily figures; millions of dollars]

Year and month

1929: Dec1933- Dec1939: Dec

1940: Dec1941: Dec1942- Dec1943: Dec1944- Dec1945- Dec1946: Dec1947- Dec1948- Dec1949: Dec

1950* Dec1951- Dec1952: Dec1953- Dec1954: Dec1955: Dec1956: Dec1957- Dec1958: Dec1959' Dec

I960- Dec1961: Dec1962: Dec . . . .1963- Dec1964: Dec1965: Dec1966: Dec1967: Dec . .1968- Dec1 9 6 9 : D e c . . .

1970: Dec1971- Dec1972: Dec1973: Dec. . . .1974: Dec1975: Dec.1976: Dec .1977: Dec1978: Decp__

1978: JanFebMarAprMayJune

JulyAugSeptOct . . .NovDec p

Reserve Bank credit outstanding

Total

1,6432,6692,612

2,3052,4046,035

11,91419,61224,74424,74622, 85823,97819,012

21 60625, 44627, 29927,10726,31726, 85327,15626,18628,41229, 435

29, 06031,21733,21836,61039, 87343, 85346, 86451,26856,61064,100

66,70874, 25576,85185,64293, 96799, 651

107, 632116, 382129, 430

118,598115,227114,848116,784119,603121,992

126, 958125, 955127,811133, 273129, 544129,430

U.S.Govern-ment se-curities

4462,4322,510

2,1882,2195,549

11,16618 69323, 70823, 76721,90523,00218, 287

20 34523, 40924, 40025 63924,91724, 60224, 76523, 98226,31227, 036

27, 24829,09830, 54633, 72937,12640, 88543, 76048, 89152, 52957, 500

61,68869,15871,09479,70186, 67992,108

100, 328107, 948117, 344

108,195106, 808107, 790109, 358111,314112,794

117,210117,463118,927123, 361119,352117,344

Member bankborrowings

Total

80195

3

354

90265334157224134118

142657

1,593441246839688710557906

87149304327243454557238765

1,086

321107

1,0491,298

70312762

558874

481405344539

1,2271,111

1,2861,1471,0681,261

722874

Seasonal

4132131254

134

3252474393

120

143188191221185134

Other

39614299

114180482658654702822729842607

1,1191,3801,3061,0271,1541,4121,7031,4941,5431,493

1,7251,9702,3682,5542,5042,5142,5472,1393,3165,514

4,6994,9904,7084,6436,5857,4167,2427,876

11,212

9,9228,0146,7146,8877,0628,087

8,4627,3457,8168,6519,470

11,212

Member bank reserves

Total

2,3952,588

11,473

14, 04912,81213,15212,74914,16816,02716,51717,26119,99016,291

17,39120,31021,18019,92019, 27919,24019, 53519,42018,899

2 18,932

19,28320,11820, 04020, 74621,60922, 71923, 83025, 26027,22128, 031

29, 26531,329

331,3533 35,0683 36, 941* 34, 98935,13636,47141,669

38,18536, 73836, 23136, 88037,11937, 262

38,18937, 66637, 68938, 43439, 72841, 669

Re-quired

2,347i l , 8 2 2

6,462

7,4039,422

10,77611,70112 88414, 53615,61716,27519,19315,488

16,36419,48420, 45719,22718, 57618,64618, 88318,84318, 38318,450

18,51419,55019,46820, 21021,19822, 26723, 43824,91526, 76627, 774

28,99331,16431,13434,80636, 60234, 72734,96436, 29741, 487

37, 88036. 60535, 92536, 81636, 86737,125

38, 04937, 40437, 61438, 22239, 42341,487

Excess

481766

5,011

6 6463,3902 3761,0481 2841 491

900986797803

1 027'826723693703594652577516482

769568572536411452392345455257272165

3 2193 2623 339*262

172174182

305133306

64252137

140262

75212305182

1 Data are for licensed banks only.2 Beginning December 1959, total reserves held include vault cash allowed.3 Beginning November 1972, includes $450 million of reserve deficiencies on which Federal Reserve Banks were allowed

to waive penalties for a transition period in connection with bank adaptation to Regulation J as amended effective Novem-ber 9, 1972. Beginning 1973, allowable deficiencies included are (beginning with first statement week of quarter): firstquarter, $279 million; second quarter, $173 million; third quarter, $112 million; fourth quarter, $84 million. Beginning1974, allowable deficiencies included are: first quarter, $67 million and second quarter, $58 million. Transition periodended after second quarter 1974.

4 Effective November 1975, includes reserve deficiencies on which penalties are waived over a 24-mcnth period when anonmember bank merges into an existing member bank, or when a nonmember bank joins the Federal Reserve System

Source: Board of Governors of the Federal Reserve System.

256

TABLE B-64.—Aggregate reserves and deposits of member banks, 1959-78

[Averages of daily figures; billions of dollars, seasonally adjusted)

Year and month

1959* Dec

I960- Dec1961' Dec1962- Dec1963- Dec1964- Dec

1965- Dec1966- Dec1967- Dec1968: Dec1969- Dec

1970* Dec1971- Dec1972- Dec1973: Dec1974" Dec

19751 Dec1976- Dec -1977: Dec1978" Dec »

1977: JanFebMarAprMayJune

JulyAugSeptOctNovDec

1978: JanFebMarAprMayJune

JulyAugSeptOct . . .NovDec*

Member bank reserves t

Total

18.63

18.9219.7519.6620.3121.19

22.1823.2824.7627.0627.99

29.1131.1731.3434.9136.57

34.6834.9336.1441.54

34.5634.5434.5434.7634.8034.82

35.2735.5035.5235.8135.9636.14

36.6136.9336 6736 9537.2637.73

38.1937 9138.1738.4339.7341.54

Nnn

borrowed

17.68

18.8419.6119.4019.9820.92

21.7422.7524.5426.3126.87

28.7831.0430.2933.6135.84

34.5534.8835.5740.67

34.4934.4634.4334.6934.5934.55

34.9534 4434.8934.5035.1035.57

36 1236.5236 3436 3936.0536.63

36.8836 7737.1137.1539.0340.67

Required

18.12

18.1719.1619.0819.8220.78

21.7622.9424.3926.6327.70

28.8630.9831.0634.6136.31

34.4234.6635.9541.27

34.2934.3434.3234.5734.5934.67

35.0035.3035.3135.6035.7135.95

36 3436.6936 4736 8037.0437.55

38.0037 7437.9738.2639.5041.27

Member bank deposits subject to reserverequirements2

Total

158.2

162.5175.5189.0203.2218.7

238.3246.3275.7299.8287.8

321.1360.2402.0442.2486.1

504.6529.0569.1617.3

532.5533.4536.1538.4538.7543.4

547.2550.5553.0558.5564.4569.1

575.8577.9582 1586 0592.0595.6

600.3601 1606.4608.1617.3617.3

Timeand

savings

54.3

58.867.779.992.1

103.7

120.7128.7148.9164.5150.5

178.8210.5241.6279.2322.1

337 1354.3387.0429.7

357.3360.1361.3361.4364.1366.3

368.9370 8373.0377.1383.5387.0

390 5395.4399 2400 7406.0407.1

410.5411 4416.0417.5427.9429.7

Demand

Private

99.0

99 1102.9103.3105.9109.1

112.8113.9121.3130.5132.1

136.1144.0154.4158.1160.6

164 5171.5178.5185.2

172.3170.5171 7173.3172.4173.8

175.3176 5176.7178.3178.0178.5

182 2179.5179 5182 0183.4184.6

186.1186 5186.3187.2187.2185.2

U.S. Gov-ernment

4.8

4 64 95 75.25.9

4.93 75 54.95 2

6 25 86 14.93.3

2 93 23.62.4

2.92 93 13 72 33.'2

3.03 23.33 13.03.6

3 13.03 43 32.63.9

3.73 34.13.52.32.4

1 Series reflects actual reserve requirement percentages with no adjustment to eliminate the effect of changes inRegulations D and M.

2 Includes total time and savings deposits and net demand deposits as defined by Regulation D. Private demand depositsinclude all demand deposits except those due to the U.S. Government, less cash items in process of collection and demandbalances due from domestic commercial banks.

Source: Board of Governors of the Federal Reserve System.

257

TABLE B-65.—Bond yields and interest rates, 1929-78

[Percent per annum]

Year ormonth

1929

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

1960 . . . .19611962 . . . .19631964

19651966196719681969

19701971197219731974

1975197619771978

U.S. Treasury securities

Bills(new

issues)^

3-month

0.515

.023

.014

.103

.326

.373

.375

.375

.375

.5941.0401.102

1.2181.5521.7661.931.953

1.7532.6583.2671.8393.405

2.9282.3782.7783.1573.549

3.9544.8814.3215.3396.677

6.4584.3484.0717.0417.886

5.8384.9895.2657.221

6-month

3.832

3.2472.6052.9083.2533.686

4.0555.0824.6305.4706.853

6.5624.5114.4667.1787.926

6.1225.2665.5107.572

Constantmaturi-ties 2

3years

2.471.63

2.473.193.982.844.46

3.983.543.473.674.03

4.225.235.035.687.02

7.295.655.726.957.82

7.496.776.698.29

10years

2.852.40

2.823.183.653.324.33

4.123.883.954.004.19

4.284.925.075.656.67

7.356.166.216.847.56

7.997.617.428.41

Corporatebonds

(Moody's)

/aa

4.73

4.49

3.01

2.842.772.832.732.72

2.622.532.612.822.66

2.622.862.963.202.90

3.063.363.893.794.38

4.414.354.334.264.40

4.495.135.516.187.03

8.047.397.217.448.57

8.838.438.028.73

Baa

5.90

7.76

4.96

4.754.334.283.913.61

3.293.053.243.473.42

3.243.413.523.743.51

3.533.884.714.735.05

5.195.085.024.864.83

4.875.676.236.947.81

9.118.568.168.249.50

10.619.758.979.49

High-grade

munic-ipal

bonds(Stand-ard &

Poor's)

4.27

4.71

2.76

2.502.102.362.061.86

1.671.642.012.402.21

1.982.002.192.722.37

2.532.933.603.563.95

3.733.463.183.233.22

3.273.823.984.515.81

6.515.705.275.186.09

6.896.495.565.90

New-homemort-gage

yields(FHLBB)

(3)

5.895.82

5.816.256.466.977.80

8.457.747.607.958.92

9.018.999.019.54

Primecom-mer-cial

paper,4-6

months

5.85

1.73

.59

.56

.53

.66

.69

.73

.75

.811.031.441.49

1.452.162.332.521.58

2.183.313.812.463.97

3.852.973.263.553.97

4.385.555.105.907.83

7.725.114.698.159.87

6.335.355.607.99

Primerate

chargedby

banks4

2.00

2.072.563.003.173.05

3.163.774.203.834.48

4.824.504.504.504.50

4.545.635.616.307.96

7.915.725.258.03

10.81

7.866.846.839.06

Dis-countrate,

FederalReserve

Bankof NewYork*

5 16

2.56

1.00

1.001 00

«1 00e 1.00fll 00

6 1.0081 00

1 001 341.50

1.591.751.751.991.60

1.892.773.122.153.36

3.533.003.003.233.55

4.044.504.195.175.87

5.954.884.506.457.83

6.255.505.467.46

Federalfundsrates

1.782.733.111.573.30

3.221.962.683.183.50

4.075.114.225.668.22

7.174.674.448.74

10.51

5.825.055.547.94

See next page for continuation of table.

258

TABLE B-65.—Bond yields and interest rates, 7929-78—Continued

[Percent per annum]

Year ormonth

1976:JanFeb . . .Mar.. .ADr___May...June . .

July.. .Aug. . .Sept...Oct....Nov.. .Dec . .

1977:JanFeb . . .Mar...Apr . . .May...June . .

July.. .Aug.. .Sept...Oct....Nov..Dec . . .

1978:Jan. . . .Feb..__Mar. . .Apr. .May...June..

July.. .Aug..Sept..Oct.._Nov..D e c .

U.S. Treasury securities

Bills(new

issues)1

3-month

4.9614.8525.0474.8785.1855.443

5.2785.1535.0754.9304.8104.355

4.5974.6624.6134.5404.9425.004

5.1465.5005.7706.1886.1606.063

6.4486.4576.3196.3066.4306.707

7.0747.0367.8368.1328.7879.122

6-month

5.2385.1445.4885.2015.6005.784

5.5975.4165.3115.0734.9444.513

4.7834.8964.8834.7905.1935.198

5.3515.8105.9916.4106.4336.377

6.6856.7406.6446.7007.0197.200

7.4717.3637.9488.4939.2049.397

Constantmaturi-

ties 2

3years

6.997.067.136.847.277.32

7.126.866.666.246.095.68

6.226.446.476.316.556.39

6.516.796.847.197.227.30

7.617.677.707.858.078.30

8.548.338.418.629.049.33

10years

7.747.797.737.567.907.86

7.837.777.597.417.296.87

7.217.397.467.377.467.28

7.337.407.347.527.587.69

7.968.038.048.158.358.46

8.648.418.428.648.819.01

Corporatebonds

(Moody's)

Aaa

8.608.558.528.408.588.62

8.568.458.388.328.257.98

7.968.048.108.048.057.95

7.947.987.928.048.088.19

8.418.478.478.568.698.76

8.888.698.698.899.039.16

Baa

0.410.24

10.129.949.869.89

9.829.649.409.299.239.12

9.089.129.129.079.018.91

8.878.828.808.898.958.99

9.179.209.229.329.499.60

9.609.489.429.599.839.94

High-grademunic-

ipalbonds

(Stand-ard &Poor's)

6.806.916.866.626.876.85

6.646.286.206.066.055.69

5.705.755.765.615.645.53

5.505.465.375.535.385.48

5.605.515.495.715.976.13

6.185.985.935.956.036.33

New-homemort-gage

yieldsFHLBB)

8.998.938.938.928.978.89

8.979.029.089.079.059.10

9.058.998.958.948.968.98

9.009.029.049.079.079.09

9.159.189.269.309.379.46

9.579.709.739.839.87

10.02

Primecom-mer-cial

paper,4-6

months

5.275.235.375.235.545.94

5.675.475.455.225.054.70

4.744.824.874.875.355.49

5.415.846.176.556.596.64

6.796.806.806.867.117.63

7.917.908.449.03

10.2310.43

Primerate

chargedby

banks*

WAT &AWAT 6%6/4— 6%6/4— 6%6%— 6%7 -734

7lA~ 7lA7M- 77 - 77 _ fi3/

6^ -6M

634- 6 ^634- 6J^6M- 6%

6M- 6%6%- 77 - 7H7lA- 7%7*A-7%73X_ 73/

IVAT 88 - 88 - 88 - 88 _ 8i/£8^-9

9 - 99 - 9 ^934- 9%9/4-1034

103^-113^HJ/2-11%

Dis-countrate,

FederalReserve

Bankof NewYork*

5M53^- 5X653^-53^

51^-51^5^-5K

WT-VA

51^-51^

5M-5K

5M-5K534-534534-5 J4534-534534-5345^-534

53 -534534-5%

53/_g6 -66 -6

6 -63^614-63^6j -63>^

6^-77 -7

7 -7H7H-7H7%-Z8 -&A

9 !•£—91.

Federalfundsrate «

4.874.774.844.825.295.48

5.315.295.255.034.954.65

4.614.684.694.735.355.39

5.425.906.146.476.516.56

6.706.786.796.897.367.60

7.818.048.458.969.76

10.03

1 Rate on new issues within period.2 Yields on the more actively traded issues adjusted to constant maturities by the Treasury Department.3 Effective rate (in the primary market) on conventional mortgages, reflecting fees and charges as well as contract rate

and assumed, on the average, repayment at end of 10 years. Rates beginning January 1973 not strictly comparable withprior rates.

4 Average effective rate for the year; opening and closing rate for the month.5 Based on seven-day averages of daily effective rates for weeks ending Wednesday. Since July 19, 1975, the daily

effective rate is an average of the rates on a given day weighted by the volume of transactions at these rates. Prior tothat date, the daily effective rate was the rate considered most representative of the day's transactions, usually the oneat which most transactions occurred.

e From October 30, 1942, to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances secured byGovernment securities maturing in 1 year or less.

Sources: Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Home Loan BankBoard (FHLBB), Moody's Investors Service, and Standard & Poor's Corporation.

259

TABLE B-66.—Consumer installment credit, 1970-78

[Millions of dollars; monthly data seasonally adjusted]

Year or month

19701971197219731974

1975197619771978 2

1977:Jan..Feb..Mar..Apr..May.June.

July..Aug .Sept.Oct..Nov..D e c .

1978: Jan.Feb..Mar.Apr..May.June.

July.Aug.Sept.Oct..Nov..Dec 2.

Installment credit

Total *

115,132138,046151, 749173,035172, 765

180, 441211,028254,071298, 700

19, 37919, 92720,80220,95320, 99120, 764

20, 79621, 40821, 52822, 27322, 48722, 832

21,98322, 75823,92524, 68225,10425, 565

25, 02225, 66925, 53725, 75826,21426, 033

extended

Auto-mobile

30,85736, 70643, 70249,60646, 514

52,42063, 74375,64188, 900

5,7976,0066,2616,1826,1846,212

6,2936,3326,4136,5036,7196,889

6,5416,7307,0437,4347,5927,595

7,6527,7447,5427,5017,7877,725

Revolv-ing

8,68921,86224,65928,70233, 213

36,95643,93486, 756

104, 993

6,3956,7246,9297,1247,3407,199

7,0107,2757,3337,6667,7167,985

7,9608,1478,3988,5238,5639,062

8,7009,0289,0068,8469,1769,112

Installment credit

Total i

110,352127, 789136, 787152,817163,276

172,676189, 381218,793254, 300

17,27217, 56617, 43417,86418, 09118, 200

18, 38918, 47318,68319,06618, 89119, 252

19, 54619, 89619, 84920, 57620, 82421,358

21, 55622, 03721,85722, 38422,11522,308

iquidated

-Auto-mobile

31,41432,51238,08143,69646,019

49,44453, 27860,43769, 700

4,7954,8554,8854,9544,9375,089

5,1355,0945,0825,2745,1795,252

5,2155,3975,4095,6225,7155,953

5,9416,1406,0106,1266,0326,125

Revolv-ing

7,27820,81823,48526,69931, 243

35,61641, 76480,50897, 515

6,4126,4296,2756,5036,7176,690

6,7306,7956,8656,9997,0247,226

7,5457,6987,5667,8407,9198,107

8,1008,2918,3848,5008,5118,582

Net change in amountoutstandin

Total i

4,78010, 25714,96220, 218

9,489

7,76521,64735, 27844, 400

2,1072,3613,3683,0892,9002,564

2,4072,9352,8453,2073,5963,579

2,4372,8624,0764,1064,2804,207

3,4663,6323,6803,3744,0993,725

Auto-mobile

- 5 5 74,1945,6215,910

495

2,97610,46515, 20419, 200

1,0021,1511,3761,2281,2471,123

1,1581,2381,3311,2291,5401,637

1,3261,3331,6341,8121,8771,642

1,7111,6041,5321,3751,7551,600

g

Revolv-ing

1,4111,0441,1742,0031,970

1,3402,1706,2487,478

-17295654621623509

280480468667692758

415449832683644955

600737622346665530

1 Includes other categories not shown separately.2 Preliminary; December by Council of Economic Advisers.Note: Consumer installment credit consists of short- and intermediate-term credit extended through regular business

channels to finance the purchase of goods and services for personal consumption, or to refinance debts incurred for suchpurposes, and scheduled to be repaid in two or more installments. Mortgage credit generally is excluded.

Source: Board of Governors of the Federal Reserve System (except as noted).

260

TABLE B-67.—Mortgage debt outstanding by type of property and of financing, 1939-78

[Billions of dollars]

End of yearor quarter

1939

19401941194219431944

19451946194719481949

1950 .19511952. . .19531954.

1955195619571958.1959

196019611962 .19631964.

1965196619671968.1969

1970.197119721973.1974.

197519761977

1976: 1IIIII.—IV..._

1977:1III I I . . . .I V . . . .

1978:1IIIII . . - .

Allprop-erties

35.5

36 537.636.735 334.7

35.541.848.956.262.7

72.882.391.4

101.3113.7

129.9144.5156.5171.8190.8

207.5228.0251.4278.5305.9

333.3356.5381.2410,9441.4

474.2526.5603.4682.3742.5

801.5889.2

1 023 4

818.4840.5865.6889.2

912.2950.5988.5

1,023.4

1,050.21,091.51,131.9

Farmprop-erties

6.6

6 56.46.05.44.9

4.84.95.15.35.6

6.16.77.27.78.2

9.09.8

10.411.112.1

12.813.915.216.818.9

21.223.125.127.429.2

30.332.235.841.346.3

50.957.065.7

52.253.855.557.0

59.261.964.065.7

68.170.973.8

Nonfarm properties

Total

28.9

30.031.230.829.929.7

30.836.943.950.957.1

66.775.684.293.6

105.4

120.9134.6146.1160.7178.7

194.7214.1236.2261.7287.0

312.1333.4356.1383.5412.2

443.8494.3567.7641.1696.2

750.7832.2957.7

766.2786.7810.2832.2

853.0888.6924.5957.7

982.11,020.61,058.1

1- to 4-familyhouses

16.3

17.418.418.217.817.9

18.623.028.233.337.6

45.251.758.566.175.7

88.299.0

107.6117.7130.9

141.9154.7169.3186.4203.4

220.5232.9247.3264.8282.8

298.1328.3372.2416.2449.4

490.8556.5657.2

503.3519.8538.8556.5

573.7603.2632.7657.2

674.8704.5731.7

Multi-familyprop-erties

5.6

5.75.95.85.85.6

5.76.16.67.58.6

10.111.512.312.913.5

14.314.915.316.818.7

20.323.025.829.033.6

37.240.343.947.352.3

60.170.182.893.1

100.0

100.6104.5111.5

101.8102.9103.9104.5

105.3107.6109.5111.5

113.9116.5119.2

Com-mer-cial

prop-erties i

7.0

6.97.06.76.36.2

6.47.79.1

10.210.8

11.512.513.414.516.3

18.320.723.226.129.2

32.436.441.146.250.0

54.560.164.871.477.1

85.695.9

112.7131.7146.9

159.3171.2189.0

161.2164.0167.5171.2

174.0177.8182.3189.0

193.4199.6207.1

Nonfarm properties by type of mortgage

Government underwritten

Total 2

1.8

2.33.03.74.14.2

4.36.39.8

13.617.1

22.126.629.332.136.2

42.947.851.655.159.3

62.365.669.473.477.2

81.284.188.293.4

100.2

109.2120.7131.1135.0140.2

147.0154.1161.7

148.3150.5150.8154.1

155.7158.7161.6161.7

165.3167.4174.7

1- to 4-family houses

Total

1.8

2.33.03.74.14.2

4.36.19.3

12.515.0

18.922.925.428.132.1

38.943.947.250.153.8

56.459.162.265.969.2

73.176.179.984.490.2

97.3105.2113.0116.2121.3

127.7133.5141.6

129.1131.2131.2133.5

134.9137.4139.9141.6

144.7146.7150.7

FHAin-

sured

1.8

2.33.03.74.14.2

4.13.73.85.36.9

8.69.7

10.812.012.8

14.315.516.519.723.8

26.729.532.335.038.3

42.044.847.450.654.5

59.965.768.266.265.1

66.166.568.0

66.267.166.466.5

66.967.867.968.0

68.669.269.9

VAguar-

anteed

0.22.45.57.28.1

10.313.214.616.119.3

24.628.430.730.430.0

29.729.629.930.930.9

31.131.332.533.835.7

37.339.544.750.056.2

61.667.073.6

62.964.164.867.0

68.069.671.973.6

76.177.680.8

Conventional 3

Total

27.1

27.728.227.125.825.5

26.530.634.137.340.0

44.649.054.961.569.2

78.086.894.6

105.5119.4

132.3148.5166.9188.2209.8

231.0249.3267.9290.1312.0

334.6373.5436.5506.0556.0

603.7678.0796.0

617.9636.2659.4678.0

697.3730.0763.0796.0

816.9853.2883.4

1- to 4-familyhouses

14.5

15.115.414.513.713.7

14.316.918.920.822.6

26.328.833.138.043.6

49.355.160.467.677.0

85.595.6

107.1120.5134.1

147.4156.9167.4180.4192.7

200.8223.1259.2300.0328.1

363.0422.9515.6

374.2388.6407.6422.9

438.7465.9492.8515.6

530.1557.8581.0

» Includes negligible amount of farm loans held by savings and loan associations.2 Includes FHA insured multifamily properties, not shown separately.3 Derived figures. Total includes multifamily and commercial properties, not shown separately.Source: Board of Governors of the Federal Reserve System, estimated and compiled from data supplied by various

Government and private organizations.

