ECONOMIC

ECONOMICTRANSMITTEDTO THE CONGRESSJANUARY 1977

Economic Reportof the PresidentTransmitted to the CongressJanuary 1977TOGETHER WITHTHE ANNUAL REPORTOF THECOUNCIL OF ECONOMIC ADVISERSUNITED STATES GOVERNMENTWASHINGTON : 1977For sale by the Superintendent of Documents, U.S. Government Printing OfficeWashington, D.C. 20402 - Price $2.90Stock Number 040-000-00376-2

CONTENTSPageECONOMIC REPORT OF THE PRESIDENT 1ANNUAL REPORT OF THE COUNCIL OF ECONOMICADVISERS* 13CHAPTER 1. ECONOMIC POLICY AND OUTLOOK 23CHAPTER 2. ECONOMIC REVIEW OF 1976 58CHAPTER 3. THE WORLD ECONOMY IN 1976 100CHAPTER 4. POLICIES TO INCREASE SUPPLY 136APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THECOUNCIL OF ECONOMIC ADVISERS DURING 1976 171APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOY-MENT, AND PRODUCTION 181*For a detailed table of contents of the Council's Report, seepage 17.

ECONOMIC REPORTOF THE PRESIDENT

ECONOMIC REPORT OF THE PRESIDENTTo the Congress of the United States:The past year was a year of sound economic achievement. A yearago I said that my key economic goal was "to create an economic environmentin which sustainable noninflationary growth can be achieved."While much remains to be done, we have built a very solid foundationfor further economic gains in 1977 and beyond. The recovery hascontinued to produce substantial gains in output and employment.Unemployment remains much too high, but the marked reduction thatwe see in inflation as well as in inflationary expectations represents significantprogress toward regaining the stable noninflationary prosperitythat has been our goal.The gross national product, adjusted for inflation, rose by slightly morethan 6 percent last year. The rise in production was extremely rapid atthe beginning of 1976. The advance moderated during the spring, butat the close of the year the recovery showed signs of reacceleration. InDecember more than 88 million Americans were employed, an increaseof about 3 million from last December and more than 4 million abovethe 1975 recession low. Economic gains were widespread. Real incomescontinued their rise, consumer expenditures also moved upward, businessinvestment began to recover, and housing construction improved significantly.Unemployment dropped sharply in the early months of lastyear, although it rose again as the extraordinarily rapid expansion inthe labor force outpaced the creation of new jobs.Substantial headway was also made on the inflation front. Since late1975 the consumer price index has risen only 5 percent, a full percentagepoint less than was anticipated and a noteworthy improvement over the12 percent inflation rate of 1974. Wage settlements continued to moderate.Record crops and more ample supplies of farm products halted thesharp increases in food prices. As fears of inflation ebbed, interest ratesdeclined, contrary to most expectations at the beginning of the year;and the stock market, reflecting this heightened confidence, was close tothe highs of the year when trading ended in 1976. The lower rate of infla-

tion and the improved state of financial markets attest to the significantprogress we have made during the past year toward reestablishing astable, noninflationary, full-employment economy.If this goal is to be fully realized, the present policy of moderation infiscal and monetary affairs and of relying on a restored vitality in the privatesector must continue. We need tax reductions to support a lastingeconomic recovery and to provide relief from the increases in real tax burdensinduced by inflation. In the long run, inflation and real economicgrowth will constantly push taxpayers into higher and higher taxbrackets unless tax laws are changed. Some believe that these additionaltax receipts should be spent on new Government programs. I do not.Instead I believe that the Congress should counteract the growing burdenimposed by the tax system—and the reduction of private incentivesthat it implies—by periodically providing offsetting tax cuts while continuingto restrain the rate of growth of Government spending.The creation of permanent, meaningful, and productive jobs for ourgrowing labor force requires a higher level of private investment. Taxreductions must be so designed that measures to stimulate consumptionare balanced by those which will increase investment. Investment hasfor some time been falling short of the levels required if we are to provideenough productive jobs for our people at rising real wage rates, andif we hope to renew and improve our capital stock so that we can meetour requirements for energy and make headway toward environmental,job safety, and other goals. Investment has grown more slowly thanwould normally be true at this stage of a recovery. A stronger spurto investment in productive plant and equipment is necessary for thefurther improvement in production and employment in 1977 and beyond.TAX REDUCTIONSIn October 1975, I presented to the Congress a program of tax cutsand spending restraints that would have reduced the burden of governmentfor all taxpayers. It would have given the American people morefreedom to spend their incomes as they choose rather than as Washingtonchooses for them, and it would have increased incentives to expandinvestment. However, the Congress decided otherwise—to increase spendingfar more than I wanted and to cut taxes far less than I wanted.Earlier this month I again sent to the Congress my recommendations tocut taxes. I have once more urged a permanent increase in the personalexemption from $750 to $1,000 to replace the system of temporary taxcredits that has so greatly complicated the individual income tax return.I am also recommending a higher income allowance and a series of per-

manent tax rate reductions. My proposals provide income tax relief forindividuals that will total $ 10 billion in 1977.To encourage the investment that will mean good steady jobs for ourexpanding labor force, I am recommending once again a permanentreduction in the corporate income tax from 48 to 46 percent. I urge aswell the enactment of legislation to make permanent the extension of the10 percent investment tax credit and the increased corporate surtaxexemption provided by the Tax Reform Act of 1976. In the longer runwe must eliminate the double taxation of dividend payments. I am thereforerenewing my proposal to integrate corporate and personal incometaxes gradually over a period of years beginning in 1978.I am also renewing my recommendation of accelerated depreciationfor investment in new plants and equipment undertaken in areas whereunemployment is 7 percent or higher. I am firmly convinced that thisis a far better way to raise employment where the economy has not caughtup with the recovery than adding layer upon layer of new spendingprograms.Although such tax cuts for individuals and businesses are desirableat this time to support stronger consumer and capital goods markets,we must be mindful of the need to bring down our large Federal budgetdeficit as quickly as possible. As the economy improves and the demandfor private credit becomes greater, Federal borrowing requirements tofinance the deficit must be lowered to avoid preempting funds needed forprivate investment and to ensure steady progress in the battle againstinflation. Accordingly, in my Budget Message I am again recommendingresponsible restraint in the growth of Federal budget outlays. Thesepolicies will also bring us closer to our goals of stable noninflationaryprosperity.INTERNATIONAL DEVELOPMENTSMuch progress was evident in the rest of the world last year, and internationaleconomic cooperation continued to improve. Restorationof a stable growth path, however, has proved difficult. Throughout theworld, countries are still grappling with the complicated and painfulaftermath of inflation, recession, and the sharp increases in the relativeprice of energy. Serious social and political problems have made theseadjustments more difficult.When I met with the leaders of the major industrial nations in thesummer of 1976, the restoration of full employment in our several economieswas the most important item on our agenda. Stable full employmentand continued improvement in the well-being of our own peoplesand the world population at large, we agreed, will take a number of

years. Although the course of faster expansion seems attractive, it isclearly risky. Impatience which leads to a reacceleration of inflationcould jeopardize the significant progress we have achieved so far.The costly lessons of the past decade are inescapable. High and variableinflation rates are incompatible with sustainable growth. Overly expansionarypolicies contributed to the very high inflation rate and, in turn,to the deepest worldwide recession since the 1930s. Policy changes andadjustments will doubtless be needed in 1977 and thereafter. But policiesmust hold to a reasonably steady and predictable course. In particular,the measures we select to further our economic expansion must not raisethe risk of future inflation.The growing recognition among nations of their interdependence hashelped to create the cooperation that is now apparent among members ofthe industrial community. The mutuality of the policy goals of thedeveloped and developing countries needs to be better understood oneach side. For this reason the discussions between developed and developingcountries during 1976 have attempted to foster a climate inwhich our joint interests and our diverse concerns can be freely expressed.Although the progress so far achieved has disappointed some,it has helped us avoid the sometimes easier but mutually destructivecourse of trade restrictions.ENERGY POLICYEnergy matters retain their troublesome hold among the problemsthreatening the Nation's long-run prosperity. The sharp increases in oilprices in 1973-75 imposed major costs upon our economy. We have donemuch to accommodate the new higher prices for energy, but some aspectsof energy policy have hampered the adjustment. The Congress has continuedto hold prices for domestically produced oil and natural gas wellbelow world market levels. These lower energy prices have encouragedthe inefficient use of energy and discouraged efforts to expand domesticsupplies and improve the energy efficiency of the overall capital stock.The recovery has heightened the demand for energy and thus resultedin greater imports of oil. In consequence the United States now dependseven more heavily upon imported petroleum and is even more vulnerablethan a year ago to future price manipulation and interruptions in supply.Now that the problems of recession and inflation are receding, we canmore vigorously address this difficulty. The energy program that I havepresented before is designed to answer the longer need.First steps are under way toward creating a strategic oil reserve which

will help shield us from disruptions in supply. The OPEC pricing decisionsof December were a forceful reminder of the Nation's growing needfor protection against foreign moves that affect the price and can alter theavailability of imported oil. Strategic storage will provide a first line ofdefense against the threat of disrupted supplies. This vital program mustbe implemented, and we must also take positive steps to lessen our economicdependence upon foreign oil.Measures that will make us less dependent on foreign energy supplieshave been proposed by this Administration; but unfortunately many ofthe most important proposals have not yet been accepted by the Congress.Some of the measures involve present costs which will yield much greaterfuture benefits. Others, which would lead to more efficient use of ourenergy resources, would benefit the Nation immediately as well as in thefuture.It is critically important—for energy security, environmental quality,and long-term economic productivity—that prices of domestic petroleumand natural gas be allowed to match more closely the full cost of thesefuels. In the immediate future oil prices should be allowed to rise as theywere intended to do under the Energy Policy and Conservation Act.Steps should also be taken which would help close the gap more rapidlybetween domestic and world market prices for petroleum, allow a freemarketprice for North Slope Alaskan oil, and deregulate the wellheadprice of new natural gas.Although a number of inconsistencies remain, the relation betweenthe Nation's goals for energy and for the environment has become clearerand the effects of existing policies more fully known. The time is ripefor reexamining environmental policy and determining whether the endswe all seek can be achieved at a lower cost to the economy and to thesecurity of our energy supplies.Taken together, all of the actions recommended here would help theeconomy to adjust to the new energy situation and do much to ensuremore reliable supplies of energy for the future. They would also signalto the world that this Nation is serious about developing secure suppliesof energy. Most important, these efforts would encourage conservationand give industry the confidence that will spur the production of bothconventional fuels and substitutes.REGULATORY REFORMAs economic problems have arisen and been dealt with by new policyinitiatives, the Government's role in the economy has grown ever larger.

The number of commissions, agencies, administrations, bureaus, andoffices set up to conduct programs increases constantly. Each appearsimportant when it is first established. The trouble is that they are seldom,if ever, terminated when they have accomplished their originalmission. By one recent count there were 1,200 Federal Government organizationsalone having significant powers to regulate a wide andgrowing range of economic activities.The direct Federal outlay to control practices in the private sector issubstantial. Even more important are the losses that these activities imposeon the production and distribution of goods and services throughoutthe economy. No accurate measure of the total costs and benefits ofactions by the regulatory agencies is possible at this time or perhaps ever.Although all Americans are aware of the substantial benefits which regulationsproduce in their everyday lives, we frequently lose sight of theefforts of such programs in restricting the growth of productivity.The use of newly developed technology, the development of new companiesand products, and the opening up of new occupations have allbeen impeded by the need for licenses, certification, review, and legaljudgments introduced by one agency or another. When innovative activitiesare discouraged progress is curbed throughout the economy, evenin those areas where some regulation is justified. Regulations must thereforebe reexamined to ensure the removal of costly and counterproductiveregulations and to identify those whose need has passed. Wherebenefits seem large we should make sure that the benefits are realized atthe least possible cost.To reduce the regulatory burden, I asked the Congress in the last yearto eliminate unnecessary and anticompetitive regulation in the airlineand trucking industries. This action was to follow the path of regulatoryreform that the railroad industry achieved in the Railroad Revitalizationand Regulatory Reform Act of 1976. I also urged the Congress toeliminate the Federal Power Commission's controls on new gas prices,which have held back exploration and sales to the interstate pipelinesserving northern and western cities. Earlier this month I once again submittedto the Congress a plan to eliminate controls on gasoline refiningand marketing.Among agencies under my jurisdiction I have set out new regulatoryprocedures which will make controls more effective and less costly to allconcerned, but such steps are only a beginning. The Congress and the8

executive branch must undertake a comprehensive review to ascertainthe effects of present controls, and then offer to the American people acorrective program that will cut across administrative boundaries. Only asweeping reform will remove the regulatory burden where it is no longerjustified and place the initiative for production and distribution back inthe more efficient hands of private enterprise.ROLE OF THE GOVERNMENT IN SOCIETYI firmly believe that if we dedicate our efforts to the major problemsI have outlined here we can successfully resolve them. As a people wehave an extraordinary capacity to marshal our resources against even thegravest difficulties.Unfortunately many of our problems are self-made. One which hasconcerned me particularly over the years is a tendency, born of goodwilland a desire to improve the state of American life, which makes us thinkwe can create costless benefits for our people. We are unwilling to confrontsome of our hardest choices. We persist in the belief that we can alwaystolerate a little larger Federal deficit, or the creation of a little moremoney, especially for the sake of programs which seem to promise clearand readily definable benefits. This is a kind of self-deception that wemust learn to resist.Certainly we must adopt measures that promise to keep the economicexpansion going and reduce the high unemployment. But overly expansivepolicies with their inevitable risk of renewed inflation are realitieswhich are easily overlooked in the understandable desire for the immediatelytangible benefits foreseen from specific programs. What we seek is asustainable expansion and the restoration of full employment withoutinflation, and we must settle for no less.The discipline implicit in a prudent fiscal policy is not easy but it offersvery considerable and lasting rewards. I am hopeful that the recentcreation of the budget committees to serve the Congress will help to providethis necessary discipline. Prudent budget policies are essential if weare to restore stable full-employment conditions and provide the productivejobs which our people need and want. Some part of our present deficitis the result of the recession and will accordingly disappear as full employmentis restored. Beyond this, however, we must restrain the growthof Federal expenditures. If we do not, we shall have to resign ourselves tohigher taxes or to high employment deficits with their inflationaryconsequences.Nowhere are these tradeoffs so evident as in our social security programand our efforts to provide medical insurance for our people. I

have emphasized the need to maintain a fiscally sound social securitysystem and repeatedly rejected proposals to fund increased benefits out ofwhat are called general revenues. The purpose of linking social securitybenefits to specially designated taxes is to balance the benefits to onesegment of society with the costs to another segment. Our democraticprocesses of government work better when the costs of programs are openand visible to those who pay them. Funding our social security benefitsthrough specifically designated payroll taxes strengthens the disciplinethat should govern these decisions. Benefits are not costless, and weshould not allow this fact to be submerged in any general revenue fundingof the social security system.Similar pressures are building up with respect to medical care. Wehave become concerned, and rightly so, over sharp increases in the costof medical care which emphasize the need to improve the efficiency andeffectiveness in the delivery of health care services. These have arisen inpart because the large expansion in health insurance coverage under bothprivate and public programs has reduced the sensitivity of consumers tocosts and weakened the incentives to achieve efficiencies. Individuals,businesses, and unions, confronted with the higher costs of private healthinsurance have begun to exert curbs on the systems for delivering healthand medical service, and their influence should be salutary. I hope wewill not choose to fund these costs through a comprehensive nationalhealth insurance system, since this will only weaken the incentives forimprovement and efficiency that are now emerging.These are but two examples of the pressures which threaten to erodeour fiscal processes. We must recognize that making governmental expenditurepolicy the principal arm of demand management has undesirableconsequences. Expenditure programs once in place areextremely difficult to cut back. The result is a permanent rise in Federaloutlays and the risk of ever-increasing growth in the government relativeto the private sector. As the experience of other countries forcibly illustrates,this is a dangerous path. It weakens incentives, reduces efficiency,leads to lagging standards of living, and carries inevitable risks of inflation.It is much better to provide fiscal adjustments through tax reductionsthan through Federal spending programs.The solid improvement of this year means continued progress towarda better life for all Americans. Problems will always remain, but the futureis bright with opportunities to continue strengthening our economy.Improvement is part of the American way of life, but we must recognizethat few problems, when viewed realistically, lend themselves to quickand easy solution. Our policies must take into account the full costs and10

lasting implications of the changes we make today for whatever worthwhilereason. If they attack symptoms rather than causes, policies will beineffective and may even preclude the very goals which we seek. Enduringimprovement in the economic welfare of the American peoplerequires that the courses we embark on to meet today's problems willalso bring us closer to our more distant goals and aspirations.January 18, 197711