261

TABLE B-68.—Mortgage debt outstanding by holder, 1939-78

[Billions of dollars]

End of yearor quarter

1939

19401941194219431944

19451946194719481949

19501951195219531954

19551956195719581959

I9601961196219631964

19651966196719681969

19701971197219731974

197519761977

1976: 1IIIIIIV

1977: 1 _IIIII .IV

1978: 1 - - - - -| |III" . - „ -

Total

35.5

36.537.636 735.334.7

35.541 848 956.262.7

72.882 391 4

101.3113.7

129.9144 5156 5171 8190.8

207.5228 0251.4278 5305.9

333 3356.5381.2410.9441.4

474.2526 5603.4682.3742.5

801.5889.2

1, 023.4

818.4840.5865.6889.2

912.2950.5988.5

1,023.4

1,050.21,091.51,131.9

Major financial institutions

Total

18.6

19.520.720.720.220.2

21.026 031.837.842.9

51.759 566 975.185.7

99.3111 2119 7131.5145.5

157.6172 6192.5217 1241.0

264 6280.8298.8319.9339.1

355 9394 2450.0505.4542.6

581.2647.5745.0

593.2611.5630.0647.5

662.8690.5717.9745.0

764.6794.0822.2

Savingsandloan

associa-tions

3.8

4.14.64.64.64.8

5.47.18.9

10.311.6

13.715 618.422.026.1

31.435 740 045.653.1

60.168 878.890 9

101.3

110 3114 4121.8130.8140.2

150 3174 3206.2231.7249.3

278.6323.0381.2

286.3299.2311.8323.0

333.6350.6366.6381.2

392.4408.0421.0

Mutualsavingsbanks

4.8

4.94.84.64.44.3

4.24.44.95.86.7

8.39 9

11.412.915.0

17.519 721.223.325.0

26.929 132.336 240.6

44 647 350.553.556.1

57.962.067.673.274.9

77.281.688.1

77.978.880.281.6

82.384.186.188.1

89.891.593.4

Com-mercialbanks*

4.3

4.64.94.74.54.4

4.87.29.4

10.911.6

13.714 715.916.918.6

21.022 723.325.528.1

28.830 434.539 444.0

49 754.459.065.770.7

73.382.599.3

119.1132.1

136.2151.3179.0

139.6143.7147.8151.3

155.2163.0171.2179.0

184.4194.5205.4

Lifeinsurance

com-panies

5.7

6.06.46.76.76.7

6.67 28.7

10.812.9

16.119.321.323.326.0

29.433 035.237.139.2

41.844 246.950 555.2

60.064.667.570.072.0

74.475.576.981.486.2

89.291.696.8

89.489.790.291.6

91.892.9S4.196.8

98.0100.0102.4

Other holders

Federaland

relatedagencies2

5.0

4.94.74.33.63.0

2.42.01.81.82.3

2.83.54.14.64.8

5.36.27.78.0

10.2

11.512.212.611.812.2

13.517.520.925.131.1

38.346.454.664.882.1

101.0116.6140.3

105.0107.3112.3116.6

121.5127.1133.7140.3

146.1152.6160.8

Indi-viduals

andothers

11.9

12.012.211.711.511.5

12-113.815.316.617.5

18.419.320.421.723.2

25.327.129.132.335.1

38.443.146.349.552.7

55.258.261.465.971.2

79.985.998.9

112.2117.8

119.3125.1138.1

120.2121.8123.4125.1

127.9132.9136.9138.1

139.5144.9148.9

1 Includes loans held by nondeposit trust companies, but not by bank trust departments.2 Includes former Federal National Mortgage Association (FNMA) and new Government National Mortgage Association

(GNMA), as well as Federal Housing Administration, Veterans Administration, Public Housing Administration, FarmersHome Administration, and in earlier years Reconstruction Finance Corporation, Homeowners Loan Corporation, andFederal Farm Mortgage Corporation. Also includes GNMA Pools and U.S.-sponsored agencies such as new FNMA, FederalLand Banks, and Federal Home Loan Mortgage Corporation. Other U.S. agencies (amounts small or current separate datanot readily available) included with "individuals and others."

Source- Board of Governors of the Federal Reserve System, based on data from various Government and privateorganizations.

262

GOVERNMENT FINANCE

TABLE B-69.—Federal budget receipts and outlays, fiscal years 1929-80

[Millions of dollars)

1929

1933

1939

19401941194219431944

19451946194719481949

19501951 .19521953 . . ..1954

19551956 . .. . .195719581959

I96019611962 . ... .1963.1964

1965196619671968 . .1969

19701971197219731974

19751976Transition quarter197719781979 i19801

Fiscal year Receipts

3,862

1,997

4,979

6,3618,62114 35023,64944,276

45,21639,32738, 39441,77439,437

39,48551,64666,20469, 57469,719

65,46974,54779,99&79,63679,249

92,49294,38999,676106,560112,662

116,833130,856149,552153,671187,784

193,743188,392208,649232,225264,932

280, 997300, 00581, 773357, 762401,997455,989502,553

Outlays

3,127

4,598

8,841

9,45613,63435 11478, 53391,280

92,69055,18334 53229,77338,834

42, 59745 54667,72176,10770,890

68,50970,46076,74182,57592,104

92,22397,795106,813111,311118,584

118,430134,652158,254178,833184,548

196,588211,425232,021247,074269,620

326,185366,43994, 729402, 725450,836493,368531,566

Surplus ordeficit (-)

734

-2,602

-3,862

-3,095-5,013-20 764-54,884-47,004

-47,474-15,856

3,86212,001

603

-3,1126,100

-1,517-6, 533-1,170

-3,0414,0873,249

-2,939-12,855

269-3,406- 7 137-4,751-5,922

-1,596- 3 796-8,702

-25,1613,236

-2,845-23 033—23, 373-14, 849-4,688

-45 188-66,434-12,956-44,963-48,839-37,379-29,013

i Estimates.Note.—Under provisions of the Congressional Budget Act of 1974, the fiscal year for the Federal Government shifted

beginning with fiscal year 1977. Through fiscal year 1976, the fiscal year was on a July 1-June 30 basis; beginning October1976 (fiscal year 1977), the fiscal year is on an October 1-September 30 basis. The 3-month period from July 1, 1976,through September 30, 1976 is a separate fiscal period known as the transition quarter.

Data for 1929-39 are according to the administrative budget and those beginning 1940 according to the unified budget.Refunds of receipts are excluded from receipts and outlays.See "Budget of the United States Government, Fiscal Year 1980" for additional information.Sources: Department of the Treasury and Office of Management and Budget.

263

TABLE B-70.—Federal budget receipts, outlays, and debt, fiscal years 1970-80

[Millions of dollars; fiscal years]

DescriptionActual

1970 1971 1972 1973 1974 1975

BUDGET RECEIPTS AND OUTLAYS:

Total receipts

Federal fundsTrust fundsInterfund transactions..

Total outlays.

Federal fundsTrust fundsInterfund transactions.

Total surplus or deficit (—) .

Federal funds.Trust funds. _.

OUTSTANDING DEBT, END OF PERIOD:

Gross Federal debt

Held by Government agencies.Held by the public

Federal Reserve System..Other

193,743

143,15859, 362

- 8 , 7 7 8

196, 588

156, 30049,066

- 8 , 7 7 8

- 2 , 845

-13 ,14210,296

382,603

97, 723284,880

57,714227,166

188, 392

133,78566,193

-11 ,586

211,425

163,65159, 360

- 1 1 , 586

-23 ,033

- 2 9 , 8666,833

409, 467

105,140304, 328

65,518238,810

208,649

148, 84672,959

-13 ,156

232, 021

178,11067,067

-13 ,156

- 2 3 , 373

- 2 9 , 2645,892

437, 329

113,559323, 770

71,426252, 344

232,225

161, 35792,193

-21 ,325

247,074

186,95181,448

- 2 1 , 325

-14 ,849

- 2 5 , 59410, 745

468, 426

125,381343, 045

75,182267, 863

264, 932

181,219104,846

-21 ,133

269,620

199,91890, 835

- 2 1 , 1 3 3

- 4 , 688

-18,69914,011

486, 247

140,194346, 053

80,649265, 404

280,997

187, 505118,590

- 2 5 , 0 9 8

326,185

240,115111,168

-25 ,098

- 45 ,188

-52 ,6097,422

544,131

147,225396,906

84,993311,913

BUDGET RECEIPTS.

Individual income taxesCorporation income taxesSocial insurance taxes and contributions...Excise taxesEstate and gift taxesCustoms dutiesMiscellaneous receipts:

Deposits of earnings by Federal Re-serve System

Allother

BUDGET OUTLAYS.

National defenseInternational affairsGeneral science, space, and technology....EnergyNatural resources and environmentAgricultureCommerce and housing creditTransportationCommunity and regional developmentEducation, training, employment, and social

servicesHealthIncome securityVeterans benefits and servicesAdministration of justiceGeneral governmentGeneral purpose fiscal assistanceInterestAllowancesUndistributed offsetting receipts

193,743

90, 41232, 82945, 29815,7053,6442,430

3,266158

196, 588

78, 5534,2974,507990

3,0615,1612,1087,0062,360

8,62513, 05143,0738,677952

1,888536

18, 309

188, 392

86,23026, 78548, 57816,6143,7352,591

3,533325

211,425

75, 8084,0974,1801,0313,9094,2882,3588,0502,833

9,83914, 71655, 4269,7761,2992,104535

19, 602

208, 649

94,73732,16653,91415, 4775,4363,287

3,252381

232,021

76, 5504,6934,1731,2704,2355,2802,2168,3883,388

12,51917, 46763, 91310,7301,6502,449673

20, 563

232, 225

103,24636,15364, 54216, 2604,9173,188

3,495426

247, 074

74, 5414,0664,0301,1794,7634,852924

9,0654,537

12,73518, 83272,96512,0132,1312,6267,351

22, 782

264, 932

118,95238,62076, 78016, 8445,0353,334

4,845524

269, 620

77, 7815,6813,977837

5,6702,2273,9259,1724,080

12, 34422,07384,43713, 3862,4623,2966,89028,032

Composition of undistributed offsetting re-ceipts:

Employer share, employee retirement-Interest received by trust fundsRents and royalties on the Outer Conti-

nental Shelf

- 6 , 567

- 2 , 4 4 4- 3 , 9 3 6

- 1 8 7

- 8 , 427

- 2 , 6 1 1- 4 , 765

- 1 , 0 5 1

- 8 , 1 3 7

- 2 , 768- 5 , 0 8 9

- 2 7 9

-12 ,318

- 2 , 927- 5 , 4 3 6

- 3 , 956

-16 ,651

- 3 , 3 1 9- 6 , 583

- 6 , 748

280,997

122,38640,62186,44116, 5514,6113,676

5,777934

326,185

85, 5526,9223,9892,1707,3351,6595,607

10, 3883,689

15, 87027,648

108, 61016, 5972,9423,1827,187

30,911

-14 ,075

- 3 , 9 8 0- 7 , 6 6 7

- 2 , 428

See next page for continuation of table.

264

TABLE B-70.—Federal budget receipts, outlays, and debt, fiscal years 1970-80—Continued

[Millions of dollars; fiscal years]

DescriptionActual

1976 Transitionquarter 1977 1978

Estimate

1979 1980

BUDGET RECEIPTS AND OUTLAYS:

Total receipts

Federal fundsTrust fundsInterfund transactions.

Total outlays.

Federal fundsTrust fundsInterfund transactions.

Total surplus or deficit (—).

Federal funds.Trust funds

OUTSTANDING DEBT, END OF PERIOD:

Gross Federal debt

Held by Government agencies.Held by the public

Federal Reserve System.Other

300,005

201, 099133, 695

- 3 4 , 789

366, 439

269, 943131, 286

- 3 4 , 789

-66,434

- 6 8 , 8432,410

631, 866

151,566480, 300

94, 714385, 586

81, 773

54, 08532, 071

- 4 , 383

94, 729

65, 08934,023

- 4 , 383

-12 ,956

-11 ,004- 1 , 9 5 2

646, 379

148, 052498, 327

96, 702401, 625

357, 762

241,312152, 763

- 3 6 , 313

402, 725

295, 772143, 267

- 3 6 , 313

- 4 4 , 963

-54 ,4599,496

709,138

157, 295551, 843

105, 004446, 839

401, 997

270, 484168, 012

- 3 6 , 498

450, 836

332, 016155,318

- 3 6 , 498

- 4 8 , 839

-61 ,53312,694

780, 425

169, 477610, 948

114,965495,983

455, 989

306,135189, 496

- 3 9 , 641

493, 368

361,315171,694

- 3 9 , 641

- 3 7 , 379

-55 ,18017, 801

839,187

188, 238650, 948

502, 553

332, 798212, 208

- 4 2 , 452

531,566

381, 844192,175

- 4 2 , 452

- 2 9 , 013

-49 , 04620, 033

898,956

209, 008689, 948

BUDGET RECEIPTS

Individual income taxesCorporation income taxesSocial insurance taxes and contributions..Excise taxesEstate and gift taxes. _Customs duties...Miscellaneous receipts:

Deposits of earnings by Federal ReserveSystem..

All other.

BUDGET OUTLAYS

National defenseInternational affairs.__General science, space, and technologyEnergyNatural resources and environmentAgricultureCommerce and housing creditTransportationCommunity and regional developmentEducation, training, employment, and social

servicesHealthIncome securityVeterans benefits and services.Administration of justiceGeneral governmentGeneral purpose fiscal assistanceInterestAllowancesUndistributed offsetting receipts..

300,005

131,60341, 40992,71416,9635,2164,074

5,4512,575

366, 439

89, 4305,5524,3703,1278,1242,5043,79213, 4354,709

18, 73733, 448127,41218, 4323,3203,0067,23534,511

81, 773

38, 8018,46025, 7604,4731,4551,212

1,500112

94, 729

22, 3072,1931,161794

2,532581

1,3923,3041,340

5,1628,721

32, 7973,962859883

2,0927,216

357, 762

157, 62654, 892108,68817,5487,3275,150

5,908622

402, 725

97, 5014,8134,6774,17210, 0005,532-44

14, 6366,286

20, 98538, 785137,91518, 0383,6003,3749,49938, 009

401, 997

180, 98859, 952123, 41018, 3765,2856,573

6,641772

450, 836

105,1865,9224,7425,86110,9257,7313,32515, 44411, 000

26, 46343,676146, 21218, 9743,8023,7779,601

43, 966

455, 989

203,60270, 307141, 78918, 3955,6867,517

7,6001,093

493, 368

114,5037,3125,2268,63011,2076,2242,96817, 4499,063

30, 65649,136158, 86720, 3294,3514,4138,93652, 766

Composition of undistributed offsetting re-ceipts:

Employer share, employee retirement..Interest received by trust fundsRents and royalties on the Outer Con-

tinental Shelf

-14 ,704

- 4 , 242- 7 , 800

- 2 , 6 6 2

- 2 , 567

- 9 8 5- 2 7 0

- 1 , 3 1 1

- 1 5 , 0 5 3

- 4 , 548- 8 , 1 3 1

- 2 , 374

-15 ,772

- 4 , 983- 8 , 530

- 2 , 259

-18,670

- 5 , 388- 9 , 782

- 3 , 500

502, 553

227, 32270, 987

161,45318, 4556,0118,447

8,6001,278

531, 566

125, 8308,2135,4577,87811,4564,2693,39017, 6097,281

30,21053, 379179,12020,4614,3884,4128,814

57, 0221,398

- 1 9 , 0 2 1

- 5 , 482-10 ,940

-2,600

Note.—Through fiscal year 1976, the fiscal year was on a July 1-June 30 basis. Beginning October 1976 (fiscal year 1977),the fiscal year is on an October 1-September 30 basis. The period July 1, 1976 through September 30, 1976 is a separatefiscal period known as the transition quarter.

See "Budget of the United States Government, Fiscal Year 1980" for additional information.

Sources: Department of the Treasury and Office of Management and Budget.

265

TABLE B-71.—Relation of Federal Government receipts and expenditures in the national incomeand product accounts to the unified budget, 1978—80

[Billions of dollars; fiscal years]

Receipts and expenditures

RECEIPTS

Total budget receipts

Government contribution for employee retirement (grossing)Other netting and grossingAdjustment to accruals __ _ __ _. . ._Other

Federal sector, national income and product accounts, receipts

EXPENDITURES

Total budget outlays _____ _ __.

Lending and financial transactions -_ __Government contribution for employee retirement (grossing)Other netting and grossingDefense timing adjustment _ . __ __ _Bonuses on Outer Continental Shelf land leasesOther

Federal sector, national income and product accounts, expenditures__.

1978

402.0

7.13.02.8

- 1 . 0

413.8

450.8

- 8 . 47.13.02.71.2

- 5 . 8

450.6

Estimate

1979

456 0

7.93.5

- 1 . 9- 1 1

464.3

493.4

- 5 . 27.93.51.52.2

- 7 . 0

496.3

1980

502 6

8.36.3

- 2 . 0—1 3

513.8

531 6

- 3 . 78.36.31.81.1

- 6 2

539.2

Note—See Note, Table B-69.See Special Analysis B, "Special Analyses, Budget of the United States Government, Fiscal Year 1980" for description

of these categories.

Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Treasury, and Office of Manage-ment and Budget.

266

TABLE B-72.—Government receipts and expenditures, national income and productaccounts, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Calendar year or quarter

1929

1933

1939

19401941.1942 . .19431944.1945..194619471948. . .1949

195019511952.19531954.1955. . .1956195719581959

1960196119621963 . .19641965.196619671968. .1969

19701971197219731974..197519761977. . .1978 v

1976: 1 _ ___ __ _-.IIINIV

1977: 1IIIIIIV

1978: 1| |_ . _IIIIV v

Total government

Re-ceipts

11.3

9.3

15.4

17.725.032.649.251.253.251.056.958.955.9

69.085.290.194.689.9

101.1109.7116.2115.0129.4

139.5144.8156.7168.5174.0188.3212.3228.2263.4296.3

302.6322.2367.4411.2455.1468.5537.2603.3682.7

516.1532.8543.6556.4

587.4598.0605.2622.3

638.0676.3693.3

Ex-pendi-tures

10.3

10.7

17.6

18.428.864.093.3

103.092.745.642.550.559.3

61.079.293.9

101.697.098.0

104.5115.3127.6131.0

136.4149.1160.5167.8176.3187.8213.6242.4268.9285.6

311.9340.5370.9404.9458.2532.8570.4621.8684.2

561.1562.8574.2583.5

595.3609.8630.5651.9

659.1670.1692.7714.8

Sur-plus ordeficit<-),

nationalincome

andprod-

uct ac-counts

1.0

-1 .4

-2 .2

- . 7- 3 . 8

-31.4-44.1-51.8-39.5

5.414.48.4

- 3 . 4

8.06.1

- 3 . 8-6 .9- 7 . 1

3.15.2.9

-12.6-1 .6

3.1- 4 . 3-3 .8

.7- 2 . 3

. 5- 1 . 3

-14.2-5 .510.7

-9 .4-18.3-3 .5

6.3-3 .2

-64.4-33.2-18.6-1 .5

-44.9-29.9-30.6- 2 7 . 1

-7 .8-11.8-25.2-29.6

-21.16.2.6

Federal Government

Re-ceipts

3.8

2.7

6.7

8.615.422.939.341.042.539.143.243.238.7

50.064.367.370.063.772.678.081.978.789.8

96.198.1

106.2114.4114.9124.3141.8150.5174.7197.0

192.1198.6227.5258.3288.6286.2331.4374.5431.6

318.6329.4335.5342.3

366.6371.4374.3385.5

396.2424.7441.7

Ex-pendi-tures

2.6

4.0

8.9

10.020.556.185.895.584.635.629.834.941.3

40.857.871.177.169.868.171.979.688.991.0

93.1101.9110.4114.2118.2123.8143.6163.7180.6188.4

204.2220.6244.7265.0299.3356.8385.2422.6461.0

376.3375.8387.5401.4

403.9411.7430.7444.1

448.8448.3464.5482.3

Sur-plus ordeficit(-),

nationalincome

andprod-uct ac-counts

1.2

- 1 . 3

-2 .2

- 1 . 3- 5 . 1

-33.1-46.6-54.5-42.1

3.513.48.3

-2 .6

9.26.5

-3 .7- 7 . 1-6 .0

4.46.12.3

-10.3-1.1

3.0-3.9-4.2

.3-3.3

. 5-1 .8

-13.2-5 .8

8.5

-12.1-22.0-17.3-6 .7

-10.7-70.6-53.8-48.1-29.4

-57.7-46.4-52.0-59.1

-37.3-40.3-56.4-58.6

-52.6-23.6-22.8

State and localgovernment

Re-ceipts

7.6

7.2

9.6

10.010.410.610.911.111.613.015.417.719.5

21.323.425.427.429.031.735.038.542.046.4

49.954.058.563.269.575.184.893.6

107.2119.7

134.9152.6177.4193.5210.4236.9266.9296.2327.7

256.4262.6268.6280.2

283.0292.0301.8307.9

315.7327.4329.2

Ex-pendi-tures

7.8

7.2

9.6

9.39.1

. 8.88.48.59.0

11.114.417.620.2

22.523.925.527.330.232.935.939.844.346.9

49.854.458.062.868.575.184.394.7

106.9117.6

132.2148.9163.7180.5202.8230.6246.3266.6299.8

243.6246.2247.2248.2

253.5263.5270.7278.9

284.2297.7305.8311.6

Sur-plus ordeficit(-),

nationalincome

andprod-uct ac-counts

-0 .2

- . 1

.0

.61.31.82.52.72.61.91.0.1

- . 7

-1 .2- . 4- . 0

.1- 1 . 1- 1 . 3- . 9

- 1 . 4-2 .4- . 4

.1- . 4

.5

.51.0

- . 0.5

- 1 . 1. 3

2.1

2.83.7

13.713.07.66.2

20.729.627.8

12.816.421.432.0

29.528.531.229.0

31.529.823.4

Note.—Federal grants-in-aid to State and local governments are reflected in Federal expenditures and State and localreceipts. Total government receipts and expenditures have been adjusted to eliminate this duplication.

Source: Department of Commerce, Bureau of Economic Analysis.