THE ANNUAL REPORTOF THECOUNCIL OF ECONOMIC ADVISERS13224-250 O - 77 - 2

THE PRESIDENT:LETTER OF TRANSMITTALCOUNCIL OF ECONOMIC ADVISERS,Washington, D.C., January 14,1977.SIR: The Council of Economic Advisers herewith submits its AnnualReport, January 1977, in accordance with Section 4(c) (2) of the EmploymentAct of 1946.Respectfully,ALAN GREENSPAN,Chairman.BURTON G.MALKIEL.15

CONTENTSPageCHAPTER 1. ECONOMIC POLICY AND OUTLOOK 23General Policy Principles 25Economic Policy for 1977 31Fiscal Policy 31Monetary Policy 33Energy Policy 35The Outlook 36Private Consumption 37Nonresidential Fixed Investment 37Housing Starts and Residential Investment 38Inventory Investment 38Net Exports 39Government Purchases 39Labor Force and Unemployment 41Inflation 41Productivity Growth and Resource Utilization 45The Productivity Slowdown, 1966-76 45The Full-Employment Unemployment Rate 48Growth in Potential Output 52Policy Implications 56CHAPTER 2. ECONOMIC REVIEW OF 1976 58Demand and Output 58Personal Consumption 59Business Fixed Investment 61Inventory Investment 62Housing and Residential Investment 62Government Purchases 63Net Exports 64Prices, Wages, and Profits 64Prices 64Wages 66Productivity and Unit Labor Costs 68Corporate Profitability 68Government Budgets and Fiscal Policy 69Federal Expenditures and the Shortfall 70Tax Legislation and Federal Receipts 74The Fiscal Balances 76The New Congressional Budget Process 7717

CHAPTER 2. ECONOMIC REVIEW OF 1976—ContinuedPageMonetary Policy and Financial Markets 78Growth of the Monetary Aggregates 78Federal Reserve Tolerance Ranges for Monetary Growth 80Interest Rates 81Other Financial Developments 82Employment, Unemployment, and Income Transfer Programs. 84Employment 84Unemployment 85Labor Force Participation 86Income Transfer Programs 87Energy Developments 90Consumption 90Production 91Imports 92Prices 93Agricultural Developments 94Commodity Markets and Food Prices 95Farm Income 96Farm and Food Policy 97CHAPTER 3. THE WORLD ECONOMY IN 1976 100The Demand Situation 101Demand and Output in Major Industrial Countries 102General Demand Trends 109Public Sector DeficitsIllThe External Sector 113Economic Outlook and Government Policies 118Stabilization Policy and Exchange Rate Policy 119Current Account Positions and Financing 124OECD Current Account Positions 124OPEC Surpluses 126Non-Oil LDC's 126Exchange Rate Changes 127International Financial Markets 128Official Financing 130Adequacy of Official Financial Resources 132North-South Economic Relations 133CHAPTER 4. POLICIES TO INCREASE SUPPLY 136Structural and Induced Unemployment 136Frictional and Cyclical Unemployment 137Induced Unemployment and Unemployment Compensation137Structural Unemployment 139Employment Tax Credit 144Summary 14518

CHAPTER 4. POLICIES TO INCREASE SUPPLY—ContinuedPageGovernment Regulation 146Regulated Price Above Market Price ....-* 148Regulated Price Below Market Price 151Regulations That Directly Affect Cost 153Implementing Regulatory Reform 156Summary 157Agricultural Policy 158The Movement to Market-Oriented Farm Programs 158The Threat to Market-Oriented Policies 159The Future of Market-Oriented Policies 160Tax Policies for Capital Formation 162Investment Tax Credit 163Tax Integration 166Policies To Stimulate Saving 168APPENDIXES :A. Report to the President on the Activities of the Council ofEconomic Advisers During 1976 171B. Statistical Tables Relating to Income, Employment, andProduction 181List of Tables and ChartsTables1. The Market Value and the Replacement Cost of Net Assetsof Nonfmancial Corporations, 1960-76 292. Projected Growth Rates of Monetary Aggregates, 1977 343. Calendar of Major Private Nonfarm Collective BargainingActivity, 1977 424. Civilian Unemployment Rates by Age, Sex, and Reason forUnemployment, 1973 495. Civilian Unemployment Rates for Selected Groups, 1956,1965, and 1973 506. Potential and Actual Gross National Product, 1952-76 547. Changes in Gross National Product in Constant (1972) Dollars,1975-76 598. Growth of Real Consumption Expenditures and Real DisposablePersonal Income, 1975-76 609. Changes in Plant and Equipment Expenditures, 1974-76 6110. Changes in Selected Price Measures, 1973-76 6511. Changes in Labor Costs and Productivity in the Private NonfarmBusiness Sector, 1974-76 6612. Changes in Major Collective Bargaining Settlements, 1974-76. . 6713. Output, Profits, Net Interest, and Profit Measures of NonfinancialCorporate Business, 1960-76 6919

List of Tables and Charts—ContinuedTables—ContinuedPage14. Comparison of Projected and Actual Federal Expenditures,National Income and Product Accounts, Fiscal Years1970-76 7015. Federal Government Receipts and Expenditures, NationalIncome and Product Accounts, Calendai Years 1975-76 7116. Federal Expenditure Shortfall, National Income and ProductAccounts, Calendar Year 1976 7217. Reconciliation of Estimates of Federal Expenditure Shortfall,Unified Budget and National Income and Product Accounts,Fiscal Year 1976 and Transition Quarter 7318. Actual and Full-Employment Federal and State and LocalGovernment Receipts and Expenditures, National Incomeand Product Accounts Basis, Calendar Years 1970-76 7619. Projected and Actual Growth Rates of Monetary Aggregates,1975-76 8120. Funds Raised in Credit Markets by Nonfinancial Sectors,1971-76 8321. Labor Market Indicators, 1974-76 8422. Income Transfer Programs, 1974-76 8823. Changes in Energy Consumption and Relevant EconomicIndicators by Final Consumption Sector, 1950-76 9124. Changes in Consumer Prices of Energy Items, 1966-76 9425. Real Income Per Farm and Per Capita Disposable PersonalFarm Income as Percent of Nonfarm Income, 1961-75. ... 9726. Personal or Household Saving Rates in Selected IndustrialCountries, 1965-76 10227. Changes in Industrial Production in Selected IndustrialCountries, 1975-76 10328. Private and Public Employment in Selected Industrial Countries,1960-75 11229. Export Shares in Trade in Manufactures of 11 IndustrialCountries, 1966-76 11530. Current Account Balances for OECD, OPEC, and OtherCountries, 1973-77 12431. Current Account Balances for OECD Countries, 1974-76 12532. Estimated Disposition of OPEC Investible Surplus, 1974-76.. . 12733. Borrowing in International Capital Markets, 1974-76 12934. Civilian Unemployment Rates Under Alternative Definitionsby Age and Sex, 1973 14035. Change in After-Tax Internal Rate of Return Under Present 10Percent Investment Tax Credit, All Businesses 16520

List of Tables and Charts—ContinuedChartsPage1. Relation of Real Business Fixed Investment to Real GNP 272. Ratio of Market Value of Nonfinancial Corporations to ReplacementCost of Net Assets 303. Productivity in the Private Business Economy 464. Gross National Product, Actual and Potential 555. Growth in Money Stock 796. Interest Rates 827. Exchange Rates for Selected Industrial Countries 1168. Interest Rates in Selected Industrial Countries 12021

CHAPTER 1Economic Policy and OutlookTHE U.S. ECONOMIC RECOVERY is now almost 2 years old. In1976 real gross national product (GNP) rose by 6.2 percent, and employmentincreased by almost 3 million persons. Although the pattern ofreal GNP growth during 1976 was more erratic than had been anticipated,showing rapid growth in the first quarter followed by more moderate gainsin subsequent quarters, the rise in real GNP for the year as a whole wasabout what had been projected a year ago. The growth of production andemployment for 1976 was accompanied by a further significant moderationof the inflation rate. The average annual rate of change in the GNPdeflator was 5 percent over the 4 quarters of 1976 compared with a 7 percentaverage in 1975.The unemployment rate declined by almost 1 percentage point from 1975to 1976, but it is still much too high and must be reduced further. The 3.2percent increase in employment in 1976 indicates that progress is being madein alleviating the economic and social hardships remaining from the recession.Owing to the combination of secular and cyclical increases in laborforce participation rates and in the growth of the working-age population,the labor force grew by 2.3 percent in 1976. This rapid growth of the laborforce means that jobs must be created at a fast pace in order to reducethe rate of unemployment.A continuation of rapid employment and real income gains will requirea strong growth in private investment demand in the years ahead. Littleextra impetus to the economic expansion will be forthcoming from inventoryinvestment and personal consumption, because inventories alreadyhave risen and saving rates have dropped closer to normal levels. Althoughbusiness fixed investment has begun to recover from the low levels of therecession, its growth has been slower than in past recoveries. Without asharper upturn in investment the expansionary momentum, already slowerin the second half of last year, cannot easily be maintained. Even if finalsales growth could be bolstered without a strong recovery of business fixedinvestment, the implied lesser growth of productive capital would not besufficient to provide new jobs at a faster rate in the future without a slowergrowth of productivity and real wages.In our 1976 Report we indicated that business fixed investment wouldhave to account for approximately 12 percent of GNP during the last half23

of the 1970s if the Nation is to achieve full employment by 1980, meet specifiedproductivity and environmental objectives, and attain greater independencein regard to energy. While it was not suggested that economic equilibriumcannot be attained under many other sets of conditions, the socialand economic strains of adjusting to a slower and less widely shared improvementin living standards seem likely to become severe if we continueto fall very far short of this ratio. Business fixed investment in 1976 was lessthan 10 percent of GNP, and even with the improvement anticipated thisyear the share is likely to remain below 10 percent in 1977. The momentumof the recovery must be maintained in the near term through measures whichfoster growing business confidence and which support stable economicgrowth and decelerating inflation. If not, a slow growth of capital formationmay create capacity limitations which could stall the expansion beforeacceptably low levels of unemployment are reached.To provide support for an economic expansion strong enough to effect asubstantial reduction in unemployment without at the same time jeopardizingthe progress achieved so far in containing inflation, the President hasrecommended a permanent reduction in personal and business taxes beginningthis year. The purpose of these measures is to further the growth ofdisposable income, which has been eroded in part by inflation-induced increasesin taxes, and to provide more incentives to investment spending. Thecontinuing diminution of inflation during the past year indicates that suchtax reductions to promote the growth of demand are consistent with thegoal of sustainable noninflationary growth—if they are accompanied bysteps to restrain the growth of Federal expenditures in future years. To helpconsolidate our progress in curbing inflation, the President has proposed abudget which provides for a slowing of the growth in Federal outlays in1978 and beyond. Unless surpluses can eventually be achieved in the Federalbudget at high levels of employment, it may be difficult to increase the shareof investment in GNP and maintain the growth of the Nation's productivecapacity.With the help of these policies the economic recovery is expected to continuein 1977. Real GNP is expected to be 5 to 5/ 2 percent higher than in1976, and its rate of growth should average between 5j/i and 6 percentduring the 4 quarters of 1977. Such growth will produce further gainsin employment. But unless labor force growth decelerates significantly fromthe current high rates, the decline in the unemployment rate is likely to bemodest. In any event, unemployment will still be unacceptably high duringthe year. If we are to eliminate the economic loss and hardship associatedwith idle resources, economic growth in 1978 and beyond must continueto proceed at a more rapid pace than the longer-run rate of growth of potentialoutput. We do not anticipate that these policies will lead to an increase inthe underlying rate of inflation. Indeed, if wage settlements continue tomoderate, further progress in reducing inflation could be possible in thisyear and in future years.24

GENERAL POLICY PRINCIPLESTo assure a sustained expansion, four general principles should guide theformulation of economic policies over the next several years. Economic stimulus,where needed, should be provided by tax reduction rather than by increasesin government spending. Tax reduction should be permanent ratherthan in the form of a temporary rebate. Policy initiatives should be balancedbetween measures directed toward consumption and those aimed at increasingbusiness fixed investment. Economic policy should aim for a steadyeconomic expansion in which the components of aggregate demand are inbalance.1. Stimulus should be provided by tax reduction rather than by increasesin government spending. Rising government purchases of goods and servicesfirst increase income and employment in the areas that produce the increasedoutput demanded by government. The visibility and strength ofthese first-round effects account for much of the political support for increasedspending. A number of serious difficulties arise, however, when governmentexpenditures are used as a tool of stabilization policy.Our experience has been that under existing institutional arrangementsthe startup time for many spending programs can be quite long; this isparticularly true of the large construction projects which are considered bymany to be useful instruments of countercyclical fiscal policy. The dangeris that the economic impact of new spending programs will not be felt whenit is most needed and will then outlast the need for stimulus. In addition,when restraint rather than continued stimulus becomes desirable, it may bepolitically difficult to cut these programs. As a result, a fiscal policy whichstimulates expansion primarily through increases in government purchasesmay risk overstimulating the expansion at a later stage. Another difficultyis that frictional inefficiencies arise from manipulating the level of governmentexpenditures for stabilization purposes. Each time a government programis changed, costs are incurred as the private sector is forced to adjustand reallocate the necessary resources. And in some cases the rules and regulationsassociated with the enactment of these programs may necessitatewidening government interference in the private sector.Similar dangers exist with income maintenance and support programs.These programs are essential to relieve the economic hardships associatedwith unemployment. But we must be careful that changes in programsdesigned to deal with cyclical contingencies do not end by permanentlyincreasing Federal payments, the number of beneficiaries, and the size ofthe individual benefits. Such a result would reduce the growth of resourcesavailable to the private sector; and the higher marginal tax rates eventuallyrequired to finance these expenditures may lower incentives to work andinvest, thereby hindering the growth of our aggregate supply capabilities andheightening inflationary pressures. An analysis of some special job creationprograms is provided in Chapter 4 of this Report.25