267

T A B L E R-73.—Federal Government receipts and expenditures, national income and product accounts1952-80

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

Fiscal year:195219531954195519561957195819591960196119621963196419651966 . . -1967196819691970197119721973 . . .197419751976197719781979219802

Calendar year:1952 . .19531954195519561957195819591960196119621963196419651966196719681969197019711972197319741975197619771978 p

1977: 1IIIIIIV

1978:1IIIIIIV V

Receipts

Total

65.269.465.867.476.381.078.185.494.895.0

104.0110.0115.6120.0132.7146 0160.0190.1194.9192.5213.5240.5271.8283.5313.9365.3413.8464.3513. 8

67.370.063.772.678.081.978 789.896.198.1

106.2114.4114.9124.3141.8150 5174.7197.0192.1198.6227.5258.3288.6286.2331.4374.5431.6366.6371.4374.3385.5396.2424.7441.7

Per-sonaltaxandnon-taxre-

ceipts

28.831.430.329.733.636.736.338.242.543.647.349.650.751.457.564.471.490.093.687.5

100.3107.3122.6127.136.9

165.9186.3206.6236.4

31.032.229.031.435.237.436.839.943.644.748.651.548.653.961.767.579.694.892.289.9

108.2114.6131.1125.4146.8169.4193.2168.3167.0167.6174.8176.8186.7199.7209.7

Corpo-rate

profitstaxac-

cruals

19.419.717.318.921.520.817.921.422.320.022.723.325.727.130.830 333.237.033.032.034.241.043.742.151.958.867.276.978.2

18.619.516.921.120.920.418.022.521.421.522.524.626.128.931.430.036.336.230.833.536.643.045.942.854.861.371.758.461.862.062.959.672.673.6

Indi-rectbusi-nesstaxandnon-taxac-

cru-als

9.710.710.410.010.811.711.612.013.213.314.215.015.616.915.515.817.118.619.220.019.920.721.422.224.224.527.229.030.4

10.310.99.7

10.711.211.811.512.513.413.614.615.316.216.515.616 318.019.019.320.420.021.221.723.923.425.027.924.424.825.425.626.527.928.229.0

Con-tribu-tionsfor

socialinsur-ance

7.37.67.88.7

10.311.712.313.916.718.119.922.123.624.528.935.538.444.549.252.959.171.584.292.100.9

116.133.151.868.8

7.47.48.29.4

10.612.312.414.917.618.320.523.124.025.033.136.740.847.049.754.962.879.489.994.2

106.4118.7138.7115.5117.7119.3122.2133.3137.6140.1144.0

Expenditures

TotaP

66.075.974.367.270.076.082.891.291.398.1

106.2111.7117.2118.5132.7154.9172.2184.7195.6212.7232.9256.2278.8328.7371.5412.0450.6496.3539.2

71.177.169.868.171.979.688.991.093.1

101.9110.4114.2118.2123.8143.6163.7180.6188.4204.2220.6244.7265.0299.3356.8385.2422.6461.0403.9411.7430.7444.1

448.8448.3464.5482.3

Pur-chases

ofgoodsandserv-ices

47.256.453.944.345.548.151.154.852.955.861.063.765.964.672.486.095.098.097.094.8

100.9101.7104.6118.0126.2140.7151.1166.0178.2

52.457.547.944.545.950.053.953.953.757.463.764.665.267.378.890.998.097.595.696.2

102.1102.2111.1123.1129.9145.1154.0138.3142.9146.8152.2151.5147.2154.0163.4

Transferpayments

Toper-sons

8.59.2

10.512.112.814.417.819.920.623.625.126.527.428.431.837.242.748.755.067.776.187.1

101.7131.2153.5166.4178.4196.6222.5

8.89.4

11.512.413.415.719.620.121.625.025.627.027.930.333.540.146.050.661.372.780.593.2

114.4146.0158.4169.5181.8165 6165.2172.0175.0176.9177.0185 5187.8

Tofor-

eign-ers

2.62.11.72.11.81.91.71.81.82.1Z.I2.12.22.22.32.22.12.22.02.32.82.73.03.13.03.23.43.63.9

2.12.01.82.01.91.81.81.81.92.12.22.22.22.22.32.22.12.12.22.62.72.63.23.13.23.23.53.03.03.73.4

3.33.73.43.6

Grants-in-aid

to Stateandlocal

govern-ments

2.52.82.93.03.23.74.76.26.96.97.68.39.8

10.912.714.817.819.222.626.832.640.441.648.457.566.274.678.278.9

2.62.82.93.13.34.25.66.86.57.28.09.1

10.411.114.415.918.620.324.429.037.540.643.954.661.167.476.662.165.470.971.173.975.977.579.1

Netin-ter-est

paid

4.54.54.64.64.85.35.45.66.86.46.47.17.78.28.79.6

10.512.113.614.214.115.919.821.925.228.433.741.645.2

4.54.64.64.65.15.55.26.26.86.26.87.38.08.49.29.8

11.412.914.314.014.618.220.923.226.829.135.528.128.828.930.7

33.234.636.337.9

Subsi-dieslesscur-rentsur-plusof

gov-ern-mententer-prises

0.8.9.8

1.21 72.62.42.52.43.34.14.04.14.34.85.24.14.65.46.86.49.18.05.76.27.09.4

10.310.5

.8

l'.O1.52.42.42.82.12.64.04.23.94.54.65.54.74.55.26.36.27.88.25.36.85.88.39.66.76.48.4

11.8

10.010.08.0

10.5

Sur-plusor

defi-cit

( - ) ,na-

tion-al in-comeand

prod-uctac-

counts

- 0 . 8-6 .5-8 .5

.26.35.0

-4 .7-5 .8

3.4-3 .1-2 .2-1 .7-1 .5

1.4.0

-8 .9-12.2

5.4- . 6

-20.2-19.5-15.7-7 .0

-45.3-57.6-46.7-36.8-32.0-25.4

-3 .7- 7 . 1- 6 . 0

4.46.12.3

-10.3-1 .1

3.0- 3 . 9- 4 . 2

.3-3 .3

.5-1 .8

-13.2- 5 . 8

8.5-12.1-22.0-17.3-6 .7

-10.7-70.6-53.8-48.1-29.4-37.3-40.3-56.4-58.6-52.6-23.6-22.8

11ncludes an item for the difference between wage accruals and disbursements, not shown separately.3 Estimates.Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.

268

TABLE B-74.—State and local government receipts and expenditures, national income and productaccounts, 1946-78

Calendaryear orquarter

1946194719481949

19501951 -195219531954 .

19551956195719581959

1960 . .196119621963 .1964

1965 .1966196719681969

1970 . .1971197219731974

1975197619771978 p

1976: 1IIIIIIV

1977: 1IIillIV.

1978: 1IIillIVP____

Billions of dollars; quarterly data at seasonally adjusted annual rates]

Receipts

Total

13.015.417.719.5

21.323.425.427.429.0

31.735.038.542.046.4

49.954.058.563.269.5

75.184.893.6

107.2119.7

134.9152.6177.4193.5210.4

236.9266.9296.2327.7

256.4262.6268.6280.2

283.0292.0301.8307.9

315.7327.4329.2

Per-sonaltaxandontaxceipts

1.51.72.12.4

2.52.83.03.23.5

3 94.55.05.46.1

6.77.48.28.8

10.0

10.912.814.617.420.6

23.126.433.036.139.2

43.449.756.662.9

46.748.750.352.9

54.556.257.058.5

60.562.563.565.3

Cor-porate>rofitstax

ccruals

0.5.6.7.6

.8

.9

.8

.8

.8

1.01.01.01.01.2

1.21.31.51.71.8

2.02.22.53.13.4

3.74.25.05.76.5

7.19.4

10.512.3

9.19.69.59.3

9.910.610.710.9

10.412.412.5

ndirectbusi-nesstaxandontax

ccruals

9.310.712.213.3

14.615.917.418.819.9

21.623.825.727.229.3

32.034.437.039.442.6

46.149.754.060.867.4

74.783.191.099.0

106.9

115.4128.0140.0150.3

123.7126.6129.2132.4

135.9138.5141.2144.6

146.8151.5149.5153.3

tontri-utionsfor

socialnsur-ance

0.6

.8

.9

1.11.41.61.72.0

2.12.32.62.83.1

3.43.73.94.24.7

5.05.76.77.27.9

9.09.9

10.812.113.9

16.418.721.725.5

18.018.519.019.5

20.521.422.022.8

24.125.226.126.7

Fed-eralrants-n-aid

1.11.72.02.2

2.32.52.62.82.9

3.13.34.25.66.8

6.57.28.09.1

10.4

11.114.415.918.620.3

24.429.037.540.643.9

54.661.167.476.6

58.859.260.566.1

62.165.470.971.1

73.975.977.579.1

Expenditures

Total i

11.114.417.620.2

22.523.925.527.330.2

32.935.939.844.346.9

49.854.458.062.868.5

75.184.394.7

106.9117.6

132.2148.9163.7180.5202.8

230.6246.3266.6299.8

243.6246.2247.2248.2

253.5263.5270.7278.9

284.2297.7305.8311.6

Pur-chases

ofgoodsandserv-ices

9.912.815.318.0

19.821.823.225.027.8

30.633.537.141.143.7

46.550.854.359.064.6

71.179.889.3

100.7110.4

123.2137.5151.0167.3191.5

215.4229.6248.9280.2

226.9229.4230.5231.7

236.7245.9252.7260.3

265.2277.6285.8292.2

Trans-fer

pay-ments

toper-sons

1.72.33.03.0

3.63.13.33.53.6

3.83.94.34.85.1

5.45.86.06.46.9

7.38.19.4

10.612.1

14.617.218.920.320.5

24.527.229.733.5

26.426.927.528.0

28.629.330.130.9

32.033.134.134.6

Netnterestpaid

0.2

.1

.1

.1

.0

.0

.0

.1

.1

.1

- . 1

- . 3- . 7- . 9

- 1 . 2- 1 . 6

- 2 . 0- 1 . 8- 2 . 1—2.9- 4 . 9

- 4 . 8- 5 . 4- 6 . 5- 7 . 9

- 4 . 9- 5 . 2- 5 . 7- 5 . 9

- 6 . 2- 6 . 4- 6 . 5- 6 . 8

- 7 . 1- 7 . 3- 8 . 2- 9 . 1

Sub-sidiesless

currentsurplusof gov-

ern-mententer-prises

- 0 . 78

- . 8- . 9

_ Q

n1L.2L.3

1 5

- 1 . 7—1 7- 2 . 0

—2 2- 2 . 3—2 5—2 8- 2 . 8

- 3 0- 3 . 0—3 1- 3 . 2- 3 . 3

- 3 . 6- 3 . 8- 4 . 2- 4 4- 4 . 3

- 4 . 5- 5 . 1- 5 . 6- 5 . 9

- 4 . 9- 4 . 9- 5 . 1- 5 . 5

- 5 . 7- 5 . 3- 5 . 7- 5 . 5

- 6 . 0- 5 . 7- 5 . 9- 6 . 1

Surplusor

deficit/ \nationalncomeand

prod-uct ac-counts

1.91 0.1

- . 7

- 1 . 2

— 0.1

1 i

1 39

- 1 . 42 4

- . 4

1

'55

1.0

— 0.5

1 i.3

2.1

2 83.7

13.713 07.6

6.220 729 627 8

12.816.421.432.0

29 528.531.229.0

31 529.823.4

1 Includes an item for the difference between wage accruals and disbursements, not shown separately.Source: Department of Commerce, Bureau of Economic Analysis.

269

T A B L E B-75.—State and local government revenues and expenditures, selected fiscal years, 1927-77

[Millions of dollars]

Fiscal year1

General revenues by source 2

TotalProp-erty

taxes

Salesand

grossre-

ceiptstaxes

Indi-vidualincometaxes

Corpo-ration

netincometaxes

Reve-nue

fromFederalGovern-

ment

Allothers

General expenditures by function 2

Total Edu-cation

High-ways

Publicwel-fare

Allother <

1927...

1932...1934...1936...1938...

1940...1942...1944...1946..1948..

1950..1952..1953..1954..

1955..1956-.1957..1958..1959-

1960..1961.-1962..1963..

1962-63 «_.1963-64 5.1964-65 6..

1965-66 6..1966-67 6..1967-68 6..1968-69 6.1969-70 6.

1970-716.1971-72 8.1972-73 «_1973-745..1974-75 6..

1975-76 6..1976-775..

7,271

7,2677,6788,3959,228

9,60910,41810,90812,35617,250

20,91125,18127,30729,012

31,07334,66738,16441,21945,306

50,50554,03758,25262,890

62,26968,44374,000

83,03691,197101,264114,550130,756

144,927166,352190,214207, 670228,171

256,176285, 796

4,730

4,4874,0764,0934,440

4,4304,5374,6044,9866,126

7,3498,6529,3759,967

10,73511,74912,86414,04714,983

16,40518,00219,05420,089

19,83321,24122,583

24,67026,04727,74730,67334,054

37,85242,13345,28347,70551,491

57,00162, 535

470

7521,0081,4841,794

70

153218

1,9822,3512,2892,9864,442

5,1546,3576,9277,276

224276342422543

788998

1,0651,127

7,6438,6919,4679,82910,437

11,84912,46313,49414,456

14,44615,76217,118

19,08520,53022,91126,51930,322

33,23337,48842,04746,09849,815

54,5460, 595

1,2371,5381,7541,7591,994

2,4632,6133,0373,269

3,2673,7914,090

4,7605,8267,3088,90810,812

11,90015,23717,99419,49121,454

24,57529,245

92

7949113165

156272451447592

593846817778

744890984

1,0181,001

1,180,266,308,505

,505,695,929

2,0382,2272,5183,1803,738

3,4244,4165,4256,0156,642

7,2739,174

116

2321,016948800

945858954855

1,861

2,4862,5662,8702,966

3,1313,3353,8434,8656,377

6,9747,1317,8718,722

8,66310,00211,029

13,21415,37017,18119,15321,857

26,14631,25339,25641, 82047, 034

55,58962,575

1,793

1,6431,4491,6041,811

1,8722,1232,2692,6613,685

4,5415,7636,2526,897

7,5848,4659,2509,69910,516

11,63412,56313,48914,850

14,55615,95117,250

7,210

7,7657,1817,6448,757

9,2299,1908,86311,02817,684

22,78726,09827,91030,701

33,72436,71140,37544,85148,887

51,87656,20160,20664,816

63,97769,30274, 546

19,26921,197 ...23,598 102,26,11829,971

82,84393,35002,411116,728131,332

32,37435,82640,21046,541 ___,51, 735 230,

150,674166,873181,227198,959~~~\, 721

57,191 256,731

2,235

2,3111,8312,1772,491

2,6382,5862,7933,3565,379

7,1778,3189,39010,557

11,90713,22014,13415,91917,283

18,71920,57422,21623,776

23,72926,28628, 563

33,28737,91941,15847,23852,718

59,41364,88669,71475, 83387,858

97,21661,673 274, 388 102, 805

1,809

1,7411,5091,4251,650

1,5731,4901,2001,6723,036

3,8034,6504,9875,527

6,4526,9537,8168,5679,592

9,4289,84410,35711,136

11,15011,66412,221

12,77013,93214,48115,41716,427

18,09519,01018,61519,94622,528

23,90723,105

151

444889827

1,069

1,1561,2251,1331,4092,099

2,9402,7882,9143,060

3,1683,1393,4853,8184,136

4,4044,7205,0845,481

5,4205,7666,315

6,7578,2189,857

12,11014,679

18,22621,07023, 58225,08528,155

32,604

3,015

3,2692,9523,2153,547

3,862

3,7374,5917,170

8,86710,34210,61911,557

12,19713,39914,94016,54717,876

19,32521,06322,54924,423

23,67825,58627,447

30,02933,28136,91541,96347, 508

54,94061,90769,31678,09692,180

103,00435,941 112,537

1 Fiscal years not the same for all governments. See footnote 5.2 Excludes revenues or expenditures of publicly owned utilities and liquor stores, and of insurance-trust activities.

Intergovernmental receipts and payments between State and local governments are also excluded.3 Includes licenses and other taxes and charges and miscellaneous revenues.* Includes expenditures for health, hospitals, police, local fire protection, natural resources, sanitation, housing and

urban renewal, local parks and recreation, general control, financial administration, interest on general debt, and un-allocable expenditures.

s Data for fiscal year ending in the 12-month period through June 30. Data for 1963 and earlier years include local govern-ment amounts grouped in terms of fiscal years ended during the particular calendar year.

Note.—Data are not available for intervening years.Source: Department of Commerce, Bureau of the Census.

270

TABLE B-76.—Interest-bearing public debt securities by kind of obligation, 1967-1S

[Millions of dollars]

End of yearor month

Fiscal year:196719681969

19701971197219731974

1975197619771978

1977: JanFebMarAprMayJune

JulyAugSeptOctNovDec

1978: JanFebMarAprMay.June

July...Aug.Sept.Oct.NovDec

Totalin-

terest-bearingpublicdebt

securities

322,286344,401351,729

369,026396,289425,360456,353473,238

532,122619, 254697, 629766,971

652,980662, 320668,216668, 509670,958673, 389

671,386684, 081697,629696, 301706,973715, 227

720, 563728, 474736, 929733,074740, 579748, 002

749,462763,404766,971775,452782,048782, 371

Marketable

Total

5 210,672226,592226,107

232,599245,473257,202262,971266,575

315,606392,581443, 508485,155

423,995431,607435, 379434, 065431, 447431,149

430, 248438,146443,508447,435454, 862459,927

466,780470, 766478, 252472,193473, 684477, 699

481,041485, 557485,155491, 651493,337487, 546

Bills

58,53564,44068,356

76,15486,67794,648100,061105,019

128, 569161,198156, 091160, 936

164, 005164,175164,264161, 977157,931155, C64

154, 227154, 283156, 091156,174156,656161, 081

161,221161,817165, 652159, 640159, 391159,757

160,092160, 615160,936161, 227161, 548161,747

Treasurynotes

49,10871,07378,946

93,489104,807113,419117,840128,419

150,257191,758241,692267, 865

219, 474225, 856229,625230,655230,230232, 885

231,371238, 084241,692245, 587251,104251, 800

257,077258, 472262,179262,180261, 612265, 310

266, 586268, 531267,865272,610271,663265, 791

Treasurybonds1

97,41891,07978,805

62,95653,98949,13545,07133,137

36,77939,62645, 72456,355

40,51641, 57641, 49041, 43343, 28643, 200

44,65045, 77845,72445,67447,10247, 045

48, 48350, 47750, 42050, 37352, 68152,632

54, 36356,41056,35557, 81460,12560, 007

Non marketable

Total

111,614117,808125,623

136,426150,816168,158193,382206,663

216, 516226,673254,121281,816

228,985230, 714232,837234, 444239,511242, 240

241,138245,935254,121248, 866252,111255, 300

253,783257, 707258, 677260,881266, 895270, 303

268,420277, 847281,816283,801288,711294,825

U.S.savingsbonds

51,21351,71251,711

51,28153,00355,92159,41861,921

65,48269,73375,41179, 798

72, 23472,64073,03773, 45773,90874, 282

74, 80375, 05975,41175, 81676, 22476, 602

76,98777, 41577, 80478, 22078, 64578,965

79,28179, 54379,7S880, 09180, 33180, 546

Foreigngovern-ment

series2

1,5143,7414,070

4,7559,27018,98528, 52425,011

23,21621, 50021, 79921,680

22, 20922, 06922, 07821, 90321, 83121, 732

21,54521, 37021, 79921,12321, 66522,187

22, 78722, 59723, 64923, 43322, 41921, 460

20, 81322, 22421,68024,04226,62429, 593

Govern-ment

accountseries»

56,15559,52666,790

76,32382,78489,598101,738115,442

124,173130,557140,113153, 271

126, 810127, 770128,192128, 992133, 029134, 754

132,447136, 329140,113136, 890138, 580139, 774

136, 364139,422137,956138, 833144, 394146, 448

144,665149, 047153,271152,685154, 812157, 522

Other <

2,7312,8283,051

4,0685,7593,6543,7014,289

3,6444,88316, 79727,067

7,7318,2359,52910, 09210,74311,473

12, 34213,17616, 79715, 03915,64216,737

17,64418, 27319,26720,39521, 43623, 430

23,66027,03227,06726,98326, 94427,164

1 Includes Treasury bonds and minor amounts of Panama Canal and postal savings bonds.2 Nonmarketable certificates of indebtedness, notes, bonds, and bills in the Treasury foreign series and foreign-currency-

series issues.* Includes Treasury deposit funds and some special issues formerly included in "Other."* Includes depository bonds, retirement plan bonds, Rural Electrification Administration bonds, State and local bonds,

and special issues held only by U.S. Government agencies and trust funds and the Federal home loan banks.*Includes $5,610 million in certificates not shown separately.

Note.—Through fiscal year 1976, the fiscal year was on a July 1-June 30 basis; beginning October 1976 (fiscal year 1977)'the fiscal year is on an October 1-September 30 basis.

Source: Department of the Treasury.

271

TABLE B-77.— Estimated ownership of public debt securities, 1967-78[Par values;1 billions of dollars]

End of year ormonth

Fiscal year:196719681969

19701971197219731974 . . .

1975197619771978

1977: JanFebMar .AprMayJune

JulyAugSept . _- - .OctNovDec

1978: Jan _ _FebMarAprMayJune

JulyAugSeptOctNovDec

Total public debt securities

Totah

322.9345.4352.9

370.1397.3426.4457.3474.2

533.2620.4698.8771.5

653.9663.3669.2671.0672.1674.4

673.9685.2698.8697.4708.0718.9

721.6729.8738.0736.6741.6749.0

750.5764.4771.5776.4783.0789.2

Held, b y

Govern-ment

accounts

71.876.184.8

95.2102.9111.5123.4138.2

145.3149.6155.5168.0

144.1144.4144.9145.5149.4151.2

148.7151.9155.5152.2153.9154.8

151.5154.2152.7153.6159.1161.1

159.3163.7168.0166.3167.4170.0

Held byFederalReserveBanks

46.752.254.1

57.765.571.475.080.5

84.794.4

104.7115.3

94.195.896.099.897.4

102.2

98.698.4

104.794.696.5

102.8

97.098.5

101.6103.5102.8110.1

108.9111.7115.3115.3113.3110.6

Held by private investors

Totals

204.4217.0214.0

217.2228.9243.6258.9255.6

303.2376.4438.6488.3

415.7423.1428.3425.7425.3421.0

426.5434.9438.6450.6457.6461.3

473.1477.1483.7479.5479.7477.8

482.3489.0488.3494.7502.3508.6

Com-mercialbanks *

55.559.755.3

52.661.060.958.853.2

69.092.599.895.3

102.4104.4104.9104.1102.6102.8

100.7100.499.899.7

100.6101.4

100.9102.2101.1100.798.498.5

97.795.895.394.393.5

Mutualsavingsbanks

and in-surance

com-panies

13.212.511.6

10.410.310.29.68.5

10.616.020.520.5

18.618.818.918.919.019.0

19.420.220.520.620.921.0

20.920.820.620.420.520.2

20.620.620.520.720.4

Corpo-rations 5

11.012.011.1

8.57.49.39.8

10.8

13.224.323.321.5

29.731.029.229.227.624.3

23.525.023.323.222.822.7

23.422.320.819.919.719.0

20.022.421.521.020.9

Stateand localgovern-ments •

23.625.126.4

29.025.926.928.828.3

31.739.353.067.8

44.843.344.448.449.147.6

47.952.153.054.055.355.2

56.758.661.261.260.262.7

61.769.267.867.169.1

Indi-viduals *

70.474.277.3

81.875.473.275.980.7

87.196.4

103.9109.3

101.0101.5101.9102.2102.7103.0

103.4103.7103.9104.4104.9105.3

106.1106.6106.9107.1107.7108.1

108.5108.9109.3109.8110.2

Miscel-laneousinves-tors s. s

30.733.432.3

35.049.163.276.074.2

91.5107.9138.1173.9

119.2124.1129.0122.9124.3124.3

131.6133.5138.1148.7153.1155.7

165.1166.6173.1170.2173.2169.3

173.9172.1173,9181.?188.2

1 U.S. savings bonds, series A - F and J, and U.S. savings notes are included at current redemption value.2 As of July 31, 1974, public debt outstanding has been adjusted to exclude the notes of the International Monetary

Fund to conform with the Budget presentation. This adjustment applies to the 1967-78 data in this table.s For comparability with 1975-78 published data, published data for 1967-74 have been adjusted to exclude notes of

the International Monetary Fund. These adjustments amounted to $3.3 billion in 1967, $2.2 billion in 1968, and $0.8 billionin each year 1969 through 1974. These adjustments were necessary in order to add to the total public debt figures aspublished by the Department of the Treasury.

4 Includes commercial banks, trust companies, and stock savings banks in the United States and Territories and islandpossessions; figures exclude securities held in trust departments. Since the estimates in this table are on the basis of parvalues and include holdings of banks in United States Territories and possessions, they do not agree with the estimatesin Table B-60, which are based on book values and relate only to banks within the United States.

4 Exclusive of banks and insurance companies.• Includes trust, sinking, and investment funds of State and local governments and their agencies, and of Territories

and possessions.7 Includes partnerships and personal trust accounts.8 Includes savings and loan associations, nonprofit institutions, corporate pension trust funds, dealers and brokers,

certain government deposit accounts and government-sponsored agencies, and investments of foreign balances and inter-national accounts in the United States.

Note.—Through fiscal year 1976, the fiscal year was on a July 1-June 30 basis; beginning October 1976 (fiscal year1977), the fiscal year is on an October 1-September 30 basis.

Source: Department of the Treasury.

272

TABLE B-78.—Average length and maturity distribution of marketable interest-bearing publicdebt securities held by private investors, 1967—78

End of year cr month

Fiscal year:196719681969

19701971197219731974

1975197619771978

1977: JanFebMar. _AprMayJune _. .

July _ _AugS e p t . . .OctNov.Dec

1978: JanFebMarAprMayJune

JulyAugSeptOct.NovDec

Amountout-

standingprivately

held

Maturity class

Within1 year

I to5years

5 to 10years

10 to 20years

20 yearsand over

Millions of dollars

150,321159,671156, C08

157,910161,863165, 978167,869164, 862

210, 382279, 782326,674356, 501

313,497319,982323,604318,699318,619313,485

316,177325,001326,674338, 290343, 870343, 019

355,374358,320362,693355,144356, 892353,660

358,255359,919356, 501362,443367, 256365, 239

56,56166,74669,311

76, 44374, 80379, 50984,04187,150

115,677151, 723161, 329163, 819

162,633165, 942166,427162,419162,211157, 353

160,332161, 932161, 329167,699169, 552171,376

177,642175,195178,474170,272166, 094162, 533

163,619163, 512163,819165,337170, 492174,231

53,58452,29550,182

57,03558, 55757,15754,13950,103

65,85289,151

113,319132, 993

101,626106, 685109,983106, 929106,823107, 000

105, 255110,681113,319115,744121, 346118,975

123,692130,715132, 501130,884135, 524137, 543

139,017136,462132,993136,064133, 876128,293

21,05721,85018,078

8,28614, 50316, 03316, 38514,197

15, 38524,16933,06733, 500

33,68831,20431,15533,46932,65832,442

32, 52133, 26033,06735,91332, 85832,729

32, 71229,85329,41431, 81631, 75830,458

30,57333,60333, 50033, 47633, 69533,604

6,1536,1106,097

7,8766,3576,3588,7419,930

8,8578,0878,428

11,383

7,3427,2917,2367,1727,1807,092

8,4408,5128,4288,4068,3648,293

9,7339,7199,6359,5719,8479,766

11,51211,40711,38312, 74613, 87913,833

12,96812,67012,337

8,2727,6456,922< 5643,481

4,6116,652

10, 53114, 805

8,2088,8608,8038,7099,7469,598

9,62810, 61610, 53110,52911,75011,646

11,59512,83812,66912,60113,66813, 360

13, 53314, 93614, 80514, 82015, 31415,278

Average length

Years

544

33332

2223

2222

2

232232

232333

333333

Months

152

8631

11

g7

113

9999

1110

100

U100

11

110

11011

133

44

Note.—All issues classified to final maturity.Through fiscal year 1976, the fiscal year was on a July 1-June 30 basis, beginning October 1976 (fiscal year 1977), the

fiscal year is on an October 1-September 30 basis.

Source: Department cf the Treasury.

273

CORPORATE PROFITS AND FINANCE

T A B L E B-79.—Corporate profits by industry, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

19401 9 4 1 . . .19421 9 4 3 . . . _194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

19701971197219731974197519761977.. _..1978 P

1976: 1

llf—IV....

1977: 1

llf—IV....

1978: 1

Corporate profits with inventory valuation adjustment and without capital consumption adjustment

Total

10.5

- 1 . 2

6.3

9.815.220.324.423.819.219.325.633.030.8

37.642.739.839.537.846 745.945.440.851.2

48.948.753.757.664.273.378.675.682.177.9

66.476.989.697.286.5

107.9141.4159.1178 1

141.2143.0144.5137.0

144.5158.5169.9163.5

148.7180.6184.5

Domestic industries

Total

10.2

- 1 . 2

6.1

9.615.020.124.123.518.918.924.932.229.9

36.741.538.738.436.445.144.143.539.149.4

47.046.351.154.961.070.175.972.678.974.2

62.672.484.790.476.9

101.8133.2149.5168 1

132.3135.4136.3128.7

134.8148.1159.5155.6

139.2168.9175.4

Total

1.3

.3

.8

1.01.11.21.31.61.72.11.72.63.1

3.13.64.04.54.64.85.05.25.76.8

7.27.07.36.86.97.58.59.0

10.411.3

12.614.115.416.214.413.017.520.925 4

15.817.018.319.1

19.719.921.921.9

22.724.326.0

Financial'

FederalReservebanks

0.0

.0

.0

.0

.0

.0

.0

.1

.1

.2

.2

.2

.3

.4

.4

.3

.5

.6

.6

.7

1.0.8.9

1.01.11.41.72.02.53.1

3.63.33.44.55.75.76.06.27 6

6.05.96.06.1

6.06.26.26.4

6.97.38.0

Other

1.3

.3

.8

.9,0

.36

1 62.01.62.32.9

3.03.33.74.14.34.54.54.65.16.0

6.26.36.45.85.86.26.87.07.98.2

9.010.812.111.78.77.3

11.614.617 8

9.911.112.313.0

13.713.715.715.5

15.717.018.0

Nonfinancial

Total

8.9

- 1 . 5

5.3

8.614.018.922.821.917.316.823.229.626.8

33.537.934.733.931.840.339.138.333.542.6

39.839.343.848.154.162.567.463.668.562.9

50.158.269.374.162.588.9

115.6128.6142 8

116.4118.4118.0109.7

115.1128.1137.6133.7

116.6144.6149.4

Manu-factur-ing 2

5.2

- . 4

3.3

5.59.5

11.813.813.29.79.0

13.617.616.2

20.924.621.722.019.926.024.724.019.426.2

23.923.026.028.731.938.341.637.941.236.8

27.132.440.644.136.648.365.674.784 7

67.067.565.961.9

66.477.474.780.2

69.887.887.1

Whole-saleand

retailtrade

1.0

- . 5

.7

1.21.42.23.03.23.33.84.65.54.5

5.05.04.83.83.85.04.54.44.65.9

4.94.95.75.97.47.98.08.9

10.110.1

9.411.713.314.712.920.724.024.0

25.524.524.521.4

20.622.830.622.1

16.722.025.8

Utilities 3

1.8

.0

1.0

1.32.03.44.43.92.71.82.23.03.0

4.04.64.95.04.75.65.95.85.97.0

7.47.88.49.39.9

11.011.810.710.710.2

8.28.39.08.35.69.2

13.716.1

12.414.314.913.3

15.414.517.517.1

17.319.320.7

Other

0.9

- . 7

.3

.6l . i1.51.61.61.52.12.93.63.1

3.63.73.33.13.43.64.14.03.63.5

3.53.63.84.24.95.36.06.16.55.8

5.35.86.47.07.4

10.712.413.8

11.512.212.713.0

12.713.514.714.3

12.815.415.8

Restof theworld

0.2

.0

.2

.2

.2

.2

.3

.4

.7

.8

.8

1.01.21.11.11.41.61.81.91.7U

1.92.22.62.63.13.2l.i3.03.23.5

3.84.64.16.(9.66.18.29.6

10. (

8.97.68.28.2

9.710.410.37.9

9.411.79.1

See next page for continuation of table.

274

TABLE B-79.—Corporate profits by industry, 1929-78—Continued

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940 . .194119421943194419451946194719481949 . .

195019511952195319541955195619571958..1959

196019611962196319641965 . .1966196719681969

197019711972197319741975197619771978 v

1976: 1ll____III . . .IV....

1977: 1IL___III . . .IV....

1978: 1I I - . .III . . .

Corporate profits before deduction of capital consumption allowances, with inventory valuation adjustment

Total

14.7

2.6

10.1

13.619.525.429.729.925.524.031.440.038.7

46.553.051.352.752.864.164.966.362.974.8

74.175.384.290.098.7

110.8119.3119.7130.2130.9

123.0137.8157.4170.9168.1197.2238.5265.1292 5

235.1238.9242.6237.5

246.5263.5277.5272.8

260.0294.0299.9

Domestic industries

Total

14.4

2.6

9.9

13.419.325.229.529.625.323.630.739.237.9

45.551.850.251.651.462.663.164.461.273.0

72.272.981.587.495.6

107.5116.5116.7127.0127.2

119.2133.3152.6164.1158.5191.1230.3255.5282.5

226.2231.3234.4229.2

236.8253.1267.1265.0

250.6282.2290.8

Total

1.4

.4

.9

1.11.21.31.41.71.72.21.82.73.3

3.33.84.24.84.95.25.45.76.17.3

7.87.78.07.67.98.59.6

10.211.813.0

14.516.318.019.518.317.322.326.031 0

20.421.723.124.0

24.725.127.127.2

28.129.831.6

Financial1

FederalReservebanks

0.0

.0

.0

.0

.0

.0

.0

.1

.1

.1

.1

.2

.2

.3

.4

.4

.3

.3

.5

.6

.6

.7

1.0.8.9

1.01.21.41.72.02.53.1

3.63.43.44.55.75.76.06.27.7

6.05.96.06.1

6.06.26.26.4

7.07.38.0

Other

1.4

.4

.9

1.11.21.31.41.61.62.11.72.53.0

3.13.53.94.44.64.84.95.05.56.5

6.86.97.16.66.77.27.98.29.39.9

11.013.014.714.912.611.616.319.823 3

14.415.817.117.9

18.718.820.920.8

21.122.523.6

Nonfinancial

Total

13.0

2.2

9.0

12.318.123.928.127.923.621.428.936.534.6

42.248.046.046.846.557.457.758.755.065.7

64.465.373.679.887.799.0

106.9106.5115.1114.2

104.7116.9134.6144.6140.2173.8208.0229.5251 5

205.8209.6211.3205.3

212.1228.0240.0237.7

222.5252.4259.2

Manu-factur-

ing2

7.1

1.3

4.9

7.211.414.216.616.513.011.216.320.819.8

24.929.126.928.327.134.333.633.929.837.1

35.535.240.243.948.055.960.558.763.961.5

53.159.869.975.070.585.2

105.5118.6132.1

105.7106.6106.3103.4

108.7120.7119.4125.5

116.0134.8134.9

Whole-saleandretailtrade

1.3

- . 2

1.0

1.51.72.63.33.53.64.25.26.25.4

6.06.26.15.15.26.76.36.56.68.0

7.37.48.48.7

10.411.111.512.714.314.9

14.717.520.222.121.329.934.936.2

35.835.335.732.9

32.434.843.034.8

29.835.539.7

Utili-ties 3

2.9

1.1

2.0

2.33.14.85.85.54.63.03.64.74.8

6.17.17.68.18.29.8

10.310.510.912.5

13.314.015.416.817.919.621.321.021.922.4

21.423.226.327.426.732.338.542.9

36.438.939.938.8

40.941.144.844.8

45.347.749.5

Other

1.7

.0

1.1

1.41.92.22.42.42.32.93.84.84.6

5.25.65.45.35.96.67.47.87.68.0

8.48.89.6

10.411.412.313.614.115.015.4

15.516.418.320.221.726.429.131.8

27.928.829.530.2

30.231.432.832.6

31.434.435.0

Restof theworld

0.2

.0

.2

.2

.2

.2

.2

.3

.2

.4

.7

.8

.8

1.01.21.11.11.41.61.81.91.71.8

1.92.32.62.63.13.32.83.03.23.7

3.84.64.86.89.66.18.29.6

10. C

8.97.68.28.2

9.710.410.37.9

9.411.79.1

1 Consists of the following industries: Banking; credit agencies other than banks; security and commodity brokers,dealers, and services; insurance carriers; regulated investment companies; small business investment companies; andreal estate investment trusts.

2 See Table B-80 for industry detail.3Consists of transportation, communication, and electric, gas, and sanitary services.Note.—The industry classification is on a company basis and is based on the 1972 Standard Industrial Classification

(SIC) beginning 1948, and on the 1942 SIC prior to 1948.

Source: Department of Commerce, Bureau of Economic Analysis.

275

TABLE B-80.—Corporate profits of manufacturing industries, 1929-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

1940194119421943194419451946194719481949

1950195119521953195419551956195719581959

1960196119621963196419651966196719681969

197019711972197319741975197619771978 v

1976: 1 . . .ll__ML.IV..

1977: 1 . . .I L .III..IV..

1978: 1 . . .II . .IIL-

Corporate profits with inventory valuation adjustment and without capital consumption adjustment

Totalmanu-factur-

ing

5.2

- . 4

3.3

5.59.5

11.813.813.29.79.0

13.617.616.2

20.924.621.722.019.926.024.724.019.426.2

23.923.026.028.731.938.341.637.941.236.8

27.132.440.644.136.648.365.674.784.7

67.067.565.961.9

66.477.474.780.2

69.887.887.1

Nondurable goods

Total

2.6

.0

1.7

2.43.14.65.75.95.26.67.8

10.08.1

8.911.49.9

10.19.4

11.811.910.710.012.7

11.911.711.912.814.415.818.017.318.817.7

16.817.318.120.125.130.137.539.641.8

39.637.737.435.0

36.440.240.641.1

37.041.742.5

Foodand

kindredprod-ucts

1.91.6

1.61.41.71.81.62.21.81.82.12.6

2.12.32.32.72.82.63.33.13.22.9

3.53.32.82.23.07.97.35.7

8.47.08.15.8

4.55.77.05.7

4.35.46.6

Chem-icalsand

alliedprod-ucts

1.71.8

2.32.82.32.22.23.02.82.82.53.4

3.13.13.23.63.94.54.84.25.04.6

3.94.25.05.85.15.87.98.2

8.48.17.97.3

8.28.57.98.2

8.18.38.2

Petro-leumandcoal

prod-ucts

2.81.9

2.32.72.32.82.73.03.32.62.12.5

2.52.22.12.12.42.83.23.83.63.3

3.63.63.54.9

10.28.1

11.612.8

11.411.411.312.4

11.813.412.313.8

10.414.414.6

Other

3.72.8

2.74.43.63.32.93.64.13.63.34.2

4.24.04.34.55.35.86.76.27.06.9

5.86.26.87.26.88.2

10.612.9

11.511.210.19.6

12.012.613.413.4

14.313.713.2

Durable goods

Total

2.6

- . 4

1.7

3.16.47.28.17.44.52.45.87.58.1

12.013.211.711.910.514.312.813.39.3

13.5

12.011.314.115.917.522.623.520.622.419.2

10.315.122.524.011.518.328.135.142.9

27.429.728.526.9

29.937.234.239.1

32.846.144.6

Primarymetalindus-tries

1.61.5

2.33.11.92.51.72.93.03.01.92.3

2.11.51.61.92.43.13.62.72.01.4

.9

.51.62.04.92.92.01.8

2.32.81.71.0

1.02.9

.92.4

1.25.15.0

Fabri-catedmetal

products

0.8.7

1.11.31.01.0.9

1.01.11.1.9

1.1

.91.01.21.21.42.02.42.42.42.0

1.21.32.12.61.22.93.84.0

3.74.04.13.6

3.74.13.94.2

3.24.34.7

Machin-ery,

exceptelectri-

cal

1.21.3

1.62.32.31.91.71.72.12.01.42.1

1.81.82.32.43.13.84.44.04.13.6

2.72.73.94.51.54.35.67.1

5.45.45.76.0

5.96.87.38.5

6.49.27.4

Electricandelec-

tronicequip-ment

0.7.8

1.21.31.51.4

M

l'.51.31.7

1.31.31.51.51.62.53.02.92.82.2

1.11.82.92.6

2.'l2.73.9

2.72.62.62.7

3.33.94.14.4

4.34.85.8

Motorvehicles

andequip-ment

1.42.1

3.12.42.42.62.14.12.22.6

.92.9

3.02.54.04.94.76.15.13.95.54.8

1.44.95.95.8.2

1.77.49.5

6.97.97.67.1

8.811.09.29.1

7.910.810.2

Other

1.81.7

2.62.82.62.62.93.53.23.12.93.4

2.93.13.53.94.25.05.14.75.75.2

3.03.86.06.63.44.36.68.8

6.37.16.86.4

7.38.68.7

10.5

9.711.911.7

See next page for continuation of table.

276

TABLE B-80.—Corporate profits of manufacturing industries, 1929-78—Continued

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year orquarter

1929

1933

1939

19401941194219431944..19451946194719481949

1950195119521953195419551956195719581959

196019611962196319641965. . . . .1966196719681969

197019711972197319741975197619771978 p

1976: L.II.III.IV.

1977: L.II.III.IV.

1978: 1II.Ill

Corporate profits before deduction of capital consumption allowances, with Inventory valuation adjustment

Totalnanu-actur-ing

7.1

1.3

4.9

7.211.414.216 616.513.011.216.320.819.8

24.929.126.928.327.134.333.633.929.837.1

35.535.240.243.948.055.960.558.763.961.5

53.159.869.975.070.585.2

105.5118.6132.1

105.7106.6106.3103.4

108.7120.7119.4125.5

116.0134.8134.9

Nondurable goods

Total

3.6

1.1

2.6

3.44.15.97 i7.57.07.99.3

11.810.1

11.113.912.713.213.116.016.515.715.418.4

17.818.019.120.522.624.427.227.129.329.2

29.030.432.235.140.847.256.560.965.1

57.956.556.754.8

56.761.362.263.2

59.664.866.1

Foodand

kindredprod-ucts

2.22.0

2.12.02.32.32.32.92.52.63.03.6

3.23.43.64.04.24.04.94.74.94.8

5.65.55.14.85.7

10.910.69.3

11.510.311.39.1

8.09.2

10.79.4

8.19.2

10.6

Chem-icalsand

alliedprod-ucts

2.02.1

2.73.22.82.83.03.93.83.83.64.6

4.44.54.85.35.76.56.86.37.37.1

6.67.18.29.08.69.7

12.513.5

12.712.612.712.1

13.213.713.213.7

13.714.214.2

Petro-leumandcoalprod-ucts

3.42.6

3.13.63.23.94.14.64.94.44.04.5

4.54.34.44.75.15.86.37.27.37.1

7.67.98.09.7

15.113.317.419.3

17.017.117.118.4

17.819.719.020.5

17.221.421.7

Other

4.23.4

3.35.14.44.13.84.65.24.94.75.7

5.85.76.26.57.58.19.28.99.9

10.2

9.29.9

10.811.611.513.316.018.8

16.616.515.615.2

17.718.719.319.5

20.620.019.6

Durable goods

Total

3.4

.2

2.3

3.87.28.49.59.06.03.36.99.09.7

13.715.314.215.014.118.317.218.214.418.7

17.717.221.123.325.531.433.331.634.632.3

24.129.437.639.929.738.049.057.767 0

47.750.149.648.6

52.059.357.262.4

56.470.068.8

Primarymetalindus-tries

1.91.9

2.83.62.63.52.94.24.34.53.23.6

3.42.93.33.74.35.15.75.04.54.0

3.53.14.14.78.16.35.65.8

5.96.45.44.8

4.96.94.96.5

5.49.49.3

Fabri-catedmetalroducts

1.0.9

.3

.5

.3

.2

.2

.4

.4

.51.3.5

1.4L.5L.81.92.12.73.13.33.43.0

2.32.43.33.82.64.55.65.9

5.45.85.85.4

5.55.96.06.2

5.36.46.8

Machin-ery

exceptelectri-

cal

1.51.6

1.92.62.72.32.22.32.82.72.22.9

2.72.83.43.54.35.25.85.76.05.7

5.25.46.87.64.97.99.7

11.5

9.39.39.8

10.2

10.211.311.912.9

11.114.012.3

Electricandelec-tronicequip-ment

0.8.9

1.41.51.71.61.51.51.62.01.82.2

1.81.92.12.22.33.33.93.94.13.7

2.83.75.14.93.05.05.77.3

5.75.65.75.9

6.67.27.58.0

7.98.49.4

Motorvehicles

andequip-ment

1.62.3

3.32.72.73.02.54.62.93.31.63.7

4.03.55.26.36.38.07.56.48.17.5

3.87.38.48.33.14.8

10.712.9

10.011.011.010.8

12.214.012.612.6

11.314.213.6

Other

2.22.1

3.03.33.33.33.74.44.24.24.24.8

4.44.65.35.76.27.17.37.38.68.4

6.57.59.9

10.68.19.5

11.714.3

11.412.011.811.5

12.614.114.316.1

15.417. 617.3

Note.—The industry classification is on a company basis and is based on the 1972 Standard Industrial Classification(SIC) beginning 1948, and on the 1942 SIC prior to 1948.

Source: Department of Commerce, Bureau cf Economic Analysis.

277278-216 O - 79 - 18

TABLE B-81.—Corporate profits with inventory valuation and capital consumption adjustments,1946-78

[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

19461947 . . .19481 9 4 9 . . .

1950.195119521953 . .1954

19551956.195719581959 . . .

I96019611962 . . . . . .19631964

19651966196719681969 . .

197019711972 . .19731974 . .

1975197619771978 P

1976: 1 - - - -IIIIIIV

1977: 1IIIII . _IV

1978: 1 _| |III

Corporateprofits withinventoryvaluation

and capitalconsumptionadjustments

16.622.229.126.9

33.738.135.435.534.6

44.642.942.137.548.2

46.646 954.959.667.0

77.182.579.385 881.4

67.977.292.199.183.6

95.9127.0144.2160.0

126.8128.6130.0122.5

129.9143.7154.8148.2

132.6163.4165.2

Corporateprofits

tax liability

9.111.312.410.2

17.922.619.420.317.6

22.022.021.419.023.6

22.722 824.026.228.0

30.933.732.539 439.7

34.537.741.548.752.4

49.864.371.884.1

63.666.364.762.4

68.372.372.873.9

70.085.086.2

Profits after tax with inventory valuationand capital consumption adjustments

Total

7.510.916.716.7

15.715.516.015.217.0

22.620.920.618.524.6

23.924 130.933.439.0

46.248.946.846 441.8

33.439.550.550.431.2

46.162.772.376.0

63.362.365.360.1

61.671.482.174.3

62.678.479.0

Dividends

5 66.37.07.2

8.88.58.58.89.1

10.311.111.511.312.2

12.913.314.415.517.3

19.119.420.121.922.6

22.923.024.627.831.0

31.937.943.749.3

34.537.238.441.4

41.542.744.146.3

47.048.150.1

Undistributedprofits withinventoryvaluation

and capitalconsumptionadjustments

2 04.69.79.5

6.97.07.56.47.9

12.29.89.17.2

12.4

11.010.816.517.921.7

27.129.426.724.419.2

10.516.525.922.6

.2

14.224.828.726.7

28.725.126.918.7

20.128.738.028.0

15.630.329.0

Source: Department of Commerce, Bureau of Economic Analysis.

278

TABLE B-82.—Sales, profits, and stockholders1 equity, all manufacturing corporations, 1947-78[Billions of dollars]

Year orquarter

194719481949

1950195119521953.1954

19551956.1957.. .19581959.

19601961.196219631964.

1965.1966196719681969.. . .

1970.. .1971-19721973

1973: IV

New series:

1974197519761977. .

1973:1V

1974:1IIIllIV

1975: |IIIllIV

1976: 1 „||IIIIV.. . .

1977: 1IIIIIIV

1978: 1IIIII

Sales(net)

150.7165.6154.9

181.9245.0250.2265.9248.5

278.4307.3320.0305.3338.0

345.7356.4389.9412.7443.1

492.2554.2575.4631.9694.6

708.8751.4849.5

1,017.2

275.1

1,060.61,065.21,203.21,328.1

236.6

242.0269.4272.1277.0

247.1265.8271.0281.3

284.2307.6301.6309.8

311.5338.6331.7346.2

340.4377.9377.1

All manufacturingcorporations

Profits

Beforeincometaxes i

16.618.414.4

23.227.422.924.420.9

28.629.828.222.729.7

27.527.531.934.939.6

46.551.847.855.458.1

48.153.263.281.4

21.4

92.179.9

104.9115.1

20.6

21.225.925.020.1

15.420.221.722.6

24.529.326.224.9

25.632.427.329.9

26.936.133.5

Afterincometaxes

10.111.59.0

12.911.910 711.311.2

15.116.215.412.716.3

15.215.317.719.523.2

27.530.929.032.133.2

28.631.336.548.1

13.0

58.749.164.570.4

13.2

13.516.315.513.4

9.312.413.214.2

14.818 116.015.6

15.619.716.718.4

16.122.220.4

Stock-holders'equity 2

65.172.277.6

83.398.3

103 7108 2113.1

120.1131 6141.1147.4157.1

165.4172 6181.4189.7199.8

211 7230.3247.6265 9289.9

306 8320 9343.4374.1

386.4

395.0423.4462.7496.7

368.0

379.0389.9402.7408.4

410.7420.2427.4435.5

446.5460 1468.9475.3

479.8492.9502.4511.7

519.3534.1548.8

Durable goods industries

Sales(net)

66.675.370.3

86.8116.8122.0137.9122.8

142.1159.5166.0148.6169.4

173.9175.2195.5209.0226.3

257.0291.7300.6335.5366.5

363.1382.5435.8527.3

140.1

529.0521.1589.6657.3

122.7

120.3136.8134.8137.1

121.3132.4131.0136.3

137.8153.7146.2151.8

151.2169.5163.8172.7

169.1194.1188.7

Profits

Beforeincometaxes 1

7.68.97.5

12.915.412 914.011.4

16.516 515.811.415.8

14.013.616.718.521.2

26.229.225.730.631.5

23.026.533.643.6

10.8

41.135.350.757.9

10.1

9.512.610.58.6

7.09.39.1

10.0

11.314.812.212.4

12.516.913.015.5

13.619.917.1

Afterincometaxes

4.55.44.5

6.76.15 55.85.6

8.18.37.95.88.1

7.06.98.69.5

11.6

14.516.414.616.516.9

12.914.518.424.8

6.3

24.721.430 834.8

6.2

5.77.66.25.2

4.15.75.56.2

6.79.07.47.7

7.510.27.89.4

7.912.010.3

Stock-holders'equity 2

31.134.137.0

39.947.249.852.454.9

58.865.270.572.877.9

82.384.989.193.398.5

105.4115.2125.0135.6147.6

155.1160.6171.4188.7

194.7

196.0208.1224.3239.9

185.8

189.4194.1199.9200.8

201.7207.3209.7213.7

216.7223.4227.1229.9

230.8238.4243.1247.5

251.1259.9267.7

Nondurable goodsindustries

Sales(net)

84.190.484.6

95.1128.1128 0128.0125.7

136.3147 8154.1156.7168.5

171.8181.2194.4203.6216.8

235.2262.4274.8296 4328.1

345.7368.9413.7489.9

135.0

531.6544.1613.7670.8

113.9

121.7132.6137.3140.0

125.8133.3140.0145.0

146.3153.9155.4158.1

160.3169.1167.9173.5

171.3183.8188.5

Profits

Beforeincometaxes 1

9.09.57.0

10.312.110 010.49.6

12.113 212.411.313.9

13.513.915.116.418.3

20.322.622.024.826.6

25.226.729.637.8

10.6

51.044.654.357.2

10.5

11.713.314.511.5

8.410.912.712.6

13.214.514.012.6

13.015.514.314.3

13.316.216.4

Afterincometaxes

5.66.24.6

6.15.75 25 55.6

7.07 87.56.98.3

8.28.59.2

10.011.6

13.014.614.415.516.4

15.716.718.023.3

6.7

34.127.733.735.5

7.0

7.88.79.48.2

5.26.87.78.1

8.19.18.67.9

8.19.58.99.0

8.110.210.1

Stock-holders'equity >

34.038.140.6

43.551.153 955.758.2

61.366 470.674.679.2

83.187.792.396.3

101.3

106.3115.1122.6130.3142.3

151.7160.3172.0185.4

191.7

199.0215.3238.4256.8

182.1

189.6195.8202.8207.6

209.0212.9217.6221.8

229.8236.7241.7245.5

249.1254.5259.3264.2

268.2274.2281.1

1 In the old series, "income taxes" refers to Federal income taxes only, as State and local income taxes had alreadybeen deducted. In the new series, no income taxes have been deducted.