2. Tax reduction should be permanent rather than in the form of atemporary rebate. The primary objectives of tax reduction in the currentsituation should be to provide relief from the inflation-induced increases inreal tax burdens and to support a lasting economic expansion. Because consumersnormally adjust expenditures to their "permanent" or long-runincome, a lasting reduction in personal taxes which raises both current andfuture after-tax income should yield a sustained rise in consumer spending,as happened following the permanent tax reduction in 1964. Sustainedgrowth in consumer spending is required to promote a durable economicexpansion.On the other hand, any stimulative effect that a temporary tax rebatemay have on consumer spending will diminish quickly. For example, a substantialincrease in expenditures for durables did occur after the paymentof the 1975 rebate. Part of the effect of such a one-time windfall, however,may have been to shift some expenditures to the present that had beenplanned for a later time, with the result that spending would be correspondinglylower in subsequent periods. This phenomenon may be thereason for the very low rates of increase in purchases of consumer durablesin the last 3 quarters of 1976. Such fluctuations in the movements of demandcontribute to uncertainty about fiscal policy and damage the prospects forsteady growth. Thus temporary tax rebates are not consistent with theobjective of sustaining an economic expansion. While they may be useful inhelping to bring about a reversal of generally declining demands during arecession, they are not consistent with the maintenance of an expansion ofdemand that is already under way.Moreover transitory increases in consumer spending associated with temporarytax cuts are not likely to stimulate investment as much as more permanentincreases in demand would do. Business firms may realize that anexpansion in sales will not last if the increase is apparently due to a temporaryreduction in taxes and will have less incentive to expand capacity than if theyexpect a more sustained rise in sales. A permanent reduction in incometaxes has a more lasting impact on household consumption demand andconsequently on business firms' willingness to invest in productive capital.It is sometimes argued that tax cuts should be temporary in order to maintaina permanent revenue base for future spending programs. A strongand more certain growth in 1977 and beyond, however, is ultimately thekey to whether resources will become available to support these expenditures.Moreover taxes automatically increase faster than income over time becauseof the combined effects exerted by inflation, real growth, and ourgraduated tax rate structure. Unless permanent reductions are made fromtime to time, taxes will account for an ever larger share of taxable income.Thus there is little danger that a permanent tax reduction will destroythe revenue base for the Federal Government. Indeed, another fear maybe more realistic: if taxes are not reduced periodically we run the risk ofallowing the tax burden to rise over time and thus inhibit the growth ofdemand in the private sec cor.26

3. Economic initiatives should be balanced between measures to stimulateconsumption and those designed to increase business investment. We notedabove that investment must grow somewhat faster than GNP for someyears to achieve long-run goals of employment and income growth. It istherefore essential that economic policy create an environment which willencourage business investment. Clearly, investment spending will be stimulatedby substantial increases in final sales, which tend to reduce excesscapacity and increase expected profitability. A cut in personal income taxeswhich sustains real consumption growth will thus encourage investment.However, in the current economic environment we believe this consumption-inducedinvestment growth can usefully be augmented by direct stimulusto private investment. Consumption-oriented growth in demand willnot necessarily bring aggregate investment to the levels needed to offset theinadequate investment of the past few years. On the contrary, direct stimulusmay be necessary to counteract forces which have deterred investment.Chart 1 shows that business fixed investment currently accounts for arelatively low proportion of GNP, approximating the percentage of the early1960s. Even with substantial increases in business fixed investment nextyear this ratio will remain under 10 percent and far below the ratios webelieve are desirable. Furthermore the slow growth of labor productivity,analyzed later in this chapter, does not suggest that productive capital hasbecome relatively more abundant over the last decade. The policy responseto comparable problems in the early 1960s was to stimulate investmentdirectly with such measures as a reduction in corporate tax rates.Chart 1Relation of Real Business FixedInvestment to Real GNPPERCENT OF REAL GNP11.511.0 hI 1 T i l l I I 1 I1960 1962 1964 1966 1968 1970 1972 1974 1976SOURCE: DEPARTMENT OF COMMERCE.27

A number of factors may have prevented the restoration of business confidenceand hence restrained investment growth. Wage and price controlsare still a recent memory, and fears of a reacceleration of inflation have notbeen completely dispelled. Recollections of the severe 1974-75 recession mayalso restrain business confidence. Because fears of a renewed inflationrecessioncycle may encourage businesses to increase liquidity rather thaninvest in plant and equipment, confidence must be rebuilt before salesgrowth will be translated into higher capital outlays.Laws and regulations to provide necessary protection for the environmentalso create costs and uncertainties. Not only does the spread of regulationsraise production costs, but long-run cost and profit calculations are made lesscertain because of the possibility of future changes in regulations. For instance,if' a change in environmental laws may affect the operations of a newplant, then the risk associated with building this plant is correspondinglyincreased. The impact is more severe on longer-lived investments whichrequire longer commitments with less flexibility once they are made.It is of course very difficult to prove that a decline in business confidenceor an increase in risk premiums is responsible for the failure of investmentto rise as much as might have been expected during the current recovery.This difficulty results partly from our inability to directly measure the uncertaintyor accurately assess the expectational factors and the environmentwithin which long-term investment decisions are made. Most evidence forthe view that business confidence remains poor is qualitative and involvesa degree of casual empiricism. One quantitative indicator of the expectationsaffecting business investment is the market value of a corporation'sstocks and of net interest-bearing debt relative to the replacement cost ofits assets. If, for example, assets are valued in the market significantly abovetheir replacement cost, corporations will be encouraged to invest in newequipment and thereby create capital gains for the owners of their securities.On the other hand, if assets are valued below their replacement cost/corporations which sell new securities to buy new capital goods may becreating capital losses for their security holders. In the latter case we caninfer that the cost of capital has risen relative to the average profitabilityof past investment projects and that new investment will be discouraged.Of course, at the margin the expected rate of return on a significant numberof potential new investments will remain above the cost of capital, eventhough existing assets on average are valued below their replacement cost.Thus even if the market value of a firm fell below the replacement cost ofits assets this would not mean the end of investment incentives. It would beespecially inappropriate to draw such conclusions from estimated aggregatescomposed of heterogeneous corporations.Nevertheless it is probably safe to infer that the almost continuous declinein the ratio of the market value of nonfmancial corporations to the replacementcost of their assets during the last few years (Table 1 and Chart 2) is anindication that investment incentives are much lower currently than in the28

TABLE 1.—The market value and the replacement cost of net assets of nonfinancialcorporations, 1960-76YearTotalMarket valueInterestbearingdebt*Equity 2Replacement cost of net assetsTotalNet noninterestbearingfinancialassets 3Net stockof depreciablefixedassets andinventories3Ratio ofmarketvalue toreplacementcostof netassetsRatio ofrealbusinessfixedinvestmenttoreal GNPBillions of dollarsI960..1961..1962..1963..1964..435.6507.9503.9581.0656.6103.8114.8126.0136.7147.9331.8393.1378.0444.2508.7427.0442.9460.9482.2507.261.467.373.378.583.0365.6375.6387.6403.7424.20201470932052950.090.087.089.088.0931965..1966..1967..1968..1969..737.5712.9789.8893.0881.9162.9180.4200.0217.8243.1574.7532.4589.9675.3638.8541.7590.8649.9711.0782.987.291.8100.7109.3117.0454.5499.0549.2601.7665.9361207215256126.103.108.103.103.1061970..1971..1972..1973..1974..787.1934.2093.1166.1106.5267.7296.8330.3386.1428.2519.4637.4762.8780.0678.3858.1925.31,002.51,126.41,319.8126.4135.9149.6166.3181.8731.7789.4852.9960.11,138.0917010090034.838.102.098.100.106.1061975...1976«_.,113.1, 326.2439.4470.0673.8856.21, 494.51,601.4198.3212.31, 296.21,389.1.745.828.093.091i Market value of net interest-bearing debt of nonfinancial corporations (NFCs) adjusted from face value by assuminga maturity of 5 years and discounting a stream of coupon payments equal to the net interest paid by NFCs. The discountrate is assumed to equal Moody's Baa corporate bond yield.* Dividends of NFCs divided by the dividend/price ratio of Standard & Poor's composite index of 500 common stocks.3 Average of year-end values.* Preliminary.Note.—Detail may not add to totals because of rounding.Source: Council of Economic Advisers (based on data from various sources).second half of the 1960s. Even allowing for the possibility that the highvalues of the ratio in the 1960s reflected some temporary overconfidence inthe evaluation of future returns, the significant downward trend is an indicatorthat a lack of confidence may be a factor holding back long-terminvestment commitments now. One inference from this evidence is that adirect stimulus to investment, such as a corporate tax reduction wouldprovide, could hasten the restoration of business confidence and be useful tosupplement the normal accelerator mechanism. Another is that measureswhich would help reduce the risks of substantial changes in the regulatoryclimate over the normal life of fixed assets would also raise investment.Such measures would help to offset the uncertainties which are still restraininginvestment and would make up for the slow growth of productivecapital in the past few years.4. Policy should aim at a steady expansion with balance among the componentsof aggregate demand. An important policy decision in the yearsahead concerns the appropriate amount of fiscal and monetary stimulus tosustain the recovery. In the effort to achieve continued progress towardfull employment we must not create inherently unstable and ultimately29224-250 O - 77 - 3

Chart 2Ratio of Market Value of NonfinancialCorporations to Replacement Cost ofNet Assets1960 1962 1964 1966 1968 1970 1972 1974 1976SOURCE: COUNCIL OF ECONOMIC ADVISERS (BASED ON DATA FROM VARIOUS SOURCES).counterproductive conditions along the way. With a high inflation rate andmany uncertainties still remaining to hamper the economy, stimulus whichaims for a balanced composition of demand and a steady pace will providethe safest and surest path of advance. A steady recovery allows aggregate productionto expand gradually toward full capacity, thereby avoiding suchimbalances as overaccumulation of inventories, shortages of strategic commodities,or insufficient accumulation of fixed capital. Moreover, if unexpectedshortages or demand deficiencies begin to arise, policy can reactbefore either inflationary or deflationary pressures become too severe. In thisway the possibility of renewed instabilities is minimized. In turn the improvedoutlook should help restore confidence, encourage investment, and assurethat increases in demand raise employment rather than inflation rates.Evidence showing the impact of inflation and expectations of inflationon business decisions is very limited. Nevertheless an overly rapid expansioncould generate a rise in inflationary expectations which might restraincapital accumulation and threaten to cut off the expansion before fullemployment is reached. In the short run, increases in inflation may appearto stimulate investment because of delays in the upward adjustment ofmarket interest rates and the estimates of the risk associated with inflation.However, high rates of inflation may be associated with high variabilityin individual prices. If this is so, the expected variance of future returns30

on investment would increase with inflation, thereby adding a risk premiumto the rate of return required to undertake new investment projects. Thusthe cost-price uncertainties which could be associated with high inflationbecause of larger, more frequent, and less predictable changes in relativeprices may eventually discourage business spending. In the long run theeffect of inflation may be negative as market interest rates adjust to offsetthe inflation stimulus and only the negative effect of greater uncertaintyremains.Another factor which will call for moderation at a later stage if theexpansion is to be sustainable is the current uncertainty about the level ofpotential output in the U.S. economy and the likelihood that the potentialhas been growing at a lower rate in the 1970s than during most of the 1960s.There is also some uncertainty about the unemployment rate that shouldbe used to represent a constant degree of tightness in the labor market atfull employment either now or in the future. These uncertainties suggestthe wisdom of proceeding with a greater degree of caution in our returnto full employment than was previously thought necessary. (These and otherfactors that bear on long-run economic growth are discussed more fullylater in this chapter.International considerations provide a further reason for maintaining asteady recovery. If a too rapid expansion at home is accompanied by rapidexpansions followed by bottlenecks in other major industrial countries,inflationary forces can be intensified by worldwide excess demand forstrategic commodities. On the other hand, in a situation where the world'seconomic development is lagging, it is important that U.S. growth shouldnot be so slow as to contribute to sluggishness in world trade. This wouldreinforce rather than alleviate demand deficiencies and increase the risk ofanother recession.FISCAL POLICYECONOMIC POLICY FOR 1977With these general principles in mind, the President has proposed apermanent tax cut for individuals and corporations which will reduce taxliabilities by about $12.5 billion in calendar 1977. The largest part ofthe tax cut, $10 billion, would go to individuals in the form of higher personalexemptions, an increase in the low-income allowance, and lower taxrates. The rest would go to corporations in the form of a 2 percentage pointreduction in the corporate income tax rate. Federal expenditures on anational income and product accounts (NIPA) basis are expected to be$429 billion in 1977. This will yield an actual deficit of $57 billionfor the year and a decline in the full-employment surplus of $13 billionin 1977. As private sector spending continues to expand, it is expectedthat the Federal deficit will gradually diminish to make room for the necessaryprivate savings flows to finance new capital formation.31

The proposed $10-billion permanent reduction in personal income taxeswould be implemented by an increase in the individual exemption from $750to $1,000, an increase in the low-income allowance to $1,800 for single personsand $2,500 for joint returns, and a reduction in rates in the lower- andmiddle-income brackets. Furthermore, the temporary tax credits first enactedin 1975 would be repealed. These changes would offset the increase in thereal tax burden of middle-income families resulting from the high inflationrates of recent years. The reduction in personal taxes would lead to a permanentincrease in after-tax income and a more confident outlook in the householdsector, both of which should significantly boost consumer spending inthe year ahead. By creating stronger markets and raising the rate of capacityutilization, the personal tax cut would also indirectly stimulate additionalinvestment.The proposed reduction in the corporate income tax rate from 48 percentto 46 percent would reduce corporate tax liabilities by about $2.5 billion in1977. It would thus improve the net return on all capital assets and enlargethe flow of internal funds to finance new projects. The supply of savings hasbeen adequate since the recovery began in 1975; but as the expansion proceedsand pressure on capacity builds, the increased cash flow would be animportant source of finance for new investment. The tax cut would alsohave a beneficial effect on expectations in the business community, possiblyyielding further gains in investment spending. The President is also renewingseveral previous recommendations to improve business profitability: a programof accelerated depreciation for newly installed plant and equipment inareas of high unemployment; the partial integration of corporate and personalincome taxes over a period of years, beginning in 1978, to offset thedouble tax on corporate earnings; and permanent extensions of the 10 percentinvestment tax credit, the 20 percent tax on the first $25,000 of corporateincome, and the $50,000 corporate surtax exemption.As noted in the 1963 Economic Report of the President, at a time whenthere was a similar concern that stagnating investment could damage theprospects for long-term growth:... it is essential to our employment and growth objectives . . . thatwe stimulate more rapid expansion and modernization of America'sproductive facilities. . . . Investment in private plant and equipmentis a principal source of long-term gains in productivity. ... A high rateof investment is needed to equip our growing labor force with better andmore modern equipment. . . . The investment needed to gain ourgrowth objectives will be achieved only if we eliminate economicslack—only if we strengthen demand and broaden incentives to takerisks.The tax program outlined in this Report is designed to achieve these sameobjectives in 1977 and beyond. If business confidence does not improve andif investment does not begin to grow rapidly, additional stimulative measuresfor investment should be considered in the future.32