2 Annual data are average equity for the year (using four end-of-quarter figures).Note.—Data are not necessarily comparable from one period to another due to changes in accounting procedures,

industry classifications, sampling procedures, etc. For explanatory notes concerning compilation of the series, see "Quar-terly Financial Report for Manufacturing, Mining, and Trade Corporations," Federal Trade Commission.

Source: Federal Trade Commission.

279

T A B L E B-83.—Relation of profits after taxes to stockholders* equity and to sales, all manufac-turing corporations, 1947-78

Year or quarter

194719481949

1950. .1951195219531954

1955 .1956195719581959

19601961196219631964

196519661967 . .19681969

19701971 . . .19721973

1973: IV

New series:

197419751976 _ .1977

1973: IV

1974: 1II . .IllIV

1975: 1IIIIIIV

1976: 1II .IllIV _

1977: 1. .| |111IV

1978: 1. _II _.Ill .

Ratio of profits afterincome taxes (annual rate)

to stockholders' equity—percent»

Allmanufacturingcorporations

15.616.011.6

15.412.110.310.59.9

12.612.310.98 6

10.4

9.28.99.8

10.311.6

13.013.411 712.111.5

9.39.7

10.612.8

13.4

14.911.613.914.2

14.3

14.316.715 413.2

9.011.812.413.1

13.315.713.713.1

13.016.013.314.4

12.416.614.9

Durable

14.415.712.1

16.913.011 111.110.3

13 812.811.38 0

10.4

8 58.19.6

10 111.7

13.814.211 712 211.4

8.39.0

10.813.1

12.9

12.610.313.714.5

13.3

12.115.612.310.4

8.110.910.511.6

12.416.113 013.4

13.017.112.915.1

12.718.515.4

Nondurablegoods

industries

16.616.211.2

14.111.29.79.99.6

11.411.810.69.2

10.4

9.89.69.9

10.411.5

12.212.711 811.911.5

10.310.310.512.6

14.0

17 112.914.213.8

15.3

16.417.818.515.8

10.012.814.114.5

14.215.414 312.9

13.015.013 713.7

12.114.814.4

Profits after income taxesper dollar of sales—cents

Allmanufacturing

corporations

6.77.05.8

7.14.84.34.34.5

5.45.34.84 24.8

4 44.34.54 75.2

5.65.65 05 14.8

4.04.14.34.7

4.7

5.54.65.45.3

5.6

5.66.05 74.8

3.74.74.95.1

5.25.95.35.0

5.05.85.05.3

4.75.95.4

Durablegoods

industries

6.77.16.4

7.75.34.54.24.6

5.75.24.83.94.8

4.03.94.44.55.1

5.75.64.84.94.6

3.53.84.24.7

4.5

4.74.15.25.3

5.0

4.85.54.63.8

3.44.34.24.5

4.95.85 15.1

5.06.04.85.4

4.76.25.5

Nondurablegoods

industries

6.76.85.4

6.54.54 14.34.4

5.15.34.94 44.9

4.84.74.74.95.4

5.55,65.35.25.0

4.54.54.44.8

5.0

6.45.15.55.3

6.1

6.46.66.85.9

4.15.15.55.6

5.65.95.65.0

5.05.65.35.2

4.75.55.4

i Annual ratios based on average equity for the year (using four end-of-quarter figures). Quarterly ratios based on equityat end of quarter only.

Note.—Based on data jn millions of dollars.See Note, Table B-82.

Source: Federal Trade Commission.

280

TABLE B-84.—Relation of profits after taxes to stockholders' equity and to sales, all manufactur-ing corporations, by industry group, 1977-78

Industry

Ratio of profits after incometaxes (annual rate) to stock-holders' equity—percent1

1977

III IV

1978

II III

Profits after income taxes perdollar of sales—cents

1977

III IV

1978

III

All manufacturing corporations

Durable goods industries

Stone, clay, and glass productsPrimary metal industries

Iron and steelNonferrous metals..

Fabricated metal productsMachinery, except electricalElectrical and electronic equipment.Transportation equipment2

Motor vehicles and ei, .Aircraft, guided missiles, and

parts

Instruments and related products..Other durable manufacturing prod-

ucts

Nondurable goods industries..

Food and kindred productsTobacco manufacturesTextile mill productsPaper and allied productsPrinting and publishingChemicals and allied products2

Industrial chemicals and syn-thetics

Drugs

Petroleum and coal productsRubber and miscellaneous plastics

productsOther nondurable manufacturing

products

13.3

12.9

17 5-1 .0

-4 .14.9

15.316.314.912.2

11.3

14.7

17.2

18.5

13.7

13.115.89.7

12.817.814.8

12.318.1

13.7

10.9

11.1

14.4

15.1

13.95.5

6.14.4

15.117.816.916.6

18.1

15.0

19.8

15.4

13.7

13.618.611.111.820.813.8

11.917.4

12.9

10.2

15.5

12.4

12.7

7.63.9

2.76.1

12.514.414.816.0

17.0

14.4

14.9

12.9

12.1

11.416.49.0

11.314.614.3

13.119.8

10.9

10.0

14.0

16.6

18.5

19.112.6

13.111.6

19.620.317.619.6

22.1

18.0

19.8

20.6

14.8

15.418.913.214.219.816.5

14.820.0

13.2

11.6

13.1

14.9

15.4

21.410.0

10.59.1

16.416.117.612.8

11.0

17.6

18.4

18.4

14.4

13.419.511.812.218.515.1

13.218.8

14.1

10.8

16.9

5.0

4.8

6.4- . 4

-1.72.5

4.77.55.23.9

3.8

4.3

9.1

4.8

5.3

3.18.12.85.46.07.1

6.012.1

7.7

3.6

2.3

5.3

5.4

5.32.4

2.52.1

4.68.05.84.7

5.2

4.1

10.3

4.0

5.2

3.29.23.04.96.56.8

6.011.7

7.0

3.3

3.3

4.7

4.7

3.31.6

1.12.9

4.06.75.24.7

5.1

4.2

8.2

3.7

4.7

2.79.02.64.94.96.8

6.212.9

6.2

3.3

3.2

5.9

6.2

6.74.7

4.65.0

5.68.65.95.2

6.0

5.0

10.0

5.2

5.5

3.59.93.65.76.47.4

6.713.5

7.3

3.5

2.9

5.4

5.5

7.53.9

3.93.9

4.87.16.14.0

3.6

5.1

9.3

4.8

5.4

3.110.13.25.06.17.1

6.312.5

7.5

3.4

3.5

1 Ratios based on equity at end of quarter.3 Includes other industries not shown separately.Source: Federal Trade Commission.

281

T A B L E B-85.—Sources and uses of funds, nonfarm nonfinancial corporate business, 1946-78

[Billions of dollars; quarterly data at seasonally adjusted annual rate?]

Year or quarter

1946 .194719481949

19501951195219531954 .

19551956195719581959

19601961196219631964

19651966 .19671968 . . .1969

197019711972 .19731974

197519761977 .

1977: 1I I . . .IllIV _

1978: 1II _III

Sources

Total

18.426.728.519.7

41.835.929.227.329.1

52.044.042.341.355.2

47.654.358.866.072.3

90.996.993.7

114.5118.4

104.3127.1161.7199.8190.8

143.8205.0239.0

244.3198.6266.0247.1

283.9274.1289.4

Internal1

7.812.618.819.3

17.819.721.221.123.5

28.828.730.429.635.0

34.735.341.644.550.1

56.160.561.362.361.7

58.968.680.883.875.7

106.8124.7135.3

123.8134.9145.5137.3

127.2144.1151.6

Total

10.614.19.8.4

24.016.28.06.15.7

23.215.411.911.720.2

12.919.117.221.422.2

34.936.432.452.156.7

45.558.580.9

115.9115.1

37.080.3

103.6

120.563.7

120.6109.9

156.7130.0137.8

EIxterna

Credit market funds

Total

6.98.46.53.1

8.110.69.55.76.4

10.212.912.310.512.5

11.912.412.312.514.7

20.525.529.331.838.2

40.744.558.372.781.8

37 058.278.7

75.963.780 195.2

102.282.880.2

Long-term 2

3.65.46.74.9

4.26.48.06.06.7

6.47.5

10.410.58.1

7.510.89.48.48.8

9.315.921.618.820.7

32.140.640 637.039.1

49 348.846.2

34.435.353 561.5

40.353.754.5

Short-terms

3.33.0

- . 2- 1 . 8

3.94.11.4

- . 3- . 3

3.85.41.9

- . 04.4

4.51.63.04.05.9

11.29.67.8

13.017.6

8 63.9

17 635.742.6

- 1 2 39.5

32.6

41.628 526 633.7

61.929.125.7

Other

3.75.83.3

- 2 . 7

15.95.6

- 1 . 4.5

- . 8

13.02.5

- . 41.27.7

1.06 74.99.07.4

14.410.93.1

20.318.5

4 814.122 743.333.4

o22.024.9

44.6— 040 514.7

54.547.257.6

Uses

Total

17.125.324.917.9

39.937.229.127.727.7

49.241.139 438.751.7

40.650 454.959.164.1

82 290 587.5

105.3113.1

95 9119.6145 8185.6179.0

131 9184.9212.3

214.6177 3234 6222.7

263.3260.8272.6

Pur-chase

ofphysi-

calassets4

18.517.019.914.4

23.629.824.525.422.8

32.737.135.227.937.5

38.037.243.844.950.7

62 075.773.077.284.3

80.386.0

100 3123.3134.7

99 9141.2164.6

152.5162 4175 2168.0

179.8199.9194.8

In-crease

infinan-cial

assets

- 1 . 48.45.03.5

16.47.44.62 34.9

16.54.04.2

10.814.2

2.713 211.114.213.4

20 214.814.528.228.8

15.633.645.662.344.4

32 043.747.8

62.114 959 454.7

83.561.077.8

Discrep-ancy

(sourcesless

uses)

1.31.43.61.9

1.9- 1 . 3

.1- . 51.4

2.83.02.92.53.5

7.03 93.96.98.2

8 86.46.29.15.3

8.47.5

15.914.211.8

11 920.126.7

29.621.331 424.4

20.613.216.8

* Undistributed profits (after inventory valuation and capital consumption adjustments), capital consumption allowances,and foreign branch profits.2 Stocks, bonds, and mortgages.

3 Bank loans, commercial paper, finance company loans, bankers' acceptances, and Government loans.4 Plant and equipment, residential structures, inventory investment, and mineral rights from U.S. Government.Source: Board of Governors of the Federal Reserve System.

282

TABLE B-86.— Current assets and liabilities of U.S. corporations, 1939-78[Billions of dollars]

End of yearor quarter

SEC series: *1939

194019411942 ___194319441945 __.1946194719481949

19501951195219531954195519561957 _19581959

19601961

SEC series:«1961...19621963196419651966196719681969

19701971197219731974

FTC-FRB series: t19741975 -19761977

1977- 1IL.IllIV.

1978: 1IL.

Total

54.5

60.372.983.693.897.297.4

108.1123.6133.0133.1

161.5179.1186.2190.6194.6224.0237.9244.7255.3277.3

289.0306.8

Cash*

10.8

13.113.917.621.621.621.722.825.025.326.5

28.130.030.831.133.434.634.834.937.436.3

37.241.1

Current assets

U.S.Govern-

mentsecuri-ties 2

2.2

2.04.0

10.116.420.921.115.314.114.816.8

19.720.719.921.519.223.519.118.618.822.8

20.120.0

Notesand

accountsreceiv-

able

22.1

24.028.027.326.926.525.930.738.342.443.0

56.861.567.468.573.688.997.7

102.2109.7120.6

129.2139.2

Inven-tories

Othercurrentassets

Current liabilities

Total

All corporations4

18.0

19.825.627.327.626.826.337.644.648.945.3

55.164.965.867.265.372.880.482.281.988.4

91.895.2

1.4

1.54334

> 47664

1.72.12.42.43.14.25.96.77.59.1

10.611.4

30.0

32.840.747.351.651.745.851.961.564.460.7

79.892.696.198.999.7

121.0130.5133.1136.6153.1

160.4171.2

Notesand

accountspayable

21.9

23.226.426.026.326.825.731.637.639.337.5

48.354.959.359.561.776.183.986.690.4

101.0

106.8114.6

Othercurrentliabil-ities

8.1

9.614.321.325.324.920.120.323.925.023.3

31.637.836.839.438.045.046.646.546.252.0

53.656.6

Network-

ingcapital

24.5

27.532.336.342.145.651.656.262.168.672.4

81.686.590.191.894.9

103.0107.4111.6118.7124.2

128.6135.6

Cur-rent

ratios

1 817

1.8381.7911.7671.8181.8802.1272.0832.0102.0652.193

2.0241.9341.9381.9271.9521.8511.8231.8381.8691.811

1.8021.792

Nonfinancial corporations 6

254.7269.7288.2305.6336.0364.0386.2426.5473.6

492.3529.6599.3697.8790.7

734.6756.3823.1900.1

842.0856.4880.3900.1

924.2953.6

34.837.139.840.542.841.945.548.247.9

50.253.359.066.371.1

73.080.086.894.2

80.883.183.494.2

88.590.9

16.516.816.715.814.413.010.311.510.6

7.711.010.612.812.3

11.319.626.020.9

26.822.121.520.9

20.919.7

97.9103.2110.5119.9134.1146.6155.3173.9197.0

206.1221.1248.2288.5322.1

265.5272.1292.4325.7

304.1312.8326.9325.7

338.3356.8

95.0100.5106.8113.1126.6142.8153.1166.0186.4

193.3200.4225.7263.9313.6

318.9314.7341.4375.0

352.1358.8367.5375.0

389.7399.1

10.512.114.416.318.119.722.026.931.6

35.043.855.866.471.7

65.969.976.484.3

78.379.681.084.3

86.887.0

123.7132.4145.5156.6178.8199.4211.3244.1287.8

304.9326.0375.6450.9530.4

451.8446.9487.5543.2

502.6509.5528.9543.2

570.4590.6

84.488.797.0

104.9121.5137.5147.1168.8199.2

211.3220.5282.9340.3402.3

272.3261.2273.2306.8

280.2286.8297.8306.8

317.2331.4

39.343.748.551.757.361.964.275.388.6

93.6105.592.7

110.7128.1

179.5185.7214.2236.3

222.4222.7231.1236.3

253.2259.2

131.0137.3142.7149.0157.2164.6174.9182.4185.7

187.4203.6223.7246.9260.3

282.8309.5335.6357.0

339.5346.9351.4357.0

353.8363.0

2.0592.0371.981

951.8798?f>

.878747

.646

.6156?S595

L.548491

.6?6693688

.657

675.681

1.6641.657

1.6201.615

1 Includes time certificates of deposit.8 Includes Federal agency issues.3 Total current assets divided by total current liabilities.« Excludes banks, savings and loan associations, and insurance companies.5 Based on data from "Statistics of Income," Department of the Treasury.6 Excludes banks, savings and loan associations, insurance companies, investment companies, finance companies

(personal and commercial), real estate companies, and security and commodity brokers, dealers, and exchanges.7 Based on data from "Quarterly Financial Report for Manufacturing, Mining, and Trade Corporations," Federal

Trade Commission. See "Federal Reserve Bulletin," July 1978, for details regarding the series.

Note.—SEC series not available after 1974.Sources: Board of Governors of the Federal Reserve System, Federal Trade Commission, and Securities and Exchange

Commission.

283

T A B L E B-87.—State and municipal and corporate securities offered^ 1934—78

[Millions of dollars]

Year or quarter

State andmunicipalsecurities

offeredfor cash

(principalamounts)

Corporate securities offered for cash

Totalcorpo-

rateoffer-ings

Type of corporate security

Com-monstock

Pre-ferredstock

Bondsand

notes

Industry of corporate issuer

Manu-fac-

turing!

Elec-tric,gasand

water *

Trans-porta-tion *

Com-munica-

tionOther

1934..

1939..

1940..1941..1942.1943..1944..

1945..1946..1947..1948..1949..

1950..1951.1952..1953.1954..

1955..1956.1957.1958.1959.

1960.1961.1962.1963.1964.

1965.1966.1967.1968.1969..

1970..1971..1972..1973..1974..

1975..1976..1977..

1977: I...II..III.IV..

1978: I...

939

1,128

1,238956524435661

7951,1572,3242,6902,907

3,5323,1894,4015,5586,969

5,9775,4466,9587,4497,681

7,2308,3608,55810,10710, 544

11,14811,08914,28816,37411,460

17,76224, 37022,94122,95322, 824

29, 32633,84545,060

10,53313,35310,89110,283

10,31612, 75711,994

397

2,164

2,6772,6671,0621,1703,202

6,0116,9006,5777,0786,052

6,3627,7419,5348,8989,516

10, 24010,93912,88411,5589,748

10,15413,16510, 70512,21113,957

14,78217, 38524,01421,26125,997

37,45143,22939,70531,68037, 729

52, 53952, 29052,062

12,63613,02111,40814,997

9,98812,10710,887

19

87

1081103456163

397891779614736

8111,2121,3691,3261,213

2,1852,3012,5161,3342,027

1,6643,2941,3141,0112,679

1,4731,9011,9273,8857,640

7,0379,48510,7077,6423,979

7,4148,3048,135

1,8662,1671,0263,076

1,5241,7071,876

98

183167112124369

7581,127762492425

£3838564489816

635636411571531

409450422343412

724580881636691

1,3903,6833,3713,3412,253

3,4592,8033,878

840707

1,1891,142

4571,211341

372

1,979

2,3862,389917990

2,670

4,8554,8825,0365,9734,890

4,9205,6917,6017,0837,488

7,4208,0029,9579,6537,190

8,0819,4208,96910, 85610,865

12, 58514,90421, 20616,74017,666

29,02330, 06125,62820, 70031, 494

41, 66641,18240,050

9,93010,1489,19410,778

8,0079,1898,670

67

604

992848539510

1,061

2,0263,7012,7422,2261,414

1,2003,1224,0392,2542,268

2,9943,6474,2343,5152,073

2,1524,0773,2493,5143,046

5,4147,05611,0696,9586,346

10,64711,6516,3984,83210, 408

18, 65115, 49613,776

3,0303,4393,2524,055

2,2182,8982,534

133

1,271

1,2031,357472477

1,422

2,3192,1583,2572,1872,320

2,6492,4552,6753,0293,713

2,4642,5293,9383,8043,258

2,8513,0322,8252,6772,760

2,9343,6664,9355,2936,715

11,00911,72111,31410, 26912, 837

15, 89414 41413,711

3,0484,1262,6263,911

2,3673,7473,012

176

186

32436648161609

1,454711286755800

813494992595778

893724824824967

718694567957982

7021,4941,6391,5641,779

1,2531,148860811

1,005

2,6353,6261,802

388405502507

224677471

902571

399612760882720

1,1321,4191,4621,424717

1,0501,8341,3031,1052,189

9452,0031,9751,7752,172

5,2915,8404,8364,8723,930

4,4643,5624,442

1,4191,060643

1,320

844384

1,120

103

15996421109

211329293

1,008946

1,3001,0581,0682,1382,037

2,7572,6192,4261,9912,733

3,3833,5272,7613,9574,980

4,7873,1674,3965,6718,985

9,25212, 86716,29810,8979,551

10,89515,19018,333

4,7533,9904,3885,202

4,3354,3983,750

1 Prior to 1948, also includes extractive, radiobroadcasting, airline companies, commercial, and miscellaneous companyissues.

* Prior to 1948, also includes telephone, street railway, and bus company issues,s Prior to 1948, includes railroad issues only.

Note.—Covers substantially all new issues of State, municipal, and corporate securities offered for cash sale in the UnitedStates in amounts over $100,000 and with terms to maturity of more than 1 year; excludes notes issued exclusively tocommercial banks, intercorporate transactions, and issues to be sold over an extended period, such as employee-purchaseplans. Closed-end investment company issues are included beginning 1973.

Sources: Securities and Exchange Commission, "The Commercial and Financial Chronicle" and "The Bond Buyer."

284

TABLE B-88.—Common stock prices and yields, 1949-78

Yearor

quarter

1949

1950195119521953195419551956195719581959

1960196119621963196419651966. .196719681969

1970197119721973197419751976 - .19771978

1977: JanFebMarAprMayJune

JulyAugSeptOctNovDec

1978: JanFebMar.AprMayJune

JulyAugSeptOctNovDec

Common stock prices1

New York Stock Exchange indexes(December 31,1965=50)*

Com-posite

9.02

10 8713.0813.8113.6716.1921.5424.4023 6724.5630.73

30 0135.3733.4937.5143.7647 3946.1550.7755.3754.67

45.7254.2260.2957.4243.8445.7354.4653.6953.70

56.2854.9354.6753.9253.9654.30

54.9453.5152.6651.3751.8751.83

49.8949.4149.5051.7554.4954.83

54.6158.5358.5856.4052.7453.69

Indus-trial

46.1851.9758.0057.44

48.0357.9265.7363 0848.0850.5260.4457.8658.23

61 2659.6559 5658.4758 1358.44

58.9057.3056.4154.9955.6255.55

53.4552.8052.7755.4859.1459.63

59.3564.0764.2361.6057.5058.72

Trans-portation

50.2653.5150.5846.96

32.1444.3550.1737.7431.8931.1039.5741.0943.50

41.9340.5940.5241.5143.2543.29

43.5241.0439.9938.3339.3039.75

39.1538.9038.9541.1944.2144.19

44.7449.4550.1946.7041.8042.49

Utility

45.4145.4344.1942.80

37.2439.5338.4837.6929.7931.5036.9740.9239.22

41.1340.8640.1840.2441.1441.59

42.4441.5040.9340.3840.3340.36

39.0939.0239.2639.6939.4739.41

39.2840.2039.8239.4437.8838.09

Finance

44.4549.8265.8570.49

60.0070.3878.3570.1249.6747.1452.9455.2556.65

57.8655.6554.8454.3054.8055.29

57.2956.5255.3353.2454.0453.85

50.9150.6051.4455.0457.9658.31

57.9763.2863.2260.4254.9555.68

Dow-Jones

ndustrialaverage 3

179 48

216 31257.64270.76275.97333.94442.72493.01475.71491.66632.12

618.04691.55639.76714.81834.05910 88873.60879.12906.00876.72

753.19884.76950.71923.88759.37802.49974.92894.63820.23

970.62941.77946 11929.10926 31916.56

908.20872.26853.30823.96828.51818.80

781.09763.57756.37794.66838.56840.26

831.72887.93878.64857.69804.29807.94

Standard& Poor'somposite

index1941-43=

10)*

15 23

18 4022.3424.5024.7329.6940.4946.6244.3846.2457.38

55.8566.2762.3869.8781.3788 1785.2691.9398.7097.84

83.2298.29

109.20107.4382.8586.16

102.0198.2096.02

103.81100.96100.5799.0598.7699.29

100.1897.7596.2393.7494.2893.82

90.2588.9888.8292.7197.4197.66

97.19103.92103.86100.5894.7196.11

Common stock yields(percent) *

Dividend-priceratio •

6 59

6 576 135.805.804.954.084 094.353.973.23

3.472.983.373.173.013 003.403.203.073.24

3.833.142.843.064.474.313.774.625.28

3.994.214.374.474.574.60

4.594.724.824.975.025.11

5.325.495.625.425.205.19

5.254.934.975.115.455.39

Earnings-priceratio'

15 48

13 9911 829.47

10.268 577.957 557.896.235.78

5.904 625.825 505.325 596.635.735.676.08

6.455.415.507.12

11.599.158.90

10.79

10.24

10.37

11.09

11.45

12.25

11.79

11.36

1 Averages of daily closing prices, except New York Stock Exchange data through May 1964, are averages of weekly closingprices.