MONETARY POLICYThe Federal Reserve Board has projected growth ranges for the threemajor money supply measures through the third quarter of 1977. Barringunforeseen changes in financial conditions, monetary growth within theseranges should be sufficient to finance continued economic expansion withoutrisking a resurgence of inflation. However, the unusual uncertainties whichhave recently clouded the relationship between monetary growth—especiallyMi growth—and nominal GNP will require special caution and adaptabilityin setting, and revising if necessary, the growth ranges in the nearfuture.The specific ranges which have been set for the year ending in the thirdquarter of 1977 are 4/ 2 to 6/ 2 percent for Mi, 7]/ 2 to 10 percent for M 2 ,and 9 to 11 l /i percent for M 3 . The projected ranges for Mi reflect a projectedstructural shift in the growth of demand for this aggregate. The FederalReserve has estimated that a number of regulatory and technologicalchanges encouraging the use of alternatives to demand deposits for transactionswill reduce the demand for Mi in 1977. Quantitatively the mostsignificant of these changes appear to be regulations permitting the use ofsavings deposits by businesses and State and local governments, the growinguse of negotiable orders of withdrawal (NOW) savings accounts, which canprovide the equivalent of checking services, and the use of telephonic transfersof funds from savings to checking accounts.To the extent that these developments will continue to reduce the growthof demand for Mi in 1977 the announced ranges for M x growth are consistentwith a monetary policy that will encourage a stable economic recovery.If the effects of these changes are forecast correctly, then a sustained growthof Mi beyond the new upper boundary would be more than is needed tofinance the recovery, and hence it might overstimulate the economy andcarry a risk of renewed inflation. However, if these structural changes ceaseto have this expected negative effect on M x demand, then a reconsiderationof the ranges would be necessary to ensure that the growth in Mi is consistentwith a continuation of the recovery. In interpreting the impact ofthese structural changes it is important to recognize that a further slowdownin the economic recovery could be a direct cause of slower M x growth. If so,it would be inappropriate to adjust the growth range downward. A sustainedrather than a reduced Mi growth would be an important stabilizinginfluence, offsetting the weakness in aggregate demand. Because the currentforecast of the structural change in Mi demand is necessarily imprecise,financial developments must be closely monitored to determine the underlyingcauses of observed monetary growth trends.This is not to say that the current uncertainties in the demand for Misuggest an abandonment of monetary growth ranges in favor of marketinterest rates or other money market indicators. The ranges directly act todampen inflationary expectations by indicating a commitment to a monetarypolicy consistent with long-run price stability. Moreover interest rates33

alone cannot serve as a guide to monetary policy, especially during periodsof high and variable inflation rates. A monetary policy which attemptsto hold market interest rates steady for too long would be destabilizing. Inthe face of an unanticipated and excessive economic boom, such a policywould result in a rapid monetary expansion which would reinforce theboom and prevent the moderating effect of a rise in interest rates. On theother hand, if an unnoticed fall in inflationary expectations developed, apolicy which stabilizes market interest rates would effectively raise real ratesand be contractionary. Properly interpreted, however, interest rates as wellas other economic variables, such as business investment, should be usefulin projecting and revising the monetary growth ranges. Because a stronggrowth in the capital stock is crucial both for the near-term economic expansionand for the long-run sustainability of income growth, policy mustbe flexible enough to minimize the risk of not providing sufficient creditfor long-term productive investment.The upper boundary for M 2 and M 3 growth has been increased by onehalfof 1 percentage point since the previous Federal Reserve growth projection(Table 2), and this may provide some additional flexibility. One ofTABLE 2.—Projected growth rates of monetary aggregates, 1977PeriodMiM 21977:1IIIll4^-74^-77^-1073^-10M 39-129-11Range of percent change from a year earlier*:1 Range of percent changes in Mi, M2, and M3 forecast by Federal Reserve for the period.Note.—Mi is currency plus demand deposits; M2 is Mi plus time deposits at commercial banks other thanlarge negotiable certificates of deposit; and M3 is M2 plus deposits at nonbank thrift innstitutions.Source: Board of Governors of the Federal Reserve System.the serious problems facing the monetary authorities is the choice of anappropriate measure of the money supply. Theoretical or empirical evidencedoes not indicate the clear superiority of any one of the measures, and attimes they give conflicting indications. Throughout much of 1976, Migrowth was near the lower boundary of its range and M 2 growth near theupper boundary. Until there is a reversal of these diverse patterns, the increasein the upper boundary for M 2 may permit a slightly faster growthof both aggregates if this is necessary to finance the recovery.Our forecast for nominal GNP growth for the year ending in the thirdquarter of 1977 is about 11 percent. Along with these projected monetarygrowth ranges it implies that the velocity of Mi—the ratio of GNP to Mi—will increase by 4 l / 2 to 6^/2 percent. For the 4 quarters of 1976, M x velocitygrowth was 4.5 percent. Thus even if M a grows near the upper boundary ofits range, velocity growth in 1977 will be about the same as in 1976. Somereduction in velocity growth normally occurs in the advanced stages ofeconomic recoveries, especially during periods of slower economic growth34

like the latter part of 1976. The 4/ 2 percent velocity growth of Mi isunusually large and presupposes a continued structural shift in M x demand.The projections also imply that the velocity of M 2 will increase by 1 to 3/2percent over the year ending in the third quarter of 1977. This compareswith a decline in M 2 velocity over the 4 quarters of 1976. Given our GNPforecasts, velocity gains closer to the larger of the above estimates—6j/s> and3/2 percent for Mi and M 2 velocity respectively—would be unusual underany circumstances, and could generate a substantial increase in interest rates,unless the shift in money demand is even larger than last year.For the longer run, fiscal policy will have to absorb proportionatelymore of the burden of restraint than monetary policy, if we are to meetour capital growth needs. In 1975 the Federal deficit absorbed 40 percentof the net funds raised in U.S. credit markets, and although the proportionwas reduced to 30 percent in the first 3 quarters of 1976 it is not expected tobe reduced further in 1977. This has not yet constrained private financebecause overall credit needs have been low. As the borrowing requirementsfor private investment grow in the years ahead, however, fiscal stimulus willhave to be lessened in order to release funds to meet these needs. SmallerFederal deficits, and eventually surpluses, will permit a less restrictivemonetary policy with easier conditions in the credit market. In the yearsahead aggregate demand management must rely less on consumptionorientedfiscal policy for stimulus, in order that monetary policy, whichgenerally has a disproportionate effect on investment, is not forced to takeall the burden of restraining inflationary forces.ENERGY POLICYAssurance of sufficient supplies of energy resources will be required tosustain a steady economic expansion. To promote this end the President hasrecommended an energy program which stresses expanded domestic energyproduction and increased utilization of our most abundant resources, particularlycoal. The key feature of this program is the phased elimination ofcontrols on prices of natural gas and oil. While such a change would entailhigher prices for these products in the near term, it would help to ensurethat the U.S. economy is less vulnerable to sudden changes in the availabilityand cost of imported resources in coming years. Moreover the most efficientproduction and allocation of the economy's resources, which would beencouraged by decontrol, would increase our aggregate supply capabilitiesand reduce inflationary pressures in the longer run.Higher prices for oil and natural gas in the short run would reduce therelative share of imported oil and gas in total energy consumption. Thehigher prices would also tend to shift fuel use away from oil and natural gasin favor of coal, and this would further moderate the economic impact ofprice increases by the Organization of Petroleum Exporting Countries(OPEC). The phased elimination of price controls on natural gas wouldhelp remove the risk that a period of severe cold weather could disrupt the35

economic recovery by forcing a random, unscheduled closing of factoriesowing to curtailment of supplies. Such forced closing did not cause significantdisruptions in 1974 and 1975, when there was excess capacity; but as utilizationrates increase during the next 2 years the risk of shortages in manufacturingcapacity could become more serious with resulting inflationarypressures.The President has also proposed measures to encourage the use of nuclearpower. If they succeed, they will further reduce our dependence on importedoil and natural gas. Increased funds for general energy development havealso been proposed. While these may contribute little in the near future, inthe longer run the benefits to our energy supply capabilities could besubstantial.These actions would ease and hasten the adjustment of the economy to thenew energy situation, and they would help to ensure more stable and reliableenergy supplies for the future. The OPEC pricing decisions of Decemberwere a forceful reminder of the Nation's growing need for protection againstforeign moves that affect the price and availability of imported oil. Theproposed measures mean somewhat larger increases in domestic energyprices in the near term, and they would combine with the upward adjustmentsof U.S. petroleum prices under the Energy Policy and ConservationAct and the long overdue upward adjustments in natural gas prices underthe Federal Power Commission (FPG) decisions of 1976. Taken together,however, these energy price increases would not be great enough to exert asignificant restraining influence upon the expansion.THE OUTLOOKThe main elements of continued economic growth in the United Statesare well established, despite the slowdown which occurred in the secondhalf of 1976. With the assistance of the monetary and fiscal policies discussedabove, and with continued strength in the private sector, real GNP is expectedto rise by 5 to 5^2 percent from 1976 to 1977, and its annual growthrate is expected to average between 5J/2 and 6 percent over the 4 quarters of1977. This will permit a further expansion of employment and bring therate of unemployment down to nearly 7 percent by year's end. At the sametime, because the recovery over the past 2 years has avoided the excessesin public and private demand which characterized the previous upturn, therate of inflation is not expected to rise above the 5 to 6 percent range.With a much smaller expected rise in inventory investment compared toearlier stages of this recovery, the expansion in 1977 will require a stronggrowth in final demand. The expected recovery of business fixed investmentwill be an essential component of this demand. The proposed reduction inpersonal income taxes, which will stimulate a higher rate of real consumptiongrowth, as well as the reduced corporate tax rate will help to encourage suchan investment recovery. A continued strengthening of residential investmentis also expected to boost the rate of growth in final sales in 1977.36

PRIVATE CONSUMPTIONThe growth of real disposable income slowed in the latter half of 1976but is expected to reaccelerate in 1977 as a result of strong employmentgrowth, the reduction in personal taxes, and moderate increases in consumerprices. Because of the slower growth in real disposable income in the latterhalf of 1976, the saving rate had fallen to 6 percent in the last quarter. Thisrate should rise in early 1977 with the start of the personal tax reductions,but for the year as a whole the saving rate is not expected to be appreciablydifferent from the 1976 average of 6% percent. Real consumption growthfor 1977 should therefore approximate the 4 to 5 percent rate expected forreal disposable income.The growth in consumer spending in 1977 is expected to be most pronouncedin the durable goods categories. The combination of a returnto strong and steady real income gains and lower layoff rates should continueto restore the confidence which is essential for accelerated growthin real expenditures on durable goods. The year-over-year growth in realpurchases of motor vehicles and parts is expected to be about 7-8 percent.This figure is down substantially from the 23 percent growth in 1^76 butstill represents an important contribution to a continued economic expansion.Another major factor bolstering spending will be the strong growth inhousing completions in 1977, which should stimulate furniture and appliancesales.NONRESIDENTIAL FIXED INVESTMENTThe growth of nonresidential fixed investment in 1976, especially in thelatter part of the year, was low for this stage of recovery, and by the end ofthe year the real level was still well below the 1973-74 peak. With theexpected increase in sales growth, and with the reduction in the corporatetax rate which will begin to affect investment later this year, real businessfixed investment is expected to increase by approximately 9 percentin 1977. The projected rate of investment will provide sufficient capacityfor the year ahead, but the share of investment in GNP will almost certainlyremain below the average of the late 1960s.Recent surveys of investment anticipation have indicated that currentdollar expenditures in business fixed investment should increase by 11 to 13percent in 1977. Surveys often underestimate actual new investment in periodsof expansion, however, and the recent surveys may not have takenfull account of the effects of the proposed cut in taxes in 1977. An increaseof about 15 percent therefore seems quite possible.Investment growth in 1977 is likely to be strongest in durable manufacturing,particularly in the automobile sector. Plant and equipment modificationsfor producing lighter small and intermediate-sized cars as well as forgeneral modernization appear to be the underlying factors here. Othersectors where new investment should grow rapidly are nonelectrical37

machinery and ferrous and nonferrous metals. Investment growth in nondurablemanufacturing, except for petroleum refining, and in the commercialsector is expected to be comparatively weak. The sluggishness in theconstruction of commercial and office buildings should persist through 1977owing to overbuilding earlier in the decade.HOUSING STARTS AND RESIDENTIAL INVESTMENTThe housing recovery, which accelerated in the third and fourth quartersof last year, should continue in 1977 and be an important factor in the growthof final demand. Total housing starts are expected to average between 1.7and 1.8 million units this year with approximately 1.3 million single-unitstarts. Since this represents a significant increase over last year, and becauselast year's increase was concentrated in the second half of the year, real investmentin residential construction is expected to rise by 15 percent in 1977.The major sources of strength for housing in 1977 will be continued growthof real disposable income, continued strong flows of funds for mortgagecredit, slightly lower mortgage rates, and some stimulus from programs ofthe U.S. Department of Housing and Urban Development (HUD).An important influence on residential construction is the availability andcost of long-term funds for mortgages. Short-term interest rates have declinedduring the recovery and savings flows to thrift institutions are likelyto remain strong, making funds for mortgages readily available. Moreoverthe decline in secondary-market mortgage rates in the latter half of 1976has begun to bring primary-market mortgage rates down slightly.Until the latter half of 1976 the recovery in multifamily housing hadbeen relatively weak. Overbuilding in 1972 and 1973 and continued lowprofitability on rental housing had evidently been restraining the constructionof multiple-dwelling units. Vacancy rates for rental housing havefinally dropped, however, and are now below the 6 percent average of 1975.These factors, coupled with the HUD Section 8 lower income housingassistance program and the $5 billion in Government National MortgageAssociation (GNMA) loan commitments during 1976, should support therecent recovery in the multifamily sector.INVENTORY INVESTMENTThe dramatic $21-billion shift from real inventory liquidation in 1975 topositive accumulation in 1976 was a major reason for the high rate of GNPgrowth last year. This year we expect continued growth in inventory investmentas demand advances, but the growth will be slower than last year. Inreal terms, inventory investment should increase only by about $2 to $4 billionfrom 1976 to 1977. In view of some apparently undesired inventory builduplast year, as well as uncertainty about the outlook for 1977, businesses canbe expected to proceed cautiously in building new stocks.38