2 Includes all the stocks (more than 1,500) listed on the New York Stock Exchange.3 Includes 30 stocks.« Includes 500 stocks.5 Standard & Poor's series, based on 500 stocks in the composite index.6 Aggregate cash dividends (based on latest known annual rate) divided by aggregate market value based on Wednes-

day closing prices. Monthly data are averages of weekly figures; annual data are averages of monthly figures.7 Ratio of quarterly earnings after taxes (seasonally adjusted annual rate) to price index for last day of quarter.

Annual ratios are averages of quarterly ratios.

Note.—All data relate to stocks listed on the New York Stock Exchange.Sources: New York Stock Exchange, Dow-Jones & Co., Inc., and Standard & Poor's Corporation.

285

TABLE B-89.—Business formation and business failures, 1929-78

Year or month

19291933 31939 31940 .194119421943194419451946194719481949

19501951 .195219531954 . .1955195619571958 . .1959

1960196119621963196419651966196719681969

19701971 . .1972 .19731974197519761977

1977:JanFeb. . .MarAprMay.June

JulyAugSeptOctNovDec

1978:JanFebMarAprMayJune _ . . .

JulyAugSeptOct

Indexof net

businessformation

(1967=100)

112.687.8

93.193.398.294.491.399.195.290.489.596.8

92.488.390.793.397.298.698.2

100.0109.8116.2108.0111.0117.9117.9112.4108.9117.6127.4

Newbusiness

rations(num-ber)

132.916112,89796,34685,640

93,09283,77892,946

102,706117,411139,915141,163137,112150,781193,067

182,713181,535182,057186,404197,724203,897200,010206,569233,635274,267

264,209287,577316,601329,358319,149326, 345375,766436,170

Business failures l

nessfailurerates

103.9100.369.663.054.444.616.46.54.25.2

14.320.434.434.330.728.733.242.041.648.051.755.951.8

57.064.460.856.353.253.351.649.038.637.3

43.841.738.336.438.442.634.828.4

Seasonally adjusted

123.3123.0124.3122.4123.2125.8126.6130.6129.6132.0133.5134.8

135.1135.0131.8131.9132.2134.2

134.7133.8133.6133.3

34,51933,17335, 30033,39434,44237,229

35,74939, 52537,81238, 94338, 34439,674

36, 54739, 25337,60238,49838, 32039, 796

39, 40342,60541,82741, 945

28.429.632.331.730.230.824.129.727.024.227.024.7

21.624.024.624.123.421.9

22.029.8

Number of failures

Total

22,90919,85914,76813,61911,8489,4053,2211,222

8091,1293,4745,2509,2469,1628,0587,6118,862

11,08610,96912,68613,73914,96414,05315,44517,07515,78214,37413,50113,51413,06112,3649,6369,154

10,74810,3269,5669,3459,915

11, 4329,6287,919

664693858804724732513687560546621517

504559666594583519

459675

Liability sizeclass

Under$100,000

22,16518,88014,54113,40011,6859,2823,1551,176

7591,0033,1034,8538,708

8,7467,6267,0818,075

10,22610,11311,61512,54713,49912,707

13,65015,00613,77212,19211,34611,34010,83310,1447,8297,192

8,0197,6117,0406,6276,7337,5046,1764,861

418425515520440455325401342353353314

316319388335337301

244347

$100,000andover

744979227219163123664650

126371397538416432530787860856

1,0711,1921,4651,346

1,7952,0692,0102,1822,1552,1742,2282,2201,8071,962

2,7292,7152,5262,7183,1823,9283,4523,058

246268343284284277188286218193268203

188240278259246218

215328

Amount of currentliabilities (millions

of dollars)

Total

483.3457.5182.5166.7136.1100.845.331.730.267.3

204.6234.6308.1248.3259.5283.3394.2462.6449.4562.7615.3728.3692.8938.6

1,090.11,213.61,352.61,329.21,321.71,385.71,265.2

941.01,142.1

1,887.81,916.92.000.22,298.63,053.14,380.23,011.33, 095.3

168.5194.2248.2207.3473.9305.9577.8338.397.0

115.7200.3168.3

168.3205.0324.4203.0160.4178.8

231.8206.4

Liability sizeclass

Under$100,000

261.5215.5132.9119.9100.780.330.214.511.415.763.793.9

161.4151.2131.6131.9167.5211.4206.4239.8267.1297.6278.9327.2370.1346.5321.0313.6321.7321.5297.9241.1231.3

269.3271.3258.8235.6256.9298.6257.8208.3

17.718.321.722.118.419.214.218.514.014.715.414.0

14.314.118.215.514.712.3

10.615.9

$100,000andover

221.8242.049.746.835.420.515.117.118.851.6

140.9140.7146.7

97.1128.0151.4226.6251.2243.0322.9348.2430.7413.9611.4720.0867.1

1,031.61,015.61,000.01,064.1

967.3699.9910.8

1,618.41,645.61,741.52,063.02,796.34,081.62,753.42, 887.0

ISO. 9175. S226.5185.2455.4286.7

563.6319.7

83. C100.9184.8154.3

154.0190.9306.2187.5145.7166.5

111.2190.5

i Commercial and industrial failures only. Excludes failures of banks and railroads and, beginning 1933, of real estate,insurance, holding, and financial companies, steamship lines, travel agencies, etc.

> Failure rate per 10,0001 sted enterprises.3 Series revised; not strictly comparable with earlier data.Sources: Department of Commerce (Bureau of Economic Analysis) and Dun & Bradstreet, Inc.

286

AGRICULTURETABLE B-90.—Income of farm people and farmers, 1929-78

[Quarterly data at seasonally adjusted annual rates]

Year orquarter

192919331939 . . . .

1940194119421943194419451946194719481949

19501951195219531954 .19551956195719581959

1960196119621963196419651966196719681969

197019711972197319741975.. .19761977

1976: 1 __IL_.IIIIV..

1977: 1II _ .ML.IV

1978: 1IIIII.

Personal incomereceived by totalfarm population

Fromall

sources

Fromfarm

sources1

Fromnon-farm

sources2

Income received from farming3

Gross incomebefore inventory

adjustment

Total *

Cashreceipts

frommarket-

ings

Produc-tion ex-penses

Net to farmoperators

Beforeinven-tory

adjust-ment

Afterinven-tory

adjust-ment5

Billions of dollars

7.4

7.610.114.116.516.617.220.021.123.819.5

20 322.722.019 718.317.517 617.519 217 5

18.419.019.720.019.822.623.822.924.126.9

27.528.834.648.945.244.541.243.0

4.8

4 86.8

10.112 112.212.815 515.818.013.3

14 116 115.313 312 411.311 110.812 510 4

11 111.411.411.010.012.012.611.111.312 9

13.013.516.929.223.421.916 918.3

2.6

2.83.33.94.44.44.44.65.35.86.2

6 36.56.76 45.96.26.66.66 77.1

7.27.68.39.09.7

10.611.211.712.813.9

14.515.317.819.721.822.724.424.7

13.97.1

10.6

11.113.918.823.424.425.829.534.134.731.6

32 337.136.835 133.733.334.434.238 137.9

38.540.241.742.743.145.550.649.951.756.3

58.660.670.195.5

100.096.9

104.1108.1

102.5108.4102.8102.6

108.1106.7102.7114.8

115.8122.5122.5

11.35.37.9

8.411.115.619.620.521.724.829.630.227.8

28 532.932.531.029.829.530.429.733 533.6

34.235.236.537.537.339.443.442.844.248.2

50.552.961.287.192.488.294.596.1

93.398.993.292.6

97.695.791.399.6

102.2109.0109.5

7.74.46.3

6.97.8

10.011.612.313.114.517.018.818.0

19.522.322.821.521.822.222.723.725.827.2

27.428.630.331.631.833.736.538.239.542.1

44.447.452.365.672.275.983.088.0

79.585.084.582.9

87.587.086.091.4

93.596.096.0

6.32.74.3

4.26.18.8

11.812.112.815.017.115.913.6

12.814.814.013.611.911.111.710.512.310.7

11.111.611.411.111.311.914.011.712.214.214.113.217.829.927.721.121.120.1

23.023.418.319.7

20.619.716.723.4

22.326.526.5

6.22 64.4

4 56.59.9

11.711.712.315 115.417.712.8

13 615.915.013 012.411.311.311.113 210.7

11.512.012.111.810.512.914.012.312.314.3

14.214.618.733.326.124.518.820.5

21.519.917.116.5

19.620.216.825.5

22.324.525.5

Net income perfarm afterinventory

adjustment8

Currentdollars

1967dollars 7

Dollars

945379685

7061,0311,5881,9271,9502,0632,5432,6153,0442,233

2,4172,9362,8782,6042,5792,4292,4932,5363,1112,615

2,9073,1263,2673,2953,0353,8434,2863,9034,0134,7644,7995,0426,526

11,8139,3498,8456,8487,592

7,8507,2706,2506,030

7,2407,4606,2109,420

8,3209,1409,510

1,646

1 6812,3383,2543,7203,7003,8274,3473,9094,2223,127

3,3523,7743,6203,2513,2043,0293,0633,0083,5922,995

3,2773,4893,6063,5933,2674,0674,4093,9033,8514,3394,1264,1575,2088,8756,3305,4874,0164,183

4,6904,2903,6303,470

4,0904,1303.39C5, 08C

4,4104,7304,810

1 Net income to farm operators after inventory adjustment, less net income of nonresident operators, plus wages andsalaries and other labor income of farm resident workers, less contributions of farm resident operators and workers tosocial insurance.

2 Estimated income of farm residents from nonfarm sources; based on survey benchmarks with extrapolations to currentyear.

3 Includes government payments.< Also includes government payments and nonmoney income and other farm income furnished by farms, not shown

separately.«Includes net value of physical change in inventory of crops and livestock valued at average prices for the year.«The 1969 farm definition is used.7 Income in current dollars divided by the consumer price index (Department of Labor).

Source: Department of Agriculture, except as noted.

287

TABLE B-91.—Farm production indexes, 1929-78

[1967=100]

Year

1929...

1933....

1939...

1940...1941...1942...1943...1944_-

1945_..1946...1947 ...1948...1949 ...

1950...1951...1952...1953...1954...

1955...1956...1957...1958...1959...

1960...1961...1962...1963...1964...

1965...1966...1967...1968...1969...

1970...1971...1972...1973...1974...

1975...1976...1977...1978 p..

Farmout-put i

53

51

58

6062706971

7071697674

7476797980

8282818788

9191929695

9895100102102

101

nono112106

114117121122

Crops2

Total »

62

55

64

6768767175

7377738379

7678818179

8282808989

9391929693

9995100103104

100112113119110

121121130131

Feedgrains

48

44

51

5256645962

6065507263

6459636164

6868748084

8778798675

88891009599

8911611211593

114120126135

Hayandfor-age

71

62

68

7675828079

8177747473

7881798181

8682898985

9090939394

989710099100

100105104109104

108102109115

Foodgrains

52

36

48

5260635467

7072858170

6564837667

6366629173

8780747786

888810010698

91107102114120

142141131124

Vege-tables

64

62

69

7273788480

8291808482

8378798281

8489868987

8994929289

9697100104101

989899100102

101101102107

Fruitsandnuts

74

75

95

9197968396

87104999195

9698959697

9397889698

9498989697

1009810098116

110118106126128

137136139133

Cot-ton

205

180

163

173148177158169

125120164206221

138209209227188

203184151157200

196196205211209

205130100148137

139145187175158

112142193146

To-bacco

76

69

96

7464727199

101118107101100

103119115105114

112111858891

99105118119113

94961008791

97868888101

no10897102

Oilcrops

11

8

25

2929404136

3634394745

4647464749

5360586964

6877788181

9597100114116

117121131155127

153132175180

Livestock and products *

Total *

53

57

59

6064717773

7371706872

7578787982

8484838488

8791929597

9597100100101

105106107105106

101105106108

Meatani-mals

52

58

59

6063728173

6968676669

7379797881

8583808187

8588909597

9296100101102

108109109108110

102105105107

Dairyprod-ucts

75

79

81

8387919091

9493928991

9290919597

981001009998

100102103102104

1041011009998

991011029899

98103105105

Poul-tryandeggs

33

32

35

3639455252

5451504954

5759606164

6369707476

7682828487

909610098100

105106109106106

103110111117

i Farm output measures the annual volume of net farm production available for eventual human use through sales fromfarms or consumption in farm households.

» Gross production.3 Includes sugarcrops, hay seeds, pasture seeds, cover-crop seeds, and some miscellaneous crop production, notincluded

in groups shown.< Includes clipped wool, mohair, and beginning 1950 honey and beeswax, r, not included in groups shown.Source: Department of Agriculture.

288

TABLE B-92.—Farm population, employment, and productivity, 1929-78

Year

Farm populationarm popula(April 1)

Num-ber

(thou-sands)

As per-cent of

totalpopu-

lation 2

Farm employme(thousands) 3

ment

Total Familyworkers

Hiredworkers

Farm output

Perunit oftotalinput

Per hour of farm work

Total CropsLive-stockand

products

Cropproduc-

tionper

acre *

1929..

1933..

1939..

1940..1941..1942..1943..1944..

1945..1946..1947..1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957..1958..1959.

1960.1961..1962.1963.1964.

1965.1966..1967.1968.1969.

1970.1971..1972.1973.1974.

1975.1976 .1977.1978 i

Index, 1967=100

30, 580

32,393

30, 840

30,54730,11828,91426,18624, 815

24,42025,40325, 82924, 38324,194

23,04821, 89021,74819, 87419,019

19,07818,71217,65617,12816,592

15, 63514,80314,31313,36712,954

12,36311,59510, 87510, 45410,307

9,7129,4259,6109,4729,264

8,8648,2537,8068,000

25.1

25.8

23.5

23.122.621.419.217.9

17.518.017.916.616.2

15.214.213.912.511.7

11.511.110.39.89.4

8.78.17.77.16.8

6.45.95.55.25.1

4.74.64.64.54.4

4.23.83.63.7

12, 763

12,739

11,338

10,97910,66910, 50410, 44610,219

10, 00010, 29510, 38210, 3639,964

9,9269,5469,1498,8648,651

8,3817,8527,6007,5037,342

7,0576,9196,7006,5186,110

5,6105,2144,9034,7494,596

4,5234,4364,3734,3374,389

4,3424,3744,1523,922

9,360

9,874

8,611

8,3008,0177,9498,0107,988

7,8818,1068,1158,0267,712

7,5977,3107,0056,7756,570

6,3455,9005,6605,5215,390

5,1725,0294,8734,7384,506

4,1283,8543,6503,5353,419

3,3483,2753,2283,1693,075

3,0262,9972,8562,672

3,403

2,865

2,727

2,6792,6522,5552,4362,231

2,1192,1892,2672,3372,252

2,3292,2362,1442,0892,081

2,0361,9521,9401,9821,952

1,8851,8901,8271,7801,604

1,4821,3601,2531,2131,176

1,1751,1611,1461,1681,314

1,3171,3771,2961,250

52

53

59

6062686667

6871687471

7171747576

7880808787

9091929695

10097100102103

102110110111106

115115118120

16

16

19

2021242424

2627283132

3435383942

4447515759

6567717781

8992100106110

115128136130136

152162173174

16

15

20

2123252425

2729293333

3635394042

4548536161

6668727779

9094100106108

111126135138128

142146157160

26

25

27

2728303130

3132333435

3739404143

4648505458

6266717782

8693100105112

121128137144156

160178189193

56

50

60

6263706468

6771677570

6970737271

7476778685

8992959795

10097100105106

104112115116104

112111116121

* Farm population as defined by Department of Agriculture and Department of Commerce, i.e., civilian populationliving on farms, regardless of occupation.

2 Total population of United States as of July 1, including Armed Forces overseas.3 Includes persons doing farmwork on all farms. These data, published by the Department of Agriculture, Statistical

Reporting Service, differ from those on agricultural employment by the Department of Labor (see Table B-29) because ofdifferences in the method of approach, in concepts of employment, and in time of month for which the data are collected.See monthly report on "Farm Labor."

< Computed from variable weights for individual crops produced each year.

Sources: Department of Agriculture and Department of Commerce (Bureau of the Census).

289

TABLE B-93.—,-Indexes of prices received and prices paid by farmers and selected farm resourceprices, 1929-78

[1967=100, except as noted)

Year or month

1929193319391940 11941 . ..194219431944194519461947194819491950...195119521953195419551956 .-1957195819591960196119621963196419651966 . ...19671968 . -.19691970 -. ..1971197219731974 . .19751976197719781977-Jan

FebMarAprMay ..JuneJulyAugSeptOctNovDec

1978:JanFebMarAprMayJuneJulyAugSeptOctNovDec

Prices received by farmers

Allfarmroducts

592838404964777983941101151001031211151029893929410096959698979598106100102107110113125179192185186183209183186189192192184180174174177178181186193200208215217215210215217215221

Crops

60313640486483889010211711310010311811910710810310410099989910110310710610310610010097100108114175224201197192203198201210214211196181172170178184183188190198208

CM

CO

C

N

CM

CM

C

N

202203200200203

Live-stockand

roducts

582539405062727177881051159910212211197908582899993929193898694106100104117118118136183165172177175216170174172173177173179177177176174180185196204209217219217217226232228237

Prices paid by farmers

Allitems,nterest,taxes,andwagerates

473236363944505356617076737582848181818184868788889091929499100103108112118125144164180191202219198200202204204204203201201201202203209211214216219220220220223224224226

Familylivingitems

483437384046525457637478757683848484848588898990909192939598100104109114118123133151166176

I(3)

(3)

(3)

(3)

C3)(3)

8

Produc-tionitems

5134424345525760616778878386959589898787909293929394959496100100100104108113121146166182193200216196199201204205203201198197198199199203206211214217218218217220222223225

Selected resource prices

Tractorsandself-pro-pelledma-

chinery

9296100104111116122128137161195217238259224224233233233241241241245245245245245245251251251260260260272272272272

Fertil-izer

1031021009487889194102167217185181180177177181181183183183183183182182179179179181181181181181181181179179179

Averagehourlywagerate,allhiredfarm

workers1

$0.73.68.69.77.81.82.81.82.86.88.92.95.97.991.011.051.081-14L 23L.3344

1.5564

ft*2.002.252.432.662.87

2.96

2.82

2.77

2.99

3.18

3.09

2.93

3.18

Averagefarmreal

estatevalueperacre2

271619191921232629323639414046515251535558616668697377828693100107113117122132150187213242283308

283

296

308

332

1 Without room or board.2 Average for 48 States. Annual data are for March 1 of each year through 1975 and for February 1 beginning 1976.

Monthly data are for first of month.3 Series discontinued. Consumer price index (Department of Labor) substituted in calculating total prices paid.Source: Department of Agriculture.

290

TABLE B-94.—Selected measures of farm resources and inputs, 1929-78

Year

1929

1933

1939

19401941194219431944

19451946194719481949

19501951195219531954

1955195619571958 _1959

19601961196219631964

19651966196719681969

19701971197219731974

19751976..19771978*

Cropshar-vested(mil-lionsof

acres) i

365

340

331

341344348357362

354352355356360

345344349348346

340324324324324

324302295298298

298294306300290

293305294321328

336337343336

Totalhoursof

farmwork(bil-lions)

23.2

22.6

20.7

20.520.020.620.320.2

18.818.117.216.816.2

15.115.214.514.013.3

12.812.011.110.510.3

9.89.49.08.78.2

7.36.96.76.46.2

5.95.75.45.35.2

5.04.84.74.7

Index numbers of inputs (1967=100)

Total

102

96

98

100100103104105

103101101103105

104107107106105

105103101100102

101100100100100

989810010099

100100100101100

100102103102

Farmlabor

329

321

294

293288296292289

271260246240231

217218208200192

185174162156151

145139133129122

1101031009793

8986828078

76737171

Farmreal

estate

103

97

102

1031021009898

98102103103104

105105105105105

105102102100101

100100100100100

99991009998

10199989795

96979797

Me-chani-cal

powerandma-

chinery

38

32

40

4244515557

5857647280

8490949696

9798979798

9794949393

9496100101101

100102101105109

113115116117

Agri-culturalchemi-cals 2

10

6

11

1314151720

2021232527

2932353637

3941414349

4953586571

7585100105111

115124131136140

127145151150

Feed,seed,andlive-stockpur-

chases3

31

28

41

4245485252

5453555661

6367696971

7275747984

8488909092

939710097101

104111113116107

101110110111

Taxesand

interest

73

75

72

7273737779

8081817982

8282858685

8887868793

9495969899

100100100101100

10099100100101

10110199100

Miscel-laneous

86

82

78

7879767982

8081838791

8793939290

94909498103

105105108109113

109104100106105

109108115111110

104115126110

i Acreage harvested plus acreages in fruits, tree nuts, and farm gardens.> Fertilizer, lime, and pesticides.3 Nonfarm constant dollar value of feed, seed, and livestock purchases.Source: Department of Agriculture.

291

TABLE E-95.—Balance sheet of the farming sector, 1929-79

[Billions of dollars]

Beginning ofyear

1929

1933

1939

19401941194219431944

1945194619471948 . .1949

1950195119521953 . . . .1954

19551956195719581959

1960 _ - . .1961196219631964

19651966 _ -196719681969

19701971197219731974

1975197619771978

1979 p

Assets

Total

53.054.862.973.684.0

93.8102 9115.9127.4134.6

134.5154.3170.1167.6164.6

168.8173.6182.8191.3208.4

210.2210.8219.3227.7235.8

243.8260.8274.2288.0302.8

314.9326.0351.8394.8478.5

517.5579.9654.9708.3

790.1

Realestate

48.0

30.8

34.1

33.634.437.541.648.2

53.96L068.573.776.6

77.689.598.4

100.198.7

102.2107.5115.7121.8131.1

137.2138.5144.5150.2158.6

167.5179.2189.1199.7209.2

215.8223.2239.6267.3327.7

368.5416.9483.8525.8

588.9

Live-stock i

6.6

3.0

5.1

5.15.37.19.69.7

9.09.7

11.913.214.4

12.917.119.514.811.8

11.210.611.013.917.7

15.315.616.417.315.9

14.517.619.018.920.2

23.523.727.334.142.4

24.629.529.132.0

Other physical assets

Ma-chin-eryand

motorvehi-cles

3.2

2.5

3.2

3.13.34.04.95.4

6.55.45.37.4

10.1

12.214.116.717.418.4

18.619.320.220.121.8

22.722.222.523.523.9

24.826.027.429.831.3

32.334.436.639.344.2

55.764.771.075.2

Cropss

2.73.03.95.16.1

6.76.37.19.08.5

7.67.98.89.09.2

9.68.38.37.69.3

7.78.08.89.39.8

9.29.7

10.09.6

10.6

10.910.711.814.522.1

23.321.322.024.6

163.4

House-hold

equip-mentand

furnish-ings

4.24.14.84.84.7

5.25.57.28.18.9

8.49.6

10.19.69.5

9.710.09.69.69.4

9.28.78.98.88.8

8.48.48.38.89.4

9.610.010.811.912.3

14.014.214.414.5

Financial assets

De-positsandcur-rency

3.23.54.25.56.6

7.99.4

10.29.99.6

9.19.19.49.49.4

9.49.59.49.5

10.0

9.28.78.89.29.2

9.610.010.310.911.5

11.912.413.214.014.9

15.115.616.016.3

16.7

U.S.savingsbonds

.3

.3

.51.12.2

3.44.24.24.44.6

4.74.74.74.64.7

5.05.25.15.15.2

4.74.64.54.44.2

4.24.03.93.83.8

3.73.63.74.04.1

4.34.44.44.4

21

1 nvest-mentsin co-opera-tives

.8

.9

.91.01.1

1.21 41.51.71.9

2.02.32.52.72.9

3.13.23.53.73.9

4.24.54.95.05.4

5.65.96.26.56.8

7.28.08.89.7

10.8

12.113.314.215.5

1

Claims

Total

53.054.862.973.684.0

93.8102.9115.9127.4134.6

134.5154.3170.1167.6164.6

168.8173.6182.8191.3208.4

210.2210.8219.3227.7235.8

?43.8260.8274.2?88.0302.8

314.9326.0351.8394.8478.5

517.5579.9654.9708.3

790.1

Realestatedebt

9.8

8.5

6.8

6.66.56 45.95.4

4.94 74.95.15.3

5.66.16.77.27.7

8.29.09.8

10.411.1

12.012.813.815.116.8

18.921.223.125.127.4

29.230.332.235.741.3

46.351.156.663.3

72.2

Otherdebt

3.43.94.14.03.5

3.43 23.64.26.1

6.86.98.08.99.2

9.49.89.5

10.012.5

12.813.414.716.317.6

17.919.521.022.323.1

23.824.226.929.632.8

35.539.746.155.6

63.7

Pro-prie-tors'equi-ties

43 044.452 463 775.1

85.595 0

107.4118.1123.2

122.1141.3155.4151.5147.7

151.2154.8163.5170.9184.8

185.4184.6190.8196.3201.4

207.0220.1230.1240.6252.3

261.9271.5292.7329.5404.4

435.7489.1552.2589.4

654.2

* Beginning with 1961, horses and mules are excluded.2 Includes all crops held on farms and crops held off farms by farmers as security for Commodity Credit Corporation

loans. The latter on January 1,1979 totaled approximately $2.1 billion.