NET EXPORTSIn real terms net exports of goods and services are expected to be slightlylower in 1977 than in 1976. While the change in real net exports is likely tobe small, the composition of the growth in merchandise exports is expectedto be very different from that in 1976.During 1977, growth in merchandise exports is expected to be concentratedin the industrial and capital goods categories, with agriculturalexports slightly below their 1976 level. This change in the composition ofexports contrasts with that of last year, when rising agricultural exportswere an important factor. Because exports of industrial and capital goodshave a larger effect on employment than agricultural exports do, the overalleconomic effects of this shift could be substantial.Developments on the import side are likely to be dominated by oil imports.Because of a large oil inventory buildup late in 1976 in anticipation of aprice rise, imports early in 1977 are expected to be relatively low. By midyearthey should return to normal levels but should begin to decline again inthe fourth quarter when we project Alaskan oil to become available. Thevolume of nonfuel imports is expected to rise fairly smoothly and graduallythroughout the year.GOVERNMENT PURCHASESGovernment purchases are expected to increase rapidly in 1977 followinga year of sluggish growth. Total government purchases of goods and servicesare projected to rise by about 3/2 percent in real terms, with Federalspending growing somewhat faster and State and local purchases somewhatslower than the overall rate. In current dollar terms the President's budgetprojects that Federal purchases will rise approximately 12 percent in calendar1977.At the State and local level the overall fiscal outlook for 1977 is significantlybetter than it has been for the last 2 or 3 years. State and local taxreceipts should increase in line with nominal income by some 11 percent.Federal grants-in-aid—which now account for nearly 25 percent of State andlocal receipts—are also expected to grow substantially from 1976 to 1977.A significant portion of the increase will be for public service jobs, acceleratedpublic works, and other antirecession assistance. In addition, generalrevenue sharing has been extended for 4 years at about a $7-billion annualrate. Thus total State and local government receipts should rise by about 11percent. Allowing for a temporary increase in surpluses in their operatingaccounts (which exclude receipts and expenditures from social insurancefunds) an 8 to 9 percent rate of growth in current dollar purchases in1977 appears likely. If the inflation rate averages about 6 percent, thereal growth would be between 2 and 3 percent. Indeed, in view of theunusually small increase in expenditures in 1976, one could reasonably39

argue that some extra catching up may take place this year, with realgrowth reaching the 3 to 4 percent range. On the other hand, the conservativespending behavior from 1976 may carry over into 1977, in which casereal growth could fall below 2 percent.Looking beyond 1977, the impetus for continued rapid expansion of Stateand local purchases is diminishing for several reasons. The growth in theschool-age population has slowed notably, thus reducing the need to buildnew schools and hire more teachers. Moreover salaries of State and localworkers have now caught up with those in the private sector. Wages andsalaries account for more than half of total State and local purchases,and a major reason for the rapid growth of this sector in recent years wasthe drive for salary comparability. Now that parity has been achieved, it isunlikely that the rise in State and local government wage rates will divergesignificantly from the economy-wide trend in wages. Finally, there appearsto be strong sentiment among voters to curb the expansion of State andlocal spending.These considerations point to more modest growth in State and localreal expenditures in the years ahead; and, if inflation rates do not increase,nominal expenditures should grow at a rate less than the 12 percent averagebetween 1965 and 1975. With sustained revenue growth, States and localities,taken as a whole, are therefore expected to accumulate rising surpluses.It is quite possible that those governments with positive operating surpluseswill want to maintain them during the expansion to avoid the possibility offurther tax increases or expenditure cuts during periods of weaker economicgrowth. But in the long run there is little reason for these surpluses to risestrongly, and opportunities may exist in certain jurisdictions to lower taxes.The one cautionary note to add to this optimistic longer-term outlookconcerns the funding of State and local retirement plans. These plans havebecome an important part of the total compensation package of State andlocal employees, and benefits are now paid to over 1.7 million individuals.Benefits have also become exceptionally large in recent years because theyare not subject to a current budget constraint or debt limitation. MostState and local pension funds are not fully funded, which means that theassets held by the funds are not sufficient to cover the present value of allpromised benefits. Consequently there is growing concern that some of thesefunds—particularly in large cities with a deteriorating economic base—will eventually become insolvent as current contributions fail to keep upwith benefits. This has already led to legal action by current and prospectivebeneficiaries asking that States and localities fund their retirement plans ona more current basis. At least one of these suits (in Philadelphia) has beenupheld and an additional contribution has been ordered. To the extentthat there is a general move toward current funding, State and local expenditureswill have to rise, as will the taxes to finance them. These will bebudgetary increases that do not result in a higher level of current services.40

LABOR FORGE AND UNEMPLOYMENTIt is expected that the civilian labor force will grow at about 2.5 percentin 1977 compared with the 2.3 percent average annual rate of growth forthe last decade. The upward trend in the rate of labor force participation bywomen should continue and the proportion of young persons in the workingagepopulation should increase. The trend toward earlier retirement, however,is also expected to continue. With real GNP expected to grow by 5 to5J/2 percent in 1977, a decline in the average unemployment rate for theyear of a little more than one-half a percentage point would be considerednormal. If labor force growth is somewhat higher, however, a slightly smallerdecline is possible. By the end of the year the unemployment rate is expectedto be near 7 percent.INFLATIONThe inflation outlook in 1977 should be heavily influenced by the behaviorof production costs, since the economy is still some distance from the pointwhere aggregate demand would begin exerting generalized pressure oncapacity. Given the cost increases expected in 1977 and the projected growthin demand, the rate of inflation is expected to remain in the 5 to 6 percentrange. To the extent that the nonrecurrent changes in food and energy pricesduring 1976 brought measured inflation rates below the underlying rates, theforecast for 1977 represents a moderate slowing of the rate of inflation. Tosome degree this slowing is a reflection of the excess supply which still existsin many sectors of the economy.Compensation per hour is expected to increase by about l l /i percent,slightly below the 8 percent increase in 1976. However, productivityincreases are expected to be smaller than in 1976. In the very short run,productivity shifts are reflected primarily in profit changes. In the longerrun, however, income shares tend to remain relatively constant. With mostof the cyclical gains in labor productivity probably already realized, theproductivity growth rate is expected to be in the 2/2 to 3 percent range thisyear. As a result, unit labor costs in the private sector should rise by about5 percent. Additional improvement in the inflation rate will probably requirea further slowdown in nominal compensation growth. The price of food—often an erratic component of the total inflation picture—is expected toincrease only modestly in 1977 because of adequate supplies of most farmproducts. The rate of increase in energy prices will continue to convergetoward the overall inflation rate in 1977.1. Wages. The decline in the rate of inflation since late 1974 has had amoderating effect on the rate of increase in nominal wage demands. Thissource of moderation is fragile, however, since fears of a renewed inflationaryspiral and of wage and price guidelines or controls could generate anticipatorywage increases. But assuming that inflationary expectations do notincrease and that the overall rate of inflation is about 5/ 2 percent, the rate of41

increase in nominal wages in 1977 should be about 7 percent. The translationof wage rate increases into compensation per hour depends on interindustryshifts in employment, changes in the relative proportion of wageto salary workers, increases in private fringe benefits, and increases in publiclymandated supplements to wages. As noted above, it is estimated thattotal compensation per hour of work in the private sector will rise about 7^2percent in 1977.Although nearly one-fourth of all civilian workers are members of laborunions, only about 10 million, or 11 percent of total employees, are undermajor contracts covering 1,000 or more workers. Some believe, however, thatwage settlements in these sectors have a disproportionate impact on overallwage developments because of a demonstration effect. Consequently, inforecasting wages it is useful to examine the collective bargaining schedulefor the year ahead.The major collective bargaining contracts that expire this year or aresubject to wage renegotiation cover nearly 5 million workers (Table 3). Thisyear will be the second consecutive year of heavy collective bargaining in the3-year cycle. The average duration of contracts expiring in 1977 is 33 months.Thus most of these contracts were negotiated in 1974 or later, after the endof the Economic Stabilization Program and during a period of high inflation.The latter led to an expansion of coverage under cost-of-living adjustments(COLA) and high first-year wage increases. Hence some of the factors thatTABLE 3.—Calendar of major private nonfarm collective bargaining activity, 1977ContractexpirationsScheduled wagereopeningsPeriodPrincipal industryNumberWorkerscovered(thousands)NumberWorkerscovered(thousands)All years.2,2539,9842611977: Total.1,0334,721172January..FebruaryMarchApril....May..JunePetroleum refiningFood storesConstruction, food storesConstructionApparel, construction, lumber..Construction, utilities..633789145138143150116297333509529924222252JulyAugustSeptember.OctoberNovember..December..Construction, miningCommunications, steelMaritime, food storesTransportation equipment,do.Railroads, mining..61133707124591591,38120426068716124202241978 and beyondYear unknown or in negotiation l .8843363, 5601,703891 Bargaining units for which necessary information was not available include 212 agreements which expired prior toOctober 1976 (when these data were tabulated) covering 1,311,400 workers and 124 contracts which expired betweenOctober 1 and December 31,1976, covering 391,300 workers.Note.—Major agreements are those covering 1,000 or more workers.Detail may not add to totals because of rounding.Source: Department of Labor, Bureau of Labor Statistics.42

led to large first-year catchup increases in 1976 (for example the absenceof the COLA provision or a limit to it, as in the United Rubber Workersand Teamsters contracts) will be less significant in 1977. For example, twothirdsof the w r orkers covered by contracts expiring in 1977 are alreadyunder cost-of-living adjustments and thus have been well protected fromthe effects of inflation in the past 3 years. The only major contract expiringin 1977 in which there has been a cap on the COLA is in the railroadindustry.The effective wage rate change that is likely to occur in 1977for all persons covered by major collective bargaining agreements maybe projected on the basis of current contract information. Wageschange because of scheduled or deferred increases written into previous contracts,automatic cost-of-living adjustments, and first-year or currentlynegotiated wage increases. A tabulation of deferred wage increases, excludingCOLA, scheduled for the 5 million workers in the second and third years oftheir contracts shows an average increase of 5/2 percent for 1977, comparedwith 6 percent for such agreements in 1976. This implies a contribution of2/2 to 3 percentage points to the expected wage rate increase in 1977 for allworkers covered by major collective bargaining agreements. Cost-of-living adjustmentsare expected to add another 1 percent, while first-year settlementsare likely to be in the neighborhood of 8 percent. The effective wagerate increase in 1977 for workers covered by major collective bargainingagreements is thus expected to be about l l /i percent. Increases of thismagnitude are consistent with our projected overall growth in compensation.2. Food prices. Food prices are not expected to be a source of inflationarypressure in 1977. Though errors in forecasting food prices are large, onemay expect the consumer price of food relative to nonfood items to fall asit did in 1976. Commodity futures prices on organized exchanges are consistentwith a food component of the consumer price index (CPI) about 3percent higher in 1977 than a year earlier, about the same increase as in1976. This projection is roughly in line with forecasts by the U.S. Departmentof Agriculture. While futures prices are often inaccurate predictors, theydo incorporate all the currently available information and therefore providea useful point of reference for next year's outlook for wholesale food prices.There are important uncertainties in the outlook for food prices. Meatprices were primarily responsible for the stability of consumer food prices in1976. However, the supply conditions that led to lower meat prices lastyear are unlikely to persist throughout 1977, particularly for beef. Exactlywhen and how much prices for all meats will be affected is not yet clear forseveral reasons. First, it is uncertain how long farmers will go on reducingcattle inventories. Marketing of breeding stock could continue to sustaintotal beef production. Second, continued large supplies of pork and poultrywill dampen upward pressure on the overall price of meat. Ample pork andpoultry production seems assured through the first half of 1977, althoughlow prices could cause this supply to taper off later in the year. Third, the43

marketing margin—costs added to meat prices between the farm and retailmarkets—is difficult to forecast for 1977. It rose sharply in 1976, especiallyfor pork, as larger supplies increased the demand for marketing services. Ifsupplies begin to slacken, the reduced demand for marketing services couldsubstantially lower the rate of increase in these margins. Thus, while cattleprices above the 1976 average are expected in 1977, the ultimate effect onretail meat prices should be tempered by lower prices for hogs and poultrythan in 1976 and by slower growth in marketing margins.Prices of fresh fruits and vegetables are even more difficult to forecastthan those for meat, but they also carry less weight in the CPI. Generally,supplies of fruits and vegetables for processing should be sufficient to limitthe risk of sharp price increases. Coffee prices should continue to be high.Cereal products are unlikely to be subject to significant upward price pressuresin 1977 because of ample stocks of the principal food grains: wheatand rice. Milk production is expected to continue at high levels, creatingthe possibility of some weakness in prices. Because of low stocks of the majorfeed grains and oilseeds for feed, production of dairy and other livestockproducts late in the year will be sensitive to harvests of 1977 feed and foragecrops. Current soil moisture reserve conditions in the upper Midwest areunfavorable; hence 1977 crop prospects will depend more than usual onadequate spring and summer precipitation.3. Energy prices. During the period from 1974 to 1976, wholesale andretail prices of fuel and related products rose on average at rates in excessof the increase in overall consumer and wholesale prices. In 1976, however,these rates of growth began to converge and this movement should continuein 1977; prices of consumer energy products are expected to increasebetween 6 and 7 percent during the year. The recently announced increasein the price of petroleum exports imposed by members of OPEC does notalter this conclusion. The higher price of imported oil is expected to addabout 1 cent per gallon to the price of domestic petroleum products, and toresult in a 2 to 3 percent increase in the consumer price index for gasolineand distillate fuel oil.Consumer and wholesale prices of natural gas contributed most tothe increase in the wholesale and consumer price indexes of fuel andpower during 1975 and 1976, largely owing to increases in the price ofimported natural gas, primarily from Canada, and to regulatory actionsby the Federal Power Commission. This trend will continue in 1977 asa result of recent decisions which permit higher prices to be charged forsupplies of natural gas flowing from new domestic wells. In addition, inJuly 1976 the FPC raised the ceiling price for gas supplies introduced intointerstate commerce during 1975 and 1976. These actions will undoubtedlylead to continued large increases in wholesale and consumer prices for naturalgas in the near term. In the longer run, it is hoped that higher prices willbring forth additional supplies of natural gas which will tend to moderatefuture price increases.44

Consumer prices of fuels during 1977 will probably not be affected bythe removal of price controls on petroleum products. Controls were removedfrom distillate and residual fuel oils in mid-1976 without a noticeable impacton inflation. The supply of gasoline appears to be more than adequate tosatisfy projected demand at prevailing prices, so that the removal of pricecontrols from gasoline would not have adverse inflationary consequences.PRODUCTIVITY GROWTH AND RESOURCE UTILIZATIONIn designing economic policy to cope with cyclical fluctuations in economicactivity, it is important not to overlook the longer-term issue ofgrowth. In the past 25 years more than two-thirds of the increase inreal national output has been generated by increases in average laborproductivity, or output per labor-hour. Over the past decade, however,productivity growth has shown a marked decline, even after adjusting forcyclical effects. Since 1966 the trend rate of growth in measured output perlabor-hour has decreased by about one-third from the rate attained in the1950s and early 1960s. If productivity gains continue to be small, real wageswill continue to grow more slowly than in the 1950-65 period.THE PRODUCTIVITY SLOWDOWN, 1966-76Productivity growth in the private sector averaged 3.3 percent per yearbetween 1948 and 1966, almost 1 percentage point above the 1929-75average. Between 1966 and 1973, however, the private productivity growthrate was only 2.1 percent per year, below the long-run trend. This sloweradvance may have contributed to increased inflationary pressures and mayhave led to lower growth in real wages.As shown in Chart 3 the reduction in private productivity growth is striking.While part of this poor performance can be attributed to the recentrecession, the falloff in productivity was evident even before 1974. Slowergrowth in capital per worker, a larger proportion of less experienced workersin the labor force, and the changing industrial composition of labor inputhave all contributed to this slowdown. Higher relative energy prices andslower technical progress may also have played a part. However, thereasons for the slowdown are not fully understood at this time because thedecline in productivity growth appears to be larger than the sum of the estimatedeffects of these factors.Growth of Capital and LaborOne important source of productivity growth is the increase in the amountof capital per hour of labor input. Between 1948 and 1966 capital perlabor-hour in the private sector grew by about 3.1 percent per year; duringthe 1966-73 period this growth rate fell to 2.8 percent per year. Since 1973the growth of capital per labor-hour has apparently fallen to 1.7 percent,45224-250 O - 77 - 4

Chart 3Productivity in the PrivateBusiness Economy1972 DOLLARS PER HOUR (RATIO SCALE)PRODUCTIVITY ATC/iACTUAL PRODUCTIVITY_3 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 i1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976J/GROWTH RATE OF 3.3 PERCENT PER YEAR.SOURCE: DEPARTMENT OF LABOR.after adjustment for cyclical factors. The decrease can be attributed to afaster rate of growth of labor input not matched by corresponding increasesin the capital stock. The larger growth in the labor force since themid-sixties has been a result of the postwar baby boom and of an increasedpercentage of women in the work force. Although the average growth rateof fixed nonresidential capital in 1966-73 was higher than the averagegrowth rate for 1948-66, the effective growth rate of capacity may wellhave increased less because of higher obsolescence rates and increasedexpenditures on pollution abatement and safety equipment. While bothtypes of investment contribute to our well-being they do not in generalincrease our capacity to produce measured output. Estimates of thecontribution of increases in the capital-labor ratio to productivity growthare very sensitive to the measure of capital stock used; our analysis suggeststhat perhaps one-tenth to one-third of the productivity slowdown since 1966can be explained by slower growth in effective capital per labor-hour.Composition of the Labor ForceIn the last decade the proportion of the labor force made up of teenagersand young adults has been rising. Workers in these groups tend to be lessproductive to the extent that they have less experience and training than46

other workers. Productivity is measured by output per labor-hour, andthese labor-hours do not reflect differences in training and experience. Earlyretirement has also reduced the proportion of experienced workers. Thuslower productivity growth is a natural consequence of a fall in the averagew r ork experience of those in the labor force. Changes in the age-sex compositionof the labor force can explain more than 0.1 percentage point (or about10 percent) of the productivity growth differential between 1948—66 and1966-73.Median educational attainment in the labor force has also increasedmore slowly in the past decade than it did in the previous 10 years. Inmany age and sex categories of workers there has been a slight slowdown inthe rate of increase in years of schooling. It is, however, unlikely that thissmall change had a significant effect on average productivity.Employment Shifts Between Sectors in the EconomyChanges in the industrial composition of employment have also been afactor in lowering average productivity growth. Before 1970 the shift ofworkers out of agriculture contributed to growth in productivity. Eventhough the rate of growth of productivity in agriculture was high, theaverage level of productivity was below the general average, and the movementof workers from agriculture to other sectors increased aggregateproductivity. Since the late 1960s this shift out of agriculture has slowed,and productivity growth from this source has been much reduced. Almostone-third of the difference between the trend rate of private productivitygrowth in 1948-66 and 1966-73 can be attributed to the higher rate ofreduction in agricultural employment in the earlier period.A higher rate of increase in the number of workers in the low-productivityservice sector has also been a factor in the slowdown in productivitygrowth. However, the effect of shifts in employment in the private nonfarmsector are much smaller than the effect of the movement of workers outof agriculture.To some extent shifts in employment between sectors and changes in theamount of capital per labor-hour measure the same thing and thus representdouble counting of changes in the capital-labor ratio. Low-productivitysectors may be less capital intensive, and therefore a shift in employmenttoward low-productivity sectors can be accompanied by a decrease in thegrowth of capital per worker. There are also independent effects, however,since capital per worker can change within each sector.Other Factors Affecting ProductivityProductivity growth that is not caused by increases in capital per laborhouror changes in the composition of the labor force is attributed to a catchallresidual category. Measurement errors of many kinds comprise part ofthe residual, but most of it is probably traceable to various forms of technicalprogress, such as improvements in the quality of capital and new techniquesfor combining inputs to increase production.47

While allocation of resources to research and development should generatetechnical progress and increase residual productivity growth, thequantitative relation between productivity and research is not well documented.Even though a close causal relation between aggregate researchand development expenditures and residual productivity growth cannot beproved, such expenditures and their share of total output give some indicationof probable productivity growth in the future. Research and developmentexpenditures, which grew rapidly from 1955 to 1969, have fallen inreal terms since 1970. The share of research and development in GNPreached a peak of 3.0 percent in 1964 and fell to 2.3 percent in 1975.Although changes in labor force composition and slower growth in fixedcapital per worker have been a partial cause of the productivity slowdownin the last decade, much of it must be attributed to other factors. Significantlygreater productivity may be generated by the technical improvementsincorporated in new capital equipment, a consideration which would increasethe impact of the slowdown in the growth of the capital-labor ratio.However, it seems unlikely that the effect of this "embodied" technicalprogress could explain most of the large difference in residual productivitygrowth before and after 1966.Since the productivity slowdown coincides with the entrance into thelabor market of those born during the post-World War II baby boom, theslowdown in productivity may be in part a consequence of the time requiredto adjust to changes in relative factor proportions. If so, productivity growthsimilar to that in 1966-76 may continue through 1980, since the labor forceis projected to grow at relatively high rates until that time. After 1980 thegrowth rate of the working-age population will decline, and the labor forcewill expand more slowly unless the slower population growth is offset by increasesin the proportion of the population in the labor force.THE FULL-EMPLOYMENT UNEMPLOYMENT RATEAssessing long-run trends in economic growth requires a standard to measurelabor resource utilization. Although an explicit definition is difficult, thefull-employment unemployment rate is generally understood to mean thelowest rate of unemployment attainable, under the existing institutionalstructure, that will not result in accelerated inflation. Given the inexactrelation between changes in the rate of inflation and the rate of unemployment,estimates are necessarily imprecise, but in the early 1960s the Councilof Economic Advisers selected 4 percent as an estimate of the full-employmentunemployment rate in the economic circumstances existing at thattime. This estimate referred to the overall measure of unemployment as apercentage of the civilian labor force and was based on an examination ofeconomic conditions in the mid-1950s when the overall unemployment ratefluctuated around 4 percent. During the 20 years since then a number ofrelevant changes have occurred which give reason to believe that the fullemploymentunemployment rate equivalent to 4 percent in the mid-1950shas increased.48

Since the mid-1950s a dramatic change in the composition of the laborforce has apparently led to an increase in the movement of workers in andout of the labor force. High rates of labor force turnover generally increasemeasured unemployment, since first entry and reentry into the labor forcegenerally involve a period of job search and are counted as unemployment inthe labor force statistics. Hence for approximately the same tightness in thelabor market, the measured unemployment rate will be higher if a largerproportion of job seekers are persons formerly outside the labor force.Data on reasons for unemployment indicate that the high rates of laborforce entry and reentry account for most of the higher unemployment ratesamong youths compared with adults, and that the unemployment rates forjob losers and job leavers differ very little among demographic groups (Table4). Youths are far more likely than adults to combine work in the labormarket with some other activity such as schooling or work at home. Studentsmove in and out of the labor force in search of part-time and full-time employmentduring the school recess, and during the school term many searchfor part-time employment. A rising proportion of youths in the labor forcewould therefore be associated with a rising proportion of new entrants andreentrants—and hence, other things being equal, with a rise in the unemploymentrate. Since the mid-1950s teenagers and young adults have, infact, constituted an increasing proportion of the labor force, from 15 percentin 1955 to 24 percent in 1976, because of the postwar baby boom thathas increased the proportion of youths in the working-age population, andbecause of a rise in the labor force participation rate of students.TABLE 4.—Civilian unemployment rates by age, sex, and reason for unemployment, 1973[Percent]Age and sexAll civilianworkers *Job losers andjob leavers 325 years and over:Men __Women16-24 years:MenWomen2.54.09.911.22.02.34.94.11 Unemployment as percent of civilian labor force in proup specified.2 Unemployment as percent of civilian labor force excluding new entrants and reentrants.Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers.The difference between the overall unemployment rate and that for subgroupsof the population has widened markedly since the mid-1950s, partlybecause of these changing labor force proportions (Table 5). The unemploymentrates for adults, experienced workers, and the long-term unemployedin 1965 and 1973, were all roughly equal to the rates in 1956, a year in whichthe overall rate of unemployment approximated the full-employment estimateof 4 percent. Yet for the later years the overall unemployment rate wasmuch higher, rising to 4.5 percent in 1965 and to 4.9 percent in 1973.49

TABLE 5.—Civilian unemployment rates for selected groups, 1956, 1965, and 1973[Percent ijGroup195619651973All civilian workers.Experienced wage and salary workers..Long-term unemployed workers 24. 14. 484.54.31.04.94.5.9Age groups:25-54 years55 years and over16-24 years3. 33. 48. 53.23.210.13.22.710.51 Unemployment as a percent of civilian labor force in group specified, except as noted.3 Unemployed 15 weeks or longer as percent of total civilian labor force.Source: Department of Labor, Bureau of Labor Statistics.The apparent secular rise in the unemployment rate for young personsrelative to adults suggests that the change in the composition of the laborforce does not explain all of the shift between the overall unemploymentrate and the rate for adults. Direct data are not available, but some of thischange in the structure of unemployment rates may be due to increasedmovement in and out of the labor force by youths. Among youths therehas been an increase in school enrollment rates since the mid-1950s and studentsare more likely than other youths to alternate between working or jobseeking and attending school.There also appears to have been an increase in the measured unemploymentrate for adult women relative to adult men, but because of a change inthe survey the data reported after 1967 are not strictly comparable withearlier years. Moreover how greatly this survey change has affected thedifference in unemployment rates between adult men and adult womenis uncertain. If there has been a rise in the actual unemployment rate ofadult women relative to adult men, it may be due to an increase in laborforce participation for married women. Many married women leave thelabor force when a child is born and return intermittently for severalyears. A disproportionate increase in the component of the adult femalelabor force in which the labor force turnover is highest would thus tend toraise the unemployment rate of adult females relative to that of adult men.Because the estimates of these developments are still uncertain, however,it is difficult to assess their influence on the overall unemployment rate.Other developments in the past 20 years may have tended to increase thefull-employment unemployment rates of all demographic groups. For example,broader coverage of unemployment compensation is likely to raise therate of unemployment associated with a particular degree of tightness in thelabor market. The most recent extension of coverage, in 1975, placed anestimated 12 million wage and salary workers under the temporary specialunemployment assistance program. As a result of 1976 legislation, coverageunder the regular State programs is to be extended to about 9 million ofthese 12 million workers. Other circumstances suggest that the financial burdenof unemployment has been lessened for many families: the rise in theproportion of families with two adult earners because of the growth in50

women's labor force participation; and an increase in other public transferprograms for the low-income unemployed. These factors have tended toweaken the tie between current consumption and current earnings, and theymay have increased the extent of unemployment that is consistent with afull-employment economy.Other changes may have had the opposite effect. These include the risinglevel of education, the relative increase in white-collar occupations, and moreefficient job search because of improvements in transportation and communication.Because the reasons for differences in unemployment rates byeducation level are not well understood, it is not clear whether the rise ineducation by itself has been accompanied by a stable or a changing education-specificfull-employment unemployment rate for given age and sexgroups. The effects of improved labor market efficiency are also ambiguoussince it is not clear whether greater efficiency in the search for jobs lessensthe rate of unemployment at full employment.There is no unique procedure for adjusting the full-employment unemploymentrate for the changing demographic composition of the labor forceand for the changing relationships in the unemployment rates of variousdemographic groups. Moreover any estimating procedure is subject to samplingvariability. Using available data on labor force composition and unemploymentrates, and adjusting for the increased proportion of young personsin the labor force and for the increase in their unemployment rate relativeto adults, the Council of Economic Advisers has estimated that the fullemploymentunemployment rate equivalent to 4.0 percent in 1955 is now 4.9percent. This estimate corresponds with the widening in the differencebetween the overall unemployment rate and the unemployment rate foradults observed in Table 5.The effects of many of the other factors which are believed to influencethe full-employment unemployment rate are much more difficult to quantify.Partly because of this difficulty there is considerable dispute about theirrelative importance, but it is likely that they have raised the full-employmentunemployment rate even higher than the current estimate, perhaps closerto 5J/2 percent. The current benchmark estimates, however, incorporateonly the effects for which the evidence is substantial. As further evidence becomesavailable—perhaps through more data on unemployed persons classifiedby reason for unemployment, or perhaps through observed changes inwages and prices as actual unemployment rates decline—the current estimateof the full-employment unemployment rate might be further refined.It is important to bear in mind, however, that the full-employment unemploymentrate will not remain constant. For example, as the population agesand youths represent a smaller percentage of the labor force, the full-employmentunemployment rate will also tend to decline. The overall unemploymentrate that represents full employment can be expected to change withtime as demographic, social, and economic factors affect the rates at whichworkers move in and out of jobs, and in and out of the work force.51

GROWTH IN POTENTIAL OUTPUTPotential GNP is a measure of the aggregate supply capability of theeconomy, or the amount of output that could be expected at full employment.More precisely, potential GNP is the output the economy could producewith the existing technology under assumed conditions of high butsustainable utilization of the factors of production—labor, capital, and naturalresources. It does not represent the absolute maximum level of productionthat could be generated by wartime or other abnormal levels of aggregatedemand, but rather that which could be expected from high utilizationrates obtainable under more normal circumstances.The significant slowdown in average productivity growth suggests thatthe rate of growth of potential output was lower in the past 10 yearsthan has been previously estimated. The revision of the national incomeand product accounts also reduced the rate of growth of real GNP.Moreover the widespread shortages of physical capacity and the resultinginflationary pressures experienced in 1973 suggest that previous estimatesof potential GNP are overstated. The Council has therefore reestimatedpotential GNP, taking into account the lowered rate of productivity growth,the factors contributing to this slowdown, and the increase in the fullemploymentunemployment rate. The new estimates of potential output areexperimental in the sense that they are based on highly aggregated measuresof labor, capital, and output; and they must therefore be considered interimrevisions. A more definitive study would use disaggregated data on labor andcapital inputs and more evidence on the education and experience of thework force.Estimates of Potential GNPThe benchmark level of resource utilization implicit in the Council ofEconomic Advisers' previous estimates of potential output was an overall unemploymentrate of 4 percent; it was assumed that full utilization of otherresources, such as capital and land, would accompany 4 percent unemployment.The new estimates of potential attempt to include explicitly the contributionto output of fixed capital; hence a benchmark for capital utilizationas well as for labor utilization must be set. Full employment of fixed capitalis assumed to be attained when the manufacturing capacity utilization indexcalculated by the Department of Commerce reaches 86 percent. This is thecapacity utilization rate attained in the first and second quarters of 1973. In1969, another year of high employment, manufacturing capacity utilizationwas 85 percent; 86 percent is thus a relatively optimistic estimate of sustainablecapacity utilization. The capacity utilization index that represents thesame degree of resource utilization may change over time, since capital inputis at least as heterogeneous as labor input. A higher proportion of old equipmentin the capital stock would probably lower the capacity utilizationbenchmark. Inadequate data make estimation of such a variable benchmarkvery difficult, however, and it has not been attempted here.52