Note.—Beginning 1960, data include Alaska and Hawaii.Source: Department of Agriculture.

292

INTERNATIONAL STATISTICS

TABLE B-96.—Exchange rates, 1971-78

[Cents per unit of foreign currency, except as noted]

Year and month

March 1973 rate

1971: MarJuneSeptDec

1972: MarJuneSeptDec

1973: MarJuneSeptDec

1974: MarJuneSeptDec

1975: MarJuneSeptDec

1976: Mar-June _SeptDec ._

1977: Mar.JuneSeptDec

1978: MarJune..SeptDec : . : : : :

March 1973 rate

1971: MarJuneSeptDec .

1972: MarJuneSeptDec__.

1973: MarJuneSeptDec

1974: Mar..June..SeptDec. . .

1975: MarJune.Sept.Dec

1976: Mar.JuneSeptDec

1977: MarJune..SeptDec

1978: MarJuneSeptDec

Belgianfranc

2.5377

2.01452.01092.09212.19862.27572.27582 27422.2670

2 53772.66432.70892.47262.50402 63662.53642. 7158

2.90832.86032.54852.53112.54802.52202 60462.7483

2.72582.77132.79102.96083 15893.05903.22073.3637

Netherlandsguilder

34.834

27.81628. 06529.30830. 50331. 38431.29630.96930.962

34.83436. 58238. 54235.61536. 35437. 75736.87039. 331

42.12441. 50237.22937.23437.14936.52438.39040.240

40.07940.32640.60442.95545.99444.71646.73349.120

Canadiandollar

100.333

99.36797.91398. 717

100.067100.152102.092101 730100.326

100 333100.16099.181

100.058102.877103 481101.384101.192

99.95497.42697.43798.627

101.431102.712102.55798.204

95.12594.54993 16891.13288 82389.14385.73984. 763

Swedishkrona

22.582

19. 36919. 37019. 73220.43420. 95621.10121.14621. 080

22. 58223. 74623.76922.02621.91522.88522. 33323.897

25.48125. 53222. 50122.68522. 70222.47522 99824. 051

23.72622.62520.60221.04421.69321.6S022.59222. 808

Frenchfranc

22.191

18.12918.09218.11218.54919.83519.93719 97719.657

22.19123.47223.46621.75720.74220 40820.83122.109

23.80424.97122.36722.42821.65721.10920.33420.055

20.07520.24020 31420.84421 25621.84122.90923.178

Swissfranc

31.084

23.25424.40925.11825.61525.97426. 32026.40326.526

31.08432.75733.14631.25232.49033.44933. 37138.442

40.27340.08636.90537.97038. 98040.48440.43140.823

39.20940.17042.11548.16852.69353 04663.76559.703

Germanmark

35.548

27.53828.47429.79430.59331.54531.56031 31831.262

35 54838. 78641.24637.62938.21139 60337.58040.816

43.12042 72638.19138.14439.06438.79740.16941.965

41.81242.45343.03446.49949.18147.98450.77853.217

UnitedKingdom

pound

247.24

241. 87241 87246.94252.66261.81256.91244.10234.48

247. 24257.62241.83231.74234.06239.02231.65232.94

241.80228. 03208.35202.21194.28176.40172.72167.84

171.74171.91174.31185.46190.55183.72195.95198.61

Italianlira

.17600

.16063

.16009

.16292

.16652

.17161

.1714217199

.17146

. 17600

.16792

. 17691

.15458

.1568715379

.15103

.15179

.15842

. 15982

.14740

.14645

.12113

. 1178011837

.11521

.11276

.11295

.11318

.1141611692

.11634

.12050

.11863

Japaneseyen

.38190

.27971

.27979

.29583

.31249

. 33054

.33070

. 33209

.33196

. 38190

. 37808

. 37668

. 35692

. 35454

. 35340

. 33439

. 33288

.34731

.34077

.33345

.32715

.33276

.33424

.34800

. 33933

. 35687

.36652

. 37486

.41491

.43148

.46744

.52656

.51038

United States dollar(March 1973=100)

Multilateraltrade-

weightedaverage

100.0

120 2119 3115.8112.3108.4108.2109.1110.1

100.096.595.1

101.5101.6100.0102.998.6

93.994.8

103.0103.5105.1107.1105.7105.3

105.2104.4103.898.494.894.789.588.5

Bilateraltrade-

weightedaverage

100.0

114 6114 8111.8108.7106 0105.2105.8106.9

100 098.598.3

102.2100.999.9

103.0101.0

98.5100.0104.9105.0104.6105.2104.0105.8

106.2105.6105.4101.9100.399.296.096.3

Source: Board of Governors of the Federal Reserve System.

278-216 O - 79 - 19 293

TABLE B-97.— U.S. international transactions, 7946-78

[Millions of dollars; quarterly data seasonally adjusted, except as noted]

Yearor

quar-ter

1946..1947..1948..1949..

1950..1951..1952..1953..1954..

1955..1956..1957..1958..1959..

I960..1961..1962..1963..1964..

1965.1966.1967 _1968.1969_

1970.1971..1972_.1973_.1974..

1975..1976..1977..

1 9 7 6 : 1 . . . .II.. . .III...IV._.

1977: III

IV...

1 9 7 8 : 1 . . . .I I . . . .

Merchandise i

Ex-ports

11,76416,09713,26512,213

10, 20314,24313,44912,41212.929

14, 42417,55619, 56216, 41416,458

19,65020,10820, 78122, 27225, 501

26, 46129, 31030, 66633, 62636, 414

42, 46943, 31949, 38171,41098, 306

107, 088114,694120, 576

27,00128, 38029, 60229, 711

29, 47730, 62931, 00929, 461

30, 66435, 06736.930

Imports

-5,067-5,973- 7 , 557-6,874

-9,081-11,176-10,838-10,975-10,353

-11,527-12,803-13,291-12,952-15,310

-14,758-14,537-16,260-17, 048-18,700

-21,510-25, 493-26, 866-32, 991-35, 807

-39, 866-45, 579-55, 797-70, 499-103,649

-98, 041-124,047-151,706

-28,352-29,963-32,418-33, 314

-36, 502-37,263-38, 277-39, 664

-41, 865-42, 869-44,975

Netbal-ance

6,69710,1245,7085,339

1,1223,0672,6111,4372,576

2,8974,7536,2713,4621,148

4,8925,5714,5215,2246,801

4,9513,8173,800

635607

2,603-2 ,260-6 ,416

911-5 ,343

9,047- 9 , 353-31,130

-1 ,351-1 ,583-2,816- 3 , 603

-7 ,025- 6 , 634- 7 , 268-10,203

-11,201- 7 , 802-8 ,045

Investment income 3

Re-ceipts

772

l|9211,831

2,0682,6332,7512,7362,929

3,4063,8374,1803,7904,132

4,6164,9985,6196,1576,823

7,4417,5318,0249,3770,920

1,7512, 688.4, 694!1,6977, 541

25, 35929, 24432,100

7,0277,3697,4287,420

7,7968,0888,2207,997

9,381.0, 0039,946

Pay-ments

-212-245-437-476

-559-583-555-624-582

-676-735-796-825

-1 ,061

-1,237-1 ,245-1,324-1,561-1 ,784

- 2 , 088-2,481- 2 , 747-3,378- 4 , 869

-5,516- 5 , 436- 6 , 544- 9 , 655-12,084

-12, 564-13,311-14, 593

- 3 , 405- 3 , 332- 3 , 293- 3 , 281

-3,197-3,60i-3,610-4,185

- 4 , 503-5,420-5,396

Net

56085;

1,4841, 35f

1,5092,0502,1962,1122,347

2,7303,1023,3842,9653,071

3,3793,7534,2954,5965,039

5,3535,0505,2775,9996,051

6,2357,2528,1502,042.5, 457

2, 795.5,933.7, 507

3,6224,0374,1354,139

4,5994,4874,6103,812

4,8784,5834,550

Netmili-tary

trans-actions

-493-455-799-621

-576-1,270-2,054-2,423-2,460

-2, 701-2, 788-2, 841-3,135-2, 805

-2,752-2, 596-2,449-2,304-2,133

-2,122-2, 935-3, 226-3,143-3, 328

-3, 354-2, 893-3,621-2,287-2, 080

-876312

1,334

- 6 4- 3 0237169

568295467

5

210592177

Nettraveland

trans-porta-

tion re-ceipts

733946374230

-120298

83-238-269

-297-361-189-633-821

-964-978,152,309,146

,280,331,750

-1 ,548- 1 , 763

- 2 , 023-2 ,315- 3 , 028- 3 , 086-3 ,105

- 2 , 522- 2 , 245- 3 , 044

-627-399-515-704

-907-759-677-701

-823-626-802

Otherserv-ices,nets

310145175208

24;25430930;305

299447482486573

579594809960

1,041

1,3871,3651,6121,6301,833

2,1902,5092,7893,1853,975

4,6174,7144,749

1,1511,1561,1861,222

1,1361,1711,2601,183

1,3611,4681,563

Bal-anceon

goodsand

serv-ices i «

11,6176,9426,511

2,1774,3993,1451,1952,499

2,9285,1537,1073,1451,166

5,1326,3456,0267,1689,603

8,2895,9665,7123,5733,401

5,6542,294

-2,12510, 7668,905

23, 0609,361

-10,585

2,7313,1812,2271,223

-1,630-1,440-1,609-5 ,903

- 5 , 576-1 ,785- 2 , 557

Remit-tances,

pen-sions,and

otheruni-

lateraltrans-fers i

-2,922-2,625- 4 , 525- 5 , 638

- 4 , 01- 3 , 515-2,531-2,481- 2 , 280

- 2 , 498-2,423-2,345-2,361-2,448

-2 , 308-2,524-2, 638-2,754-2,781

-2, 854-2, 932-3,125-2, 952-2, 994

-3 , 294-3,701-3 , 854-3 , 881-7,186

-4,615-5,022-4, 708

-1,028-1,040-1,908-1,047

-1,126-1,243-1,277- 1 , 064

-1,282-1,317-1,267

Bal-anceon

cur-rentac-

count

4,8858,9922,417

873

—1

-1

24,

-1,

840884614286219

430730762784282

2,8243,8213,3884,4146,822

5,4353,0342,587621406

2,360-1,407-5,9796,8851,719

18, 4454,33915, 292

1,7032,141319176

-2,756- 2 , 683- 2 , 886- 6 , 967

-6 , 858-3,102- 3 , 824

1 Excludes military grants.2 Adjusted from Census data for differences in valuation, coverage, and timing.3 Fees and royalties from U.S. direct investments abroad or from foreign direct investments in the United States are

excluded from investment income and included in other services, net.4 In concept, the sum of balance on current account and allocations of special drawing rights is equal to net foreign

investment in the national income and product accounts, although the two may differ because of revisions, special handlingof certain items, etc.

(See next page for continuation of table.)

294

TABLE B-97.—U.S. international transactions, 1946-78—Continued

[Millions of dollars; quarterly data seasonally adjusted, except as noted]

Year orquarter

19461947. . - -19481949 _ . -

1950 -1951195219531954

19551956195719581959

19601961196219631964

196519661967.19681969.

1970.19711972..19731974

1975.1976 -1977.

1976: 1I I . . . .I I I . . .IV

1977: 1I I . -I I I . . .IV.. . .

1978: l_—II- - . -III p . .

U.S. assets abroad, net(increase/capital outflow ( - ) l

Total

- 4 , 0 9 9- 5 , 5 3 8- 4 , 1 7 7- 7 , 2 7 1- 9 , 5 5 9

- 5 , 718- 7 , 3 2 1- 9 , 759

-10 ,987-11 ,593

- 9 , 3 4 0-12 ,475-14 ,461-22 ,823-34 ,712

-39 ,444-50 ,608-34 ,650

-12 ,365-11 ,740-10 ,269-16 ,235

- 1 , 3 3 4-12 ,003

- 6 , 6 1 5-14 ,700

-15 ,036- 6 , 1 3 4

-11 ,006

U.S.officialreserveassets6

- 6 2 3- 3 , 3 1 5- 1 736

- 2 6 6

1,758- 3 3

- 4 1 51 256

480

182- 8 6 9

- 1 1652,2921,035

2,145606

1,533377171

1,222568

52- 8 8 0

- 1 , 1 8 7

2,4772,348

32209

- 1 , 4 3 4

- 6 0 7

-*s- 7 7 3

- 1 , 5 7 8- 4 0 7

228

- 3 8 86

151

246329180

OtherU.S.

Govern-ment

assets

- 1 , 1 0 0- 9 1 0

- 1 , 0 8 5- 1 , 6 6 2- 1 , 6 8 0

- 1 , 6 0 5- 1 , 5 4 3- 2 , 4 2 3- 2 , 2 7 4- 2 , 2 0 0

- 1 , 5 8 9- 1 , 8 8 4- 1 , 5 6 8- 2 , 6 4 4

5 366

- 3 , 4 7 0- 4 , 2 1 3- 3 , 6 7 9

- 7 6 2- 9 3 2

- 1 , 340- 1 , 1 8 0

- 9 4 9- 7 9 5

- 1 , 0 9 8- 8 3 8

- 8 9 6- 1 , 1 7 6- 1 , 4 9 4

U.S.privateassets

- 5 , 1 4 4- 5 , 2 3 4- 4 , 6 2 4- 5 , 9 8 6- 8 , 0 4 9

- 5 , 3 3 5- 6 , 3 4 5- 7 , 3 8 7- 7 , 8 3 3- 8 , 2 0 6

-10 ,228-12 ,939-12 ,925- 2 0 , 388-33 ,643

-35 ,368-43 ,865- 3 0 , 740

-10 ,830- 9 , 2 3 0- 8 , 522

-15 ,283

- 1 1 , 2 1 '- 5 , 6 6 8

-13 ,862

-14 ,386- 5 , 2 8 7- 9 , 6 9 2

Foreign assets in the U.S., net[increase/capital inflow ( + ) ]

Total

2,2942,7051,9113 2173,644

7403,6597,3789,927

12, 701

6,35722,98721,69618,66334,677

15, 55036,96950,869

7,5907,9148,932

12,534

2,49014,06414,25120,065

18,095406

14,612

Foreign officialassets

Total

1,473765

1,2701,9861,661

132- 6 7 43,450- 7 7 6

- 1 , 3 0 1

6,90726,89510, 7056,299

10,981

6,90718,07337,124

3,8194,0173,0707,166

5,4517,8848,246

15, 543

15,760- 5 , 6 8 5

4,904

Assetsof

foreignofficialreserveagen-cies

1,258741

1,1181,5581,363

67- 7 8 73,367- 7 6 1

- 1 , 5 5 2

7,36227,40510, 3225,145

10,257

5,25913,08035,480

2,3233,3511,3206,086

4,9467,4677,914

15,153

14,956- 5 , 3 7 3

4,554

Otherforeignassets

8211,939

6411,2311,983

6074,3333,928

10,70314,002

- 5 5 0- 3 , 9 0 710,99112, 36423,696

8,64318,89713, 746

3,7713,8975,8625,367

- 2 , 9 6 26,1806,0054,522

2,3366,0909,708

Alloca-tions ofspecial

drawingrights(SDR)

867717710

Statisticaldiscrepancy

Total(sum of

theitemswithsignre-

versed)

- 1 , 0 1 9- 9 8 8

- 1 , 1 2 2- 3 6 0- 9 0 7

- 4 5 7628

- 2 0 6439

- 1 515

- 2 4 4- 9 , 8 2 2- 1 , 9 6 6- 2 , 7 2 5- 1 684

5,4499,300- 9 2 7

3,0731,6851,0183,525

1,600622

- 4 , 7511,602

3,7988,830

218

Ofwhich:Sea-sonal

adjust-ment

discrep-ancy

688215

- 2 , 6 3 61,734

131- 1 7 9

- 2 , 2 2 92,276

160

- 2 , 4 1 1

s Includes extraordinary U.S. Government transactions with India.«Consists of gold, special drawing rights, convertible currencies, and the U.S. reserve position in the International

Monetary Fund (IMF).

Note.—Quarterly data for changes in U.S. official reserve assets, U.S. private assets abroad, and foreign assets in theUnited States are not seasonally adjusted.

Source: Department of Commerce, Bureau of Economic Analysis.

295

T A B L E B—98.—U.S. merchandise exports and imports by principal end-use categories, 1965—78

[Millions of dollars; quarterly data seasonally adjusted]

Year or quarter

19651966196719681969

19701971197219731974

1975 . _19761977

1977: 1IIIllIV

1978: 1IIIll »

Exports

Total

26,46129, 31030,66633,62636, 414

42,46943, 31949, 38171,41098,306

107,088114,694120, 576

29,47730, 62931, 00929,461

30, 66435, 06736, 930

Agricul-tural

6,3056,9496,4536,2976,096

7,3747,8319,513

17,97822,412

22, 24223,38124, 336

6,2196,4805,9745,663

6,5057,9947,922

Nonagricultural

Total

20,15622,36124,21327, 32930,318

35,09535,48839, 86853,43275, 894

84,84691,31396, 240

23,25824,14925, 03523, 798

24,15927, 07329, 008

Capitalgoods

8,0528,9079,934

11,11112, 369

14,65915, 37216,91421,99930,887

36,65939,06539, 807

9,5849,852

10,28610,085

9,96911,06212,465

Othergoods

12,10413,45414,27916, 21817,949

20,43620,11622,95431,43345,007

48,18752,24856, 433

13,67414, 29714, 74913,713

14,19016, 01116, 543

Imports

Total

21,51025, 49326,86632,99135, 807

39,86645, 57955,79770,499

103,649

98,041124,047151, 706

36, 50237,26338, 27739,664

41, 86542,86944,975

Petroleumand

products

2,0342,0782,0912,3842,649

2,9303,6504,6508,415

26,589

27,01734,57344,980

11, 57411,53611,30610, 564

9,94510,80710,823

Non- petroleum

Total

19,47623,41524,77530,60733,158

36,93641,92951,14762,08477,060

71,02489,474

106,726

24,92825,72726,97129,100

31, 92032,06234,152

Industrialsupplies

9,12310,2359,956

12,02711, 798

12,46713, 82416, 34919, 72527,975

24,21130,00036, 070

8,0959,1429,1829,651

10, 71011,17010,916

Othergoods

10,35313,18014,81918, 58021, 360

24,46928,10534,79842, 35949,085

46, 81359,4747C, 656

16,83316, 58517, 78919, 449

21,21020,89223, 236

Note.—Data are on an international transactions basis and exclude military shipments.Source: Department of Commerce, Bureau of Economic Analysis.

296

TABLE B-99.—U.S. merchandise exports and imports by area, 1972-78[Millions ot dollars]

Item 1972 1973 1974 1975 1976 1977 19781

Exports

Developed countries.

CanadaJapanWestern EuropeAustralia, New Zealand, and

South Africa

Developing countries..

OPEC2.Others.

Eastern Europe

Imports

Developed countries.

CanadaJapanWestern EuropeAustralia, New Zealand, and

South Africa

Developing countries..

OPEC 2_Other 3_.

Easte rn Europe..

49, 381

34, 564

13,1094,963

14, 950

1,542

13, 917

2,55111, 366

900

55, 797

40, 643

14, 4939,076

15, 661

1,413

14, 791

2,97411,817

363

71,410

48, 529

16, 7108,356

21, 216

2,247

20, 834

3,414

17, 420

2,047

70, 499

48, 98517,6949,665

19, 774

1,852

20, 913

5,09715, 816

601

98, 306

64, 487

21, 84210, 72428,164

3,757

32, 082

6,21925, 863

1,737

103,649

61, 092

22, 39212,41424, 267

2,019

41, 580

17, 23424, 346

977

107, 088

66, 496

23, 5379,567

29, 884

3,508

37, 343

9,95627, 387

3,249

98, 041

55, 973

21,71011,25720, 764

2,242

41, 334

18, 89722, 437

734

114,694

72,339

26,33610,19631,887

3,920

38,254

11,56126,693

4,101

U24,047

67,488

26,47515, 53123,003

2,479

55, 375

27,40927,966

875

120, 576

76,712

28,29310, 56634, 076

3,777

40, 952

12, 87828, 074

2,912

151, 706

79, 247

29,66418, 56528, 226

2,792

70, 678

35, 77834,900

1,127

136, 881

84,427

30, 05912,15738,261

3,949

48, 540

14, 77933,761

4,467

U72,945

97, 572

32, 87524, 39536,120

4,183

73, 737

33,16340, 575

1,441

1 First 3 quarters at seasonally adjusted annual rate; preliminary. Detail will not add to totals because of seasonaladjustment discrepancy and rounding.

2 Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emiratesand Venezuela.

3 Latin American Republics, otherWestern Hemisphere,and other countries in Asia and Africa,less petroleum exportingcountries and the International Monetary Fund.

4 Includes imports of nonmonetary gold from International Monetary Fund, not in area detail.

Note.—Data are on an international transactions basis and exclude military shipments.

Source: Department of Commerce, Bureau of Economic Analysis.

297

TABLE B-100.—International investment position of the United States at year-end, 1970-11

[Billions of dollars]

Type of investment 1970 1972 1974 1975 1976 1977

Net international position of the United States.

U.S. assets abroad

U.S. official reserve assets.

GoldSpecial drawing rights (SDR).Reserve position in the Ir

Fund ( I M F ) .Foreign currency reserves.

nternational Monetary

Other U.S. Government assets.

U.S. loans and other long-term assets _U.S. short-term assets other than reserves.

U.S. private assets.

Direct investments abroad (book value).Foreign securitiesClaims on foreigners reported by U.S. banks, not in-

cluded elsewhereClaims on unaffiliated foreigners reported by U.S.

nonbanks

Foreign assets in the United States.

Foreign official assets

U.S. Government securities1.Other U.S. Government liabilitiesLiabilities reported by U.S. banks, not included else-

where _Other official assets

Other foreign assets

Direct investments in the United States (book value)..Liabilities reported by U.S. banks, not included else-

where _U.S. Treasury securitiesOther U.S. securities2

Liabilities to unaffiliated foreigners reported by U.S.nonbanks.

58.6

165.5

14.5

11.1.9

1.9.6

32.1

29.72.5

118.8

75.521.0

13.8

8.5

106.8

26.1

17.71.7

6.7.0

80.7

13.3

22.71.2

34.78.8

37.1

199.0

13.2

10.52.0

. 5

. 2

36.1

34.12.0

149.7

89.927.6

20.7

11.4

161.8

63.2

52.91.6

8.5.2

£8.7

14.9

21.21.2

50.710.7

58.3

255.7

15.9

11.72.4

1.9.0

38.4

36.32.1

201.5

110.128.2

46.2

17.0

197.4

80.3

57.73.5

18.4.6

117.1

25.1

41.81.7

34.913.6

73.9

295.1

16.2

11.62.3

2.2.1

41.8

39.82.0

237.1

124.134.9

59.8

18.3

221.2

87.6

63.35.1

16.32.9

133.6

27.7

42.54.2

45.3

13.9

80.7

346.4

18.7

11.62.4

4.4.3

46.0

44.11.9

281.7

136.444.1

81.1

20.1

265.7

106.6

73.610.1

17.25.6

159.1

30.8

53.57.0

54.8

13.0

70.0

381.3

19.3

11.72.6

4.9.0

49.6

47.81.8

312.4

148.849.3

92.6

21.8

311.3

143.1

106.011.8

18.07.2

168.2

34.1

60.27.6

53.1

13.3

1 Includes Treasury and agency issues of securities.2 Corporate and other bonds and corporate stocks.

Note.—Gold is valued at SDR35 per ounce, throughout. The SDR value is converted to dollars at $1/SDR before Decem-ber 1971, at $1.08571/SDR from December 1971 through January 1973, at $1.20635/SDR from February 1973 throughJune 1974, and as measured by the basket valuation of the SDR beginning July 1974.