The full-employment benchmark has been changed from a constant 4percent unemployment rate to a rate that varies over time. The new laborutilization benchmark adjusts for the increase in the proportion of youngerworkers in the labor force since 1955, and for the observed increase inunemployment rates for younger workers relative to those for adults. Asdiscussed earlier, these adjustments imply a rate that rises from 4.0 percentin 1955 to 4.9 percent in 1976. The definition of the new estimate of potentialGNP in 1976 is, then, the output in 1972 dollars that the economywould produce if the Department of Commerce manufacturing capacityutilization rate were 86 percent and the unemployment rate 4.9 percent.The new potential GNP estimates are compared to the previous estimatesin Table 6, and are shown graphically in Chart 4. The average annualgrowth rate of potential from 1962 to 1976 is now estimated to be 3.6 percentper year, a reduction from the former estimate of 3.9 percent per year;and the rate is projected to be about 3*4 percent per year in the near future.The reduction in the growth of potential GNP results in an estimate thatis $58 billion in 1972 dollars (or about 4 percent) lower in 1976 than thatprevious estimate of potential. Most of the reduction in the estimate of thegrowth of potential output is due to slower growth in labor productivitysince 1966. In 1976, $30 to $40 billion of the estimated reduction in potentialoutput can be attributed to this factor.Some of the reduction in the growth rate of potential output can also beattributed to the recent benchmark revisions of the national income andproduct accounts, which incorporate new source data and estimating procedures.The revised real GNP estimates are evaluated in terms of 1972rather than 1958 prices. The result of these changes has been to lowergrowth rates of real GNP.The change in the unemployment benchmark lowers slightly our estimatesof how the expanding labor force has increased potential GNP.Using a full-employment benchmark of 4.0 percent rather than 4.9 percentin 1976 would raise potential GNP by 0.3 percent to 1.1 percent, dependingon how the reduction in unemployment is distributed over the labor force.Thus between $5 billion and $15 billion of the $58 billion reduction inpotential for 1976 can be attributed to the change in the assumed unemploymentrate at potential.The downward revision in potential GNP results in a current growth ratefor potential output that is about the same as the 3/2 percent per yearoriginally estimated by the Council of Economic Advisers for the periodfrom 1952 to 1962. Increases in the labor force growth rate since that timehave been offset by decreases in the rate of productivity growth, yielding agrowth rate of potential output which is nearly constant. This downwardrevision does not appear to be sensitive to the particular method which wehave used to estimate potential. Experiments with a number of alternativeprocedures give similar results and indicate that the new estimates are robust,given current information. For example, a calculation for the period from53

TABLE 6.—Potential and actual gross national product, 1952-76[Billions of 1972 dollars]Potential GNPGNP gapYearNewOldActualGNPNew(new potentialless actual)Old(old potentialless actual)195219531954584.9608.2629.7592.2613.0634.4598.5621.8613.7—13.6—13.616.0—6.3—8.820.71955...1956195719581959651.4673.9697.2721.3746.2656.6679.6703.4728.0753.5654.8668.8680.9679.5720.4—3.45.116.341.825.81.810 822.548.533.11960 .1961196219631964771.9798 6826.4857.1890.3779.9807 1835.4865.9898.4736.8755 3799.1830.7874.435.143 327.326.415.943.151 836.335.224.01965 .1966196719681969925.0960.8996.31,031.71,068.3932.1967.01,003.31,040.91 081 fi925.9981.01,007.71,051.81,078.8-.9-20.2-11.4-20.1-10.56.2—14.0^4.4—10.92.8197019711972197319741,106.21,145. 51,186.11,228.21,271.71,124.91,169.9i, 216.71,265.41,315.91,075.31,107. 51,171.11,235.01,214.030.938.015.0-6.857.749.662.445.630.4101.919751976 .1,316.91,363.6I, 368.61.421.21,191.711,265.0125.2198.6176 9i 156.21 Preliminary.Note.—See text in this chapter on "Productivity Growth and Resource Utilization" for differences between the oldand new potential GNP.Sources: Department of Commerce, Bureau of Economic Analysis (actual GNP) and Council of Economic Advisers(potential GNP).1968 to 1973 which adds labor force growth of 2.0 percent to productivitygrowth of 1.8 percent and subtracts 0.3 percent for the decline in averagehours worked per week, all at annual rates, yields a growth rate of potentialoutput amounting to 3.5 percent per year. More research would be useful,however, to further our understanding of the determinants of the economy'spotential and the relation between the growth of potential and economicpolicy. The attempt made here to incorporate the effects of capital accumulationand labor force composition on economic growth is a step inthis direction.The decline in average hours worked is also a factor which contributes toa slower growth in potential output than might be expected from the highrate of growth in the labor force. Between 1966 and 1973 the tendencytoward shorter workweeks accelerated somewhat. The slightly accelerateddecline in the average workweek, added to the effect of the changing compositionof the labor force, implies a growth rate of effective labor input(labor hours weighted by average hourly earnings) that is significantlylower than the growth rate of the labor force. For example, from 1966 to1973 the civilian labor force grew by 2.3 percent per year, while effective54

Chart 4Gross National Product, Actualand PotentialBILLIONS OF 1972 DOLLARS (RATIO SCALE)1,6001,500SEASONALLY ADJUSTED ANNUAL RATES1,400NEW POTENTIAL GNP1,3001,2001,100OLD POTENTIAL GNPV1,000ACTUAL GNP900800i i i i i i i i i i 11 11 1 i i i 11 i i 1 11 i 1 i i i 1 i i i 1 i i i 1 i i i1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976NOTE.-SEE TEXT IN CHAPTER ON "PRODUCTIVITY GROWTH AND RESOURCE UTILIZATION" FORDIFFERENCES BETWEEN THE OLD AND NEW POTENTIAL GNP.SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS.labor input grew by only 1.5 percent per year. Therefore, although therapidly growing labor force implies a high rate of growth in potential output,reductions in the average workweek and changes in the age-sex compositionof the labor force indicate that the increases are somewhat lower.Productivity behavior since 1973 raises a further question about thecurrent level of potential output. In the most recent downturn, the productivitydecline started earlier and was much more severe than might havebeen expected from earlier recessions. The data indicate that part of this decreasemay have been a permanent downward shift in the level of productivity.A conservative estimate of this shift lowers potential output to $1,330billion in 1976. Thus the GNP gap may be about $30 billion lower thanindicated.There is reason to expect such a drop in productivity to accompany theOPEC oil embargo and the subsequent quadrupling of crude oil prices. Thenew high energy prices should have made some capital equipment and someenergy-intensive production processes inefficient, with a consequent loss ineconomic capacity. This loss would not be included in capital stock estimates,because the method normally used for estimating the aggregate capitalstock depreciates new investment over a fixed period and does not adjustfor short-term changes in obsolescence.55

The statistical methods used to adjust for cyclical variations in productivityare necessarily based on the presumption that the variations in productivityover the business cycle are related in a stable way to measures ofthe cycle, such as the unemployment rate and capital utilization rates.Since the data indicate that the current slowdown may have produced anatypical reaction in productivity, it is possible that productivity will continueto increase and reach its former trend in the next 2 years. This possibilitywould imply private productivity growth rates for 1977 and 1978 wellin excess of the 2 percent trend.On the other hand, it has been nearly 2 years since the recession reachedits trough, and there has been little evidence of cyclical productivity gainsthis late in previous recoveries. Because of this uncertainty regarding thepermanence of the recent decline in productivity, estimates of potentialoutput will be similarly uncertain. The estimates of potential GNP presentedin Table 6 and Chart 4 do not include a shift in the level of productivityin 1973-74, but instead assume that the downward movement willbe offset by an equivalent upward movement as recovery continues. Theperformance of the economy over the next 2 years will indicate whetheror not a further revision in the estimates of potential GNP is necessary.POLICY IMPLICATIONSNeither potential GNP nor the full-employment unemployment ratewill be reached in 1977. However, both may set limits to growth in comingyears which cannot be exceeded without risking accelerating inflationand renewed instability. For example, the uncertainty that surrounds theestimates of potential output implies that caution must be observed aspotential GNP is approached. If the 1974-75 reduction in the level ofproductivity proves to be permanent, physical capacity constraints similarto those encountered in 1973 may appear well before an unemploymentrate of 4.9 percent is reached. If so, they will seriously interfere with ourfull-employment goals.As discussed previously, there are reasons to believe that the fullemploymentrate may be above the 4.9 percent benchmark we haveused to estimate potential output. In any case, policy makers should realizethat a 4 percent goal is not likely to be sustainable in the current economicenvironment; and because of the tentative nature of the full-employmentrate estimates they should watch closely for signs of accelerating wage inflationwhen the overall rate of unemployment falls to about 5J4 percent.The analysis suggests, for example, that the 4.9 percent unemployment ratein 1973 may have been partly responsible for the accelerating inflation in1973-74, although this interpretation is clouded by other events such as thewage and price controls and the extraordinary increases in the prices of foodand fuel. It also suggests that economic programs which aim to reduceunemployment in particularly depressed areas or among disadvantaged56

groups can be a useful supplement to policies which focus on the economyas a whole. Moreover it must be remembered that even with our revised estimates,the current output is far below potential, and unemployment is muchabove full-employment levels. Thus aggregate demand policies, such as thetax program proposed by the President, are still necessary to reduce unemploymentand close the existing gap between potential and actual output.The uncertainty about the lowest rate of unemployment that will notresult in accelerating inflation also has important policy implications. Nottoo long ago economic policy makers were able to illustrate the difficultiesof achieving both a stable price level and a full-employment economy byreferring to the fairly close negative association between the unemploymentrate and the inflation rate during the 1950s and early 1960s. While it wasnever thought to be exact, the relationship indicated the inevitable upwardpressure of high utilization of labor and capital on prices and wages, andit was used to calculate the tradeoff between inflation and unemployment.According to this relationship, the cost of an excessively low unemploymentrate was a higher, though not necessarily increasing, rate of inflation.During the last 10 years, however, this relationship has shifted dramaticallyand the concept of a stable tradeoff has become untenable. Neverthelessit is difficult to deny the essential fact that excessive expansion andextremely low unemployment rates ultimately produce higher and perhapsaccelerating inflation. Nor can one deny that a slack economy with lowutilization of capital and labor resources is usually a moderating influenceon prices and wages. However, because of an economy-wide persistencein price and wage inflation, these excess demand and excess supply effectssometimes seem to work very slowly, with their influence spread over along period.In the long run the lower estimated growth rate of potential output, if projectedinto the future, implies a decrease in the "fiscal dividend" to be gainedfrom full employment. Projection of the new potential GNP estimates through1980 gives an output that is 4.8 percent lower than the previous estimate,a difference amounting to about $130 billion in current dollars. The estimateof Federal tax receipts in 1980 is thus more than $30 billion lower ifoutput is assumed to be the new potential GNP rather than the old estimate.Lower total output implies lower tax revenues available for further tax cutsor for new or expanded Federal Government programs.The challenge for the future will be to devise new policies to cope withthe problems of economic growth and productivity. Increased productivitygrowth is necessary if the economy is to provide jobs without incurringdeclines in the growth of real income for the many new workers in the laborforce. Chapter 4 in this Report discusses several areas in which microeconomicpolicies have been devised or are being considered to increaseproduction and employment beyond levels attainable through the managementof aggregate demand.57

CHAPTER 2Economic Review of 1976HP HE ECONOMIC EXPANSION continued last year. Real gross-*• national product (GNP) rose 6.2 percent, as projected in the last Report.The growth of output was unexpectedly strong in the first quarter, but fell belowexpectations during the rest of the year (Table 7). The rise in real GNPhas been slightly greater since the trough in the first quarter of 1975 than theaverage rise over similar periods in the last four expansions, partly becauseof the exceptional depth of the last recession. The depth of the recessionalso accounted for the substantial excess capacity that remained at year-end,when the gap between actual and potential output was 8 percent and the unemploymentrate was just under 8 percent. For the year as a whole the unemploymentrate averaged 7.7 percent, 0.8 percentage point lower than in 1975,and employment increased by 2.7 million persons.Excess capacity helped moderate last year's rate of inflation. The GNPdeflator slowed to 5 percent last year from 7 percent during 1975 in spite ofthe large year-to-year rise of output. The slackening of inflation is a reflectionof slower rates of increase in both labor compensation per hour and profitsper unit of output. Smaller rises in food prices and a legislated rollback ofoil prices helped in the slowing of inflation.At year-end there were signs of some reacceleration of the economy,though real GNP rose at a 3 percent annual rate for the last quarter asa whole. A rapid growth of retail sales took place within the quarter, startingfrom a depressed September level, and auto sales rose rapidly from lowlevels early in the quarter when supplies were limited. Housing starts andresidential investment grew very rapidly from third-quarter averages. Businessfixed investment, which had been recovering for a year, was littlechanged from the third quarter, largely because of a sharp drop in car andtruck purchases that also reflected limited supplies.DEMAND AND OUTPUTThe rise of real GNP initially accelerated to a 9 percent annual rate, butthen decelerated to a 3% percent annual rate over the last 3 quarters of lastyear. The unevenness of GNP growth was largely due to change in the rate ofinventory accumulation. Early in 1976 GNP was increased by a large change58

TABLE 7.—Changes in gross national product in constant (1972) dollars,, 1975-76[Percent change; quarterly changes at seasonally adjusted annual rates]Component1975197611II1976IIIIV iPercent change in 1972 dollars:Total GNP-1.86 29.24.53.93.0Personal consumption expendituresDurable goods..Nondurable goodsServices1.5-.4.92.65.512.34.34.58.823.26.86.24.03.03.84.63.63.21.75.35.42.38.53.9Business fixed investmentResidential investment-13.3-14.73.822.77.822.38.315.19.616.1.837.0Government purchases. _ __Federal purchasesState and local purchases..1.8.42.61.31.01.4-4.9-7.2-3.52.62.52.72.95.71.4.43.5-1,3Addenda:Final salesDomestic final sales-.1-.74.35.03.76.04.24.54.34.54.85.0Change in billions of 1972 dollars:Inventory accumulationNet exports of goods and services-20.56.121.1-6.715.9-6.5.7-.6-.9-.3-5.5-.4i Preliminary.Source: Department of Commerce, Bureau of Economic Analysis.in inventory investment, while the pace of inventory accumulation slowedconsiderably at year-end, pushing GNP growth to its lowest rate of the year.The growth rate of final sales was much steadier, averaging 4% percent duringthe year. Consumption expenditures slowed after a rapid growth in thefirst quarter, but then accelerated at year-end. Consumption at midyear wasrestrained by a slow growth of personal income. The buildup of inventories inthe first quarter led to cautious production and employment policies by business.Wage rates and government transfers also rose less than was expectedand farm income declined. There was unexpected slowness in growth of governmentpurchases early in the year, when public spending in many categorieswas below expectations. Investment, however, was weak in the finalquarter of the year.PERSONAL CONSUMPTIONReal personal consumption expenditures rose 5.5 percent in 1976. Afterincreasing 6.1 percent in the year ending in the first quarter of 1976, realexpenditures grew more slowly during the rest of the year.Real disposable income is the most important determinant of long-run realconsumption. Individuals tend to retain their consumption patterns for sometime after a given change in income. In the short run the effects of incomechanges tend to be divided between savings and the purchases of durableitems. During 1975 and 1976 the rate of growth in real consumption roughlyfollowed the rate of growth in real disposable income (Table 8). After aperiod of relatively fast growth from the first quarter of 1975 through the59

TABLE 8.—Growth of real consumption expenditures and real disposable personalincome, 1975—76[Seasonally adjusted annual rates]PeriodReal personalconsumptionexpendituresReal disposablepersonalincomePercent change:1975 1 to 1975 IIIFrom preceding quarter:1975: IV .. _1976:1II . _ .IIIIV 15.64.58.84.03.65.47.24.96.14.7.73.71 Preliminary.Source: Department of Commerce, Bureau of Economic Analysis.first quarter of 1976, the rise in real disposable income slowed, especially inthe third quarter. Because the slowdown in income growth may have beenviewed initially as temporary and because a cushion was provided by thehigh savings of 1975, the slowdown in consumption was less pronounced andmore steady. The personal saving rate ^11 from 7.0 percent in the first half of1976 to 6.2 percent in the last half.Real expenditures for consumer durables have been the largest contributorto the recovery in final sales in the current expansion, growing by 23 percentfrom the very depressed last quarter of 1974 through the fourth quarterof 1976. After a 23 percent annual rate increase in the first quarter of 1976,however, the growth of real expenditures on durable goods slowed to a 3percent annual rate on average over the last 3 quarters. These movementsin durables were dominated by purchases of motor vehicles and parts, whichgrew 45 percent from the last quarter of 1974 through the first quarterof 1976. Growth slowed to 3.0 and 1.5 percent respectively in the secondand third quarters, and then declined by 9.0 percent at an annual rate inthe strike-affected fourth quarter.The significant slowdown in growth of real consumer durables sales in thesecond quarter, particularly sales of new domestic automobiles, was influencedby factors other than real disposable income. Shortages existed insome intermediate and large car lines. Changes in the relative price of automobilesmay also have had an effect. The deflator for new domestic autosgrew at a 9.4 percent annual rate from the third quarter of 1975 throughthe first quarter of 1976 as rebates and other discounts offered in 1975 werephased out and list prices on the 1976 domestic models increased. Some effectsof this inflation in new automobile prices apparently continued beyondthe first quarter. As individuals attempted to substitute used for new cars,the implicit deflator for used cars rose by an extraordinary 12.2 percentfrom the first quarter to the second and continued to rise strongly in thethird quarter. The increase in domestic auto prices would appear to havebeen a factor in the rise in foreign car sales after the first quarter.60

Relative price movements were apparently important in the real consumptionof some nondurable items too. In particular, food prices were virtuallyconstant throughout 1976 and helped the real value of food consumption torise 5.2 percent for the year even though real incomes grew only 4.1 percent.Energy consumption was also significantly affected by relative price movements,as noted elsewhere in this chapter.BUSINESS FIXED INVESTMENTReal business fixed investment increased 4 percent last year, about theamount forecast in last year's Report. From lows reached in the second halfof 1975 real business fixed investment grew at an 8J/2 percent averageannual rate over the first 3 quarters. Largely because of the Ford MotorCompany strike, growth slowed to a 1 percent annual rate in the fourthquarter. Real investment, apart from motor vehicles, rose at substantiallybetter than a 10 percent annual rate in that quarter.Probably most important in starting the recovery of investment were theoptimistic sales expectations stimulated by the rapid increase in consumptionexpenditures through 1975 and early 1976. An additional thrust camefrom a much improved cash flow and somewhat lower interest rates, particularlyfor firms with lower credit ratings. Rapidly rising labor and energy costsrelative to fixed investment costs have also provided an incentive to invest inplant and equipment. The increases in the investment tax credit in 1975 furtherenhanced the after-tax profitability of equipment investment.Plant and equipment expenditures by nondurable goods manufacturersincreased more rapidly in 1976 than the expenditures by durables manufacturers.Industries showing strong growth include motor vehicles, textiles,food, paper, and electric utilities (Table 9).TABLE 9.—Changes in plant and equipment expenditures, 1974—76[Percent change]Industry1974actual1975actual1976expected 1All industries12.70.37.5Manufacturing__21.04.210.5Durable goods 2 _Machinery, except electricalMotor vehicles17.529.218.0-3.42.0-23.48.011.620.3Nondurable goods 2Food including beveragesTextilesPaper24.74.69.938.811.6.2-21.014.312.519.826.517.8Nonmanufacturing 27.6-2.45.3MiningElectric utilities16.210.619.4-3.64.711.41 Based on actual expenditures in 1975 and expected expenditures in 1976 (actuals for first 3 quarters and expected forfourth quarter).2 Includes some industries not shown separately.Source: Department of Commerce, Bureau of Economic Analysis.61224-250 O - 7 7 - 5

Last year's Report noted that investment held up quite well during therecession in those industries which faced capacity constraints in 1973. Inthe past year capacity growth in the paper, chemicals, and petroleum refiningindustries has been above 3 percent, reflecting substantial investmentin these industries over the past 2 years. In paper, however, the operatingrate is perhaps high enough that constraints on capacity for the mostrefined kinds of paper could occur in the next year. In iron and steel, anotherindustry of shortages in 1973, capacity has recently been growing at about 2percent annually, close to the long-term trend growth rate of steel usage.There was a slowing of investment last year by steelmakers, however, followingthe very sizable acceleration in 1975. Other industries are operatingconsiderably below capacity levels and shortages in 1977 are unlikely.INVENTORY INVESTMENTReal inventory investment in the national income and product accounts(NIPA) reflects the difference between aggregate production and deliveries.With real consumption expenditures growing strongly in the lasthalf of 1975 and the first quarter of 1976, and with completion of the massiveinventory adjustment of 1975, production increased very sharply in thefirst quarter of 1976 as firms moved to keep output in line with the anticipatedgrowth of final sales. With an only modest rise in total final sales,inventory investment in the first quarter was $10.4 billion, compared with adecline of $5.5 billion in the fourth quarter of 1975. The $15.9-billion swingin the first quarter of 1976 accounted for more than half of the 9.2 percentannual rate increase in gross national product in that quarter. Inventoryinvestment did not accelerate later in the year, since slower growth of retailsales gave rise to conservative orders and production policies in manybusinesses.The NIPA nonfarm business inventory-to-sales ratio stayed in the neighborhoodof 0.272 throughout last year. This was below the peak levels ofabout 0.300 at the trough of the recession but was still significantly abovethe approximately 0.250 levels of the 1972-73 period, a fact suggesting thatinventory accumulation will not accelerate sharply in the immediate future.The book value of manufacturers' work-in-process inventories, which wasnot rising at the beginning of the year, rose in the second half, reflectingthe moderately strong growth in producers' durable equipment.HOUSING AND RESIDENTIAL INVESTMENTThe 1976 recovery in residential investment reflected the recovery inhousing starts which began in 1975. Real residential investment grew at an18 percent annual rate in the first 3 quarters of 1976 and accelerated to a 37percent annual growth rate in the fourth quarter. Housing demand becameone of the most favorable developments during a period of general weaknessin the economy. A strong 11 percent increase in total housing starts in62

August was followed by a 20 percent increase in September, bringing theseasonally adjusted annual rate to 1.84 million units. Total starts thenremained strong in the last months of the year.Starts of multifamily dwelling units were important in the acceleration ofstarts in 1976. Rental vacancy rates fell from above 6 percent late in 1975and remained about 5/ 2 percent during most of 1976. A strong rise in multifamilyrental absorption rates was also indicative of stronger demand forrental housing.Federal assistance programs also encouraged housing construction. InJanuary, $3 billion in Government National Mortgage Association 7 l /i percentcommitment funds was released, with an additional $2 billion in September,and by the second half of the year the subsidized leasing programauthorized by section 8 of the Housing and Urban Development Act beganto affect the building of new multifamily units. By the end of the year it wasestimated that approximately 40,000 apartment units had been started underthe section 8 program, though the incremental impact on housing constructionis smaller in that some of these units would have been constructedwithout the program.Financial developments were favorable to housing in 1976, especially inthe second half of the year. Interest rates in the short-term money marketsdid not increase in the way that many had anticipated and in fact theydeclined in the latter part of the year. By the end of the year market interestrates were below rates on time deposits of similar maturities at financial intermediaries.This situation encouraged continued savings flows into thrift institutionsand made funds for home mortgages readily available. In addition,the continued fall in all long-term interest rates in the second half ofthe year reduced mortgage interest rates. The Federal Housing Administrationseries on new-home mortgages in the secondary market fell from9.41 percent in December 1975 to 8.45 percent last December but had aneligible impact on mortgage rates in the primary market in 1976.GOVERNMENT PURCHASESTotal government purchases in real terms rose by 1.3 percent in 1976,less than in 1975 and below the rate forecast at the beginning of last year.Real Federal purchases grew by 1.0 percent for the year. (A detailed discussionof Federal spending is presented elsewhere in this chapter.) Realpurchases of goods and services by State and local governments rose by only1.4 percent in 1976, the lowest real growth since 1951.There has been a downward trend in rates of growth of real State andlocal government purchases since the late 1960s, partly because the steadyslowing of population growth has reduced the demand for additional services.The deceleration of spending appears to have been sharpened in 1976by a delayed reaction to the 1974-75 recession and ensuing financial difficultiesexperienced by some States and local units. The widely publicized63

udgetary crisis of New York City emphasized the dangers of an excessiveexpansion of current services financed by borrowing. The unusually slowgrowth of State and local spending in 1976 was thus in part a cyclical correctionto bring expenditures in line with receipts and eliminate operatingdeficits. By the fourth quarter of 1976, State and local operating balances inthe aggregate moved back into surplus for the first time since late 1973.The slowdown in State and local spending was most pronounced in newconstruction, which fell about 8 percent in nominal terms in 1976. Thebulk of the decline occurred early in the year and was concentrated in newschool building and highway construction. In addition, State and local employmentgrew by 2.7 percent in 1976, compared with 5.0 percent a yearearlier and with an average rate of growth of 4.8 percent between 1955 and1975. Moreover, most of the increase in employment came early in 1976.To some extent the slower growth in 1976 in employment can be attributedto the expansion of federally funded public service employment jobs in 1975.NET EXPORTSOn an NIPA basis, nominal net exports of goods and services declined by$15.8 billion from the fourth quarter of 1975 to the fourth quarter of 1976.In real terms the decline amounted to $7.8 billion. The decrease largelyreflects a return to more normal trade balances from the cyclically highexport surplus recorded in 1975. Real exports increased 2.0 percent during1976 and real imports increased 13.7 percent. Export prices rose 5.6 percentover the same period, while the increase for import prices was 6.5 percent.Most of the shift in real net exports was accounted for by changes in merchandisetrade. Shipments from abroad in late 1976 were 18 percentabove their level at the end of 1975. Most of this increase in volume wasaccounted for by a 26 percent rise in imports of fuels. The volume of merchandiseexports changed negligibly as a rise in agricultural sales abroadoffset a small decline in other sales. The real surplus on service transactions,including investment income, rose from $6.4 billion in 1975 to about $8billion in 1976. This increase reflects in part a trend growth in the surplus oninvestment incomes.PRICES, WAGES, AND PROFITSThe rates of growth in both prices and wages were smaller last yearthan in any of the preceding 3 years. Real wages increased after 2 yearsof decline. Corporate profits also rose with the economic recovery.PRICESThe rate of inflation slowed significantly during 1976 to about 5 percentfor both the GNP deflator and the consumer price index (CPI). Increasesfrom the four quarter of 1975 to the fourth quarter of 1976 in many of the64

main price indexes were significantly lower than during 1975 and at least7 percentage points below the 1974 figures (Table 10).The overall declines in the measured rates of inflation during 1976probably exaggerate the decline in the underlying rate of inflation duringthe year. Declines in the prices of food and energy-related products in thefirst part of the year, * which are not likely to recur in the near future,helped bring the overall inflation rate below a currently sustainable level.Although any decomposition of inflation changes into temporary and longerrunfactors is subject to considerable error, more restrained wage increasesin most sectors indicate that some of last year's decline in inflation may bemore lasting. The absence of significant demand pressures on capacity andthe damping of inflationary expectations have been important forces in thismore permanent decline.The rates of price increase for all major components of the CPI werewell below the peak rates of 1974. Compared to 1975 rates, the ratesof price increase declined for durables and nondurables and did notchange for services. Consumer price increases for energy continued towardconvergence with the overall inflation rate, rising at a much slower rate thanduring 1974 and 1975. In the first quarter the CPI for energy fell,TABLE 10.—Changes in selected price measures, 1973—76[Percent change; quarterly changes at seasonally adjusted annual rates]Price measure1973 IVto1974 IV1974 IVto1975 IV1975 IVto1976 IV i1II1976IIIIV iGNP implicit price deflators:Total GNP11.57.14.73.25.24.46.2Business ...NonfarmFarm11.712 7-J2.47.26.610.34.25.1—15.42.34.4-38.45.23.752.24.05.9-32.65.56.5-18.9Personal consumption expenditures11.96.04.73.94.15.55.4Durable goodsNondurable goods 2 . .Food..Gasoline and oil ..Fuel oil and coalServices11.014.713.526.344.79.65.65.15.311.38.57.25.72.7.62.65.16.35.4.5-1.7-13.4-8.87.16.71.61.1-5.12.85.63.64.81.419.117.56.86.94.11.713.210.65.8Consumer price index:All items12.17.35.04.64.66.04.7FoodDirectly purchased energy 3All other items12.025.510.97.111.76.9.96.16.4-2.4-6.18.31.62.26.13.117.06.51.313.14.4Wholesale price index:All commodities._22.44.34.1-.74.93.97.9Farm products .Processed foods and feedsIndustrial commoditiesEnergy 4 ___-.121.827.157.44.3-2.05.912.7-3.6—3.96.68.6-17.0-15.54.9-8.013.310.63.2-3.1-7.8-7.57.519.9—.4—1.310.530. C1 Changes in GNP deflators are preliminary, changes in consumer price index are preliminary estimates by tha Councilof Economic Advisers.2 Includes some groups not shown separately.3 Gas and electricity, fuel oil and coal, and gasoline and motor oil.4 Fuels and related products and power.Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor (Bureau of Labor Statistics),except as noted.65

primarily because of the removal of the tariff on oil and the initial price rollbackfeatures of the Energy Policy and Conservation Act. Despite moderatesecond-quarter increases and large increases during the summer months, theoverall 6.1 percent rate from the fourth quarter of 1975 to the fourth quarterof 1976 was substantially less than the 11.7 percent rate during 1975. Therise in food prices decelerated to 1 percent, the smallest increase occurringwithin a year since 1967, the principal reason being abundant supplies ofmeats and cereals.Wholesale prices for all commodities rose about 4 percent fromthe last quarter of 1975 to that of 1976 (see Table 10). Following the secondquarter, prices rose more rapidly for most of the major industrial categories,although some transaction prices may have gone