Source: Department of Commerce, Bureau of Economic Analysis.

298

TABLE B-101.—International reserves, 1952, 1962, and 1974-78

[Millions of dollars; end of period]

Area and country

All countries.

Industrialized countries2..

United States.CanadaJapan

AustriaBelgiumFranceGermanyItalyNetherlandsScandinavian countries (Den-

mark, Norway, and Sweden).SwitzerlandUnited Kingdom

Other Europe

Australia, New Zealand, and SouthAfrica

Oil exporting countries.

IranNigeriaSaudi Arabia3..VenezuelaOther*

Other less developed areas

Other Western Hemisphere

Other Middle East

Other Asia

Other Africa _

1952

1 49,187

36,773

24, 7141,9441,101

1161,133686960722950

8171,6671,956

1,559

1,509

1,699

177500

443579

7,187

2,086

826

3,479

796

1962

62,659

49, 254

17,2202,5612,021

1,0811,7534,0496,9574,0681,944

1,3622,9193,308

2,966

2,066

2,030

211289268583679

6,343

1,700

992

2,663

1974

219,799

119,908

16,0585,82513,519

3,4305 3458,85232,3986,9416,957

4,6009,0116,939

15,138

6,068

46,995

8,3835,62614,2856,51312,188

31,691

11,905

4,754

12, 055

2,977

1975

226,852

121,880

15,8835,32612,815

4,4395,79712, 59331,0344,7747,109

6,19110,4285,459

13,046

4,900

56,533

8,8975,60923,3198,8619,847

30,496

10, 021

5,186

12, 513

2,777

1976

257,402

131,849

18,3205,84316,605

4,4105,2069,72834,8016,6547,387

5,63612,9934,230

13,734

4,602

65,233

8,8335,20327,0258,57815, 594

41, 983

15,215

5,778

17,912

3,078

1977

317,847

169,356

19,3924,608

23,2614,2445,76110,19439, 73711,6298,065

7,53913,83021,057

15,668

3,657

75,495

12,2664,259

30,0348,214

20,722

53,670

20,296

7,472

22,141

3,763

1978

November

347,874

198,808

18,6054,48732,730

5,3455,82013,31952,30114,1236,930

9,95518,38116,770

21, 296

4,018

59, 326

1,61919,7616,526

64,427

26, 716

8,547.

25, 390

3,776

1 Includes Cuba.2 Includes Luxembourg.3 Data beginning April 1978 exclude the foreign exchange cover against the note issue.* Algeria, Indonesia, Iraq, Kuwait, Libya, Oman, Qatar, and United Arab Emirates.Note.—International reserves is comprised of monetary authorities' holdings of gold, special drawing rights (SDR),

reserve positions in the International Monetary Fund, and foreign exchange. Data exclude U.S.S.R., other Eastern Europeancountries, Mainland China, and Cuba (after 1960).

Source: International Monetary Fund, "International Financial Statistics."

299

TABLE B—102.—Summary of major U.S. Government net foreign assistance, July 1, 1945 to' December 31. 1977

[Millions of dollars] >

Type and geographic distribution

Yearly average or calendar year

1945-492 1950-54 1955-59 1960-64 1965-69

Total .net

Investment in 6 international financial institutions 3_.

Under assistance programs, net

Net new military grantsGross new grantsLess: Reverse grants and returns

Other grants, credits, and other assistance (through netaccumulation of foreign currency claims), net

Net new economic and technical aid grants *Gross new grantsLess: Reverse grants and returns

Net new credits < sNew creditsLess: Principal collections

Other assistance (through net accumulation of foreigncurrency claims)«

5,540

141

5,399

325340

15

5,074

3,3123,486

174

1,7621,986

224

5,059

Currency claims acquiredSales of farm productsSecond-stage operations7 .

5,059

2,4622,494

32

2,597

2,4062,512

106

148544396

42

Less: Currencies disbursedEconomic grants and credits to purchasing

countryOther uses

Geographic distribution of net nonmilitary assistance

Developing countries,* net total

Net new economic and technical aid grantsNet new creditsOther assistance (through net accumulation of foreign

currency claims)

904

752152

Developed countries,8 net total.

Net new economic and technical aid grantsNet new creditsOther assistance (through net accumulation of foreign

currency claims)

4,170

2,5601,610

1,032

772240

20

1,564

1,634- 9 2

22

4,772

7

4,764

2,4382,451

14

2,327

1,7101,759

48

210827617

407

965963

2

558

413145

2,211

1,470386

355

116

240- 1 7 6

4,664

124

4,540

1,5941,629

35

2,946

1,8501,872

22

8711,843

972

225

1,2301,186

44

1,005

807198

3,316

1,8171,310

189

- 3 7 1

32- 4 3 9

36

5,899

81

5,818

2,1902,196

3,628

1,7761,780

4

1,9503,0821,132

- 9 8

814691122

912

716196

3,611

1,7651,926

17

1124

-18

1 Negative figures (—) occur when the total of grant returns, principal repayments, and/or foreign currencies disbursedby the Government exceeds new grants and new credits utilized and/or acquisitions of foreign currencies through new salesof farm products.

2 July 1,1945, through December 31,1949. Yearly average is for 4 ^ years.s Includes paid-in capital subscriptions and contributions to the special funds of the African Development Fund, Asian

Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development, Inter-national Development Association, and International Finance Corporation.

4 Net new grants are not adjusted for settlements of postwar relief and other grants under agreements, and net newcredits exclude prior grants converted into credits. Repayments on these settlements are included in net new credits.

« Outstanding credits on December 31, 1977, totaled $41,610 million, representing net credits extended since organi-zation of Export-Import Bank, February 12, 1934, less chargeoffs and net adjustments due to exchange rates ($1,537million), and excluding World War I debts. The amount repayable in dollars at U.S. Government option was $39,018 mil-l ion; the remainder was repayable in foreign currencies, commodities, or services, at the option of the borrowers.

(See next page for continuation of table.)

300

TABLE B-102.—Summary of major U.S. Government, net foreign assistance, July. / , 1945 toDecember 31, 1977—Continued

[Millions of dollars] >

Type and geographic distribution

Yearly average or calendar year

1970-74 1975 1976 1977 P

Total, net

Investment in 6 international financial institutions3..

Under assistance programs, net

Net new military grantsGross new grantsLess: Reverse grants and returns

Other grants, credits, and other assistance (through netaccumulation of foreign currency claims), net

Net new economic and technical aid grants4

Gross new grantsLess: Reverse grants and returns

Net new credits45

New creditsLess: Principal collections

Other assistance (through net accumulation of foreigncurrency claims)6

Currency claims acquiredSales of farm productsSecond-stage operations7

Less: Currencies disbursedEconomic grants and credits to purchasing

countryOther uses

7,146

332

6,814

3,3103,314

5

3,504

2,4862,534

48

1,1903,8362,646

- 1 7 1

742106635

913

709204

8,671

654

8,017

2,8912,895

4

5,126

2,2472,249

2

2,8495,2932,444

30

1895

184

159

21138

Geographic distribution of net nonmilitary assistance

Developing countries,* net total

Net new economic and technical aid grantsNet new creditsOther assistance (through net accumulation of foreign

currency claims)

Developed countries,* net total..

Net new economic and technical aid grantsNet new creditsOther assistance (through net accumulation of foreign

currency claims)

3,614

2,5291,234

- 1 4 9

- 1 1 0

- 4 4- 4 4

- 2 2

5,017

2,2482,711

58

109

- 1138

- 2 8

7,930

1,102

6,828

1,3391,342

3

5,488

2,2662,272

6

3,2755,8372,563

-53

129

182

42140

5,329

2,2663,093

-30

158

ill-23

6,723

870

5,853

7577603

5,096

2,2752,275

2,8605,5462,686

-39

175

214

16198

5,284

2,2733,017

- 6

-188

2-157

-33

e Equivalent value of currencies still available to be used, including some funds advanced from foreign governments andafter loss by exchange rate fluctuations ($1,962 million), was $555 million on December 31, 1977.

i Includes foreign currencies acquired from triangular trade operations and principal and interest collections on credits,originally extended under Public Law 83-480, which—since enactment of Public Law 87-128—are available for thesame purposes as Public Law 83-480 currencies.

s Developed countries include Australia, Canada, Japan, New Zealand, Republic of South Africa, and all countries inEurope except Cyprus. Gibraltar, Greece, Malta, Portugal, Spain, Turkey, and Yugoslavia. Developing countries includeall other countries. This classification is on the basis of the standard list of less developed countries used by the Develop-ment Assistance Committee of the Organization for Economic Cooperation and Development.

•Less than plus or minus $500,000.Source: Department of Commerce, Bureau of Economic Analysis, based on information made available by operating

agencies.

301

TABLE B-103.—World trade: Exports and imports, 1965, 1970, and 1974-78

[Billions of U.S. dollars]

Area and country 1965 1970 1974 1975 1976 1977 1978i

Exports, f.a.s.2

Developed countries3

United StatesCanadaJapan

European Community4

FranceWest GermanyItalyUnited Kingdom

Other developed countries

Developing countries

OPEC5

O t h e r . . . .

Communist countries6

U.S.S.REastern EuropeChina

TOTAL

Developed countries3

United StatesCanadaJapan.

European Community4

FranceWest GermanyItalyUnited Kingdom..

Other developed countries

Developing countries..

OPEC5

Other

Communist countries6

U.S.S.REastern EuropeChina

TOTAL . . .

129.7

27.58.58.5

64.8

10.217.97.2

13.8

20.4

35.2

10.724.5

23.2

8.211.82.0

188.1

225.9

43.216.719.3

113.0

18.134.213.219.6

33.6

54.3

17.636.7

34.7

12.818.22.1

314.9

547.9

98.534.555.6

276.9

46.389.330.539.4

82.4

216.8

120.596.3

75.5

27.437.66.7

840.2

583.3

107.634.155.8

298.4

53.190.234.844.5

87.4

203.7

111.592.2

90.4

33.445.37.2

877.4

647.3

115.040.567.3

328.8

57.2102.237.346.7

95.7

248.6

135.3113.3

99.1

37.349.57.3

995.0

734.8

121.243.481.1

382.0

65.0118.145.058.2

107.1

283.3

147.6135.7

115.8

45.256.97.9

1,133.9

Imports, c.i.f.7

136.7

23.28.78.2

69.3

10.417.67.4

16.1

27.3

37.0

6.530.5

22.6

8.111.61.8

196.3

235.3

42.414.318.9

116.9

19.129.915.022.0

43.0

56.6

10.046.6

34.2

11.718.52.2

326.1

608.6

108.034.462.1

295.9

52.969.641.155.0

108.2

163.3

33.4129.9

79.2

24.942.37.4

851.1

610.9

103.436.257.9

301.9

54.074.938.454.2

111.5

189.5

52.7136.8

100.8

37.151.37.4

901.1

701.5

129.640.364.9

345.6

64.488.443.456.6

121.2

207.2

64.1143.1

105.1

38.255.66.0

1,013.8

793.3

157.642.171.3

389.7

70.5101.547.664 6

132.7

249.1

87.5161.6

115.3

40.961.76.9

1,157.7

853.4

140.247.599.9

444.0

79.5142.152.571.2

121.8

296.1

145.0151.1

133.3

52.963.89.9

1, 282. 8

889.2

184.045.880.2

440.9

80.7121.252.477.8

138.2

291.3

104.1187.2

133.5

49.067.710.1

1,314.0

1 Preliminary estimates.2 Free-alongside-ship value.s Includes the OECD countries, South Africa, and non-OECD Europe.4 Includes Belgium-Luxembourg, Denmark, Ireland, and the Netherlands, not shown separately,s Includes Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Oman, Qatar, Saudi Arabia, United

Arab Emirates, and Venezuela.«Includes North Korea, Vietnam, Albania, Cuba, Mongolia, and Yugoslavia, not shown separately.7 Cost, insurance, and freight value.

Sources: International Monetary Fund, Organization for Economic Cooperation and Development, and Council ofEconomic Advisers.

302

TABLE B-104.—World trade balance and current account balances, 1965, 1970, and 1974-78

[Billions of U.S. dollars]

Area and country 1965 1970 1974 1975 1976 1977 1978i

Developed countries >.

United States.CanadaJapan

European Community*.

FranceWest Germany...ItalyUnited Kingdom..

Other developed countries

Developing countries

OPEC «_.Other...

Communist countries *.

U.S.S.REastern Europe..China

TOTAL *

OECD.

United States.CanadaJapan

European Community*

FranceWest Germany...ItalyUnited Kingdom..

Developing countries..

OPEC »_.Other...

Other i ° .

TOTAL..

3.8

5.4-1 .1

.9

.9

- L 62.2

_ i

World trade balances

-6 .9

4.3

'.Z

-4 .5

- . 2.3

-l!3-6 .8

-1 .8

4.2-6 .0

.5

.1

.2

.2

- 8 . 2

-9 .6

.82.5.4

- 3 . 9

- 1 . 04.3

-1 .8-2 .4

-9 .4

- 2 . 3

7.6-9 .9

.5

1.1- . 4

-11.4

-60.7

-9 .5

- 6 ! 5

-19.0

-6 .719.7

-10.6-15.6

-25.8

53.4

87.0-33.6

-3 .7

2.5-4 .7

-11.0

-27.6

4.2-2 .1-2 .1

-3 .5

- . 815.2

-3 .6-9 .6

-24.1

14.3

58.9-44.6

-10.4

-3 .7-6 .0

-23.7

-54.2

-14.6

2*. 4

-16.8

- 7 . 213.7

-6 .2-9 .9

-25.5

41.3

71.2-29.9

-6 .0

- . 9-6 .1

1.3

-18.9

-58.5

-36.31.39.8

-7 .7

-5 .516.6

-2 .5-6 .4

-25.7

34.2

60.1-25.9

.5

4.3-4 .8

1.0

-23.8

Current account balances8

6.7

2.41.12.0

3.2

!91.11.8

-8 .5

- 8.'0

-2 .8

-4 .5

-25.3

1.7-1 .5-4 .7

-12.4

-6 .09.8

-8 .0-8 .6

34.8

59.3-24.5

-9 .8

- . 3

0.3

18.4-4 .7- . 7

.4

l!o- . 8

-4 .1

-11.2

27.3-38.5

-18.5

-29.5

-19.0

4.3-3 .8

3.7

-6 .6

-6 .13.8

-2 .8-2 .0

11.0

37.0-26.0

-12.8

-20.8

-27.5

-15.3-3 .910.9

.8

-3 .33.72.3.5

7.5

31.5-24.0

-10.0

-30.0

-35 .8

-43.81.7

19.7

3.1

- 1 . 320.9

.2

-6 .6

-16.4

4.840.9

-36.1

- . 2

3.9-3 .9

-31.2

0.5

-17.0-4 .020.0

9.8

2.06.05.5

- . 5

-23 .0

11.0-34.0

-10.8

-33.3

* Preliminary estimates.2 Exports f.a.s. (free alongside ship) less imports c.i.f. (cost, insurance, and freight),s Includes the OECD countries, South Africa, and non-OECD Europe.* Includes Belgium-Luxembourg, Denmark, Ireland, and the Netherlands, not shown separately.«Includes Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Oman, Saudi Arabia, United Arab

Emirates, and Venezuela.« Includes North Korea, Vietnam, Albania, Cuba, Mongolia, and Yugoslavia, not shown separately.7 Asymmetries arise in global payments aggregations because of discrepancies in coverage, classification, timing, and

valuation in the recording of transactions by the countries involved.8 OECD basis.9 Consists of countries in footnote 4 plus Bahrain and Qatar.10 Includes Communist countries and non-OECD developed countries.

Sources: International Monetary Fund, Organization for Economic Cooperation and Development, and Council ofEconomic Advisers.

303

T A B L E B—105.—Consumer prices and hourly compensation, major industrial countries, 1960—78

[1967=100)

Year or quarter

1960 . . .19611962 - - .19631964 - -

1965196619671968 . .1969

197019711972 -19731974 .

197519761977

1977: 1II. .IIIIV

1978" 1IIIII

19601961 -19621963 _ _-1964

1965196619671968 _ -1969

1970 -197119721973 - -1974

197519761977

UnitedStates Canada Japan France West

Germany Italy UnitedKingdom

Consumer prices

88.789.690.691.792.9

94.597.2

100.0104.2109.8

116.3121.3125.3133.1147.7

161.2170.5181.5

176.9180.7183.3185.3

188.5193.4197.9

77.179.582.685.288.9

91.095.3

100.0107.1113.9

121.7129.5136.6146.4161.1

180.1195 1212.2

85.986.787.789.390.9

93.196.6

100.0104.1108.8

112.4115.6121.2130.3144.5

160.1172.1185.9

179.7183.9188.0192.0

195 6200.3205.4

fO. 378.977 079.082.0

86.293.0

100 0107.4115.5

128.2142.6156.8170.6201.7

222.1261 3268.4

67.771.376.181.985.0

91.596.2

100.0105.3110.8

119.3126.5132.3147.9184.0

205.8224.9243.0

237.3243.7244.4246.5

247.5252.6254.3

78.881.485.389.492.5

94.897.2

100.0104.5111.3

117.1123.5131.1140.7160.0

178.9196.1214.5

205.6211.9216.9221.1

224.6230.9237.1

82.884.787.389.892.0

94.998.3

100.0101.5103.4

107.1112.7119.0127.2136.1

144.2150.7156. 6

154.8156.9157.3157.6

159.6161.1161.0

Hourly compensation'

43.450.357.564.172.0

81.189.2

100.0116.9139.3

165.9197.3259.2353.7431.2

497.2538.3650.5

56 061.767 975.080.7

86.992.5

100 0112.6111.6

117.2131.3159.9208.1229.6

304.7312 5348.6

51.860.568 873.679.5

85.794.3

100.0105.9117.3

145.9173.4211.4289.3342.5

406.2420 1497.5

74.175.779.285.190.1

94.296.4

100.0101.4104.1

109.2114.4121.0134.0159.7

186.8218.1255.2

242.9252.1258.5267.2

274.1282.6289.3

46 851.861 172.380.4

86.089.8

100 0106.8121.1

145.0169.7206.0261.7291.6

374.7352 6391.0

78.981.685.186.889.6

93.997.6

100.0104.7110.4

117.4128.5137.7150.2174.3

216.5252.4292.4

279.7292.1296.8301.1

306.2314.6320.0

65.970.874.677.983.2

91.298.7

100.093.3

100.6

115.1133.4153.3167.7204.5

247.8237.8252.9

not compensation to employees, but are labor costs to employers.Source: Department of Commerce (Bureau of International Economic Policy and Research) and Department of Labor

(Bureau of Labor Statistics).

304

TABLE B-106.—Industrial production and unemployment rate, major industrial countries91960-78

[Quarterly data seasonally adjusted]

Year or quarter

19601961196219631964

1965196619671968.1969

19701971197219731974 _ _

1975197619771978 P

1977:1IIIIIIV

1978:1MIIIIV v

19601961 _196219631964

19651966 _. ._19671968 . . „1969.

1 9 7 0 . . . _197119721973. __1974

1975.19761977.1978*

1977:1II . .IllIV . . .

1978:1| | „

IIIIV '

UnitedStates

66.266.772.276.581.7

89.897.8

100.0106.3111.1

107.8109.6119.7129.8129.3

117.8129.8137.1145.1

133.6137.0138.4139.3

139.6144.0147.0149.5

Canada

63.065.671.175.782.6

89.696.3

100.0106.4113.7

115.3121.5130.7143.0147.5

139.6146.7152.6

151.4151.7152.7154.8

155.8157.8160.4

JapanEuropean

Com-munity *

France

Industrial production (1967=

43.051.355.461.771.4

74.283.9

100.0115.2133.4

151.7155.8167.2190.5183.1

163.9182.0189.5

189.2188.9188.7191.2

196.7200.2201.6

74.778.181.384.891.0

94.798.4

100.0107.4117.6

123.3126.1131.7141.4142.3

132.8142.5145.0

149147144144

146146

7175798390

9398

100104114

120128135145148

139149152

153152151149

152155154

WestGermany

100)2

77.682.086.489.496.6

102.1103.0100.0109.2123.1

131.1133.6138.7147.7145.1

137.1149.1152.7

153151152153

153153157

Italy

60.065.771.977.979.1

83.092.3

100.0106.4110.5

117.6117.5122.7134.6140.6

127.6143.5145.1

154.5143.6142.5139.5

146.0144.6145.2

UnitedKingdom

84.084.084.888.495.0

97.799.2

100.0106.8110.3

110.9110.6113.2123.0120.0

114.3117.4123.1

123.2123.0123.6122.3

124.1128.0128.3

Unemployment rate (percent)3

5.56.75.55.75.2

4.53.83.83.63.5

4.95.95.64.95.6

8.57.77.06.0

7.57.26.96.6

6.26.06.05.8

7.07.15.95 54.7

3.93.43.84.54.4

5.76.26.25.65.4

6.97.18.18.4

7.98.18.28.4

8.48.68.58.2

1.71.51.31.31.2

1.21.41.31.21.1

1.21.31.41.31.4

1.92.02.0

«2.3

1.92.12.12.1

2.12.32.3

1.81.61.51.31.5

1.61.92.02.62.4

2.62.82.92.73.0

4.34.75.1

<5.5

4.95.15.34.9

5.05.16.0

1.1.6.6.5.4

.3

.31.31.4.9

.8

.8

.8

.81.7

3.63.63.63.4

3.53.53.63.5

3.53.43.43.4

3.83.22.82.42.6

3.53.83.43.43.3

3.13.13.63.42.8

3.23.63.43.5

3.43.43.53.4

3.53.53.63.6

2.22.02.83.42.5

2.22.33.43.33.0

3.13.74.12.92.9

4.15.56.26.1

6.06.06.36.4

6.36.26.15.9

i Consists of Belgium-Luxembourg, Denmark, France, Ireland, Italy, Netherlands, United Kingdom, and West Germany.* All data exclude construction.> Unemployment rates adjusted to U.S. concepts. Data for United Kingdom exclude Northern Ireland.< 11-month average, seasonally adjusted.Sources: Department of Commerce (Bureau of International Economic Policy and Research) and Department of

Labor (Bureau of Labor Statistics).

305

TABLE B-107.—Growth rates in real gross national product, 1960-78

[Percent change]

Area and country

OECO countries .__

United StatesCanadaJapan..

European Community3

FranceWest GermanyItaly. _ _United Kingdom

Other OECD *

Communist countries s . .

U.S.S.R.Eastern Europe _ _China

Less developed countries..

OPECOther.

TOTAL

1960-73annualaverage

4.8

3.95.4

10.5

4.7

5.74.85.23.2

5.4

«5.3

«5.0M.I«6.2

7 9.076.1

1974

0.4

- 1 . 43.5

- 1 . 0

1.7

2.6

1 9- . 6

3.6

4.6

3.84.73.7

8.05.3

1975

- 0 . 6

- 1 . 31.22.4

- 1 . 8

-2.6- 3 . 5- 1 . 6

.0

3.7

1.94.16.9

.14.1

1976

5.2

5.75.86.0

5.0

5.65.65.62.6

3.5

3.4

4.34.3.1

12.94.8

1977

3.7

4.92.75.2

2.3

3.02.61.71.6

1.8

4.6

3.34.09.0

6.34.9

19781

3.5

3.93.55.8

2.8

3.03.02.03.0

2.3

3.2

10.5

U.S. dollarvalue in

1977(billions)2

4,917.8

1,887.2197.6690.5

1,573.0

380.7516.3196.0245.2

569.5

1,870.0

1,047.9348.0372.0

1,130.0

8 7,960.0

* Preliminary estimates.2 Estimates based on conversion at average rates of exchange for 1977, except for those of the Communist countries,

which were converted at U.S. purchasing power equivalents.3 Includes Belgium-Luxembourg, Denmark, Ireland, and the Netherlands, not shown separately.* Growth rates are for OECD countries other than the Big Seven (United States, Canada, Japan, France, West Germany,

Italy, and the United Kingdom).5 Includes North Korea, Vietnam, Albania, Cuba, Mongolia, and Yugoslavia, not shown separately.«1961-73 annual average.71967-73 annual average.s Sum of OECD countries, Communist countries, and less developed countries plus a residual of $42.2 billion attribu-

table to non-OECD developed countries.

Note.—For Italy and United Kingdom, data relate to real gross domestic product. For France, data relate to gross domes-tic product excluding nonmarket activity such as compensation of employees in the government sector.

Sources: Department of Commerce, International Monetary Fund, Organization for Economic Cooperation and Develop-ment (OECD), and Council of Economic Advisers.

306

U. S. GOVERNMENT PRINTING OFFICE : 1979 O - 278-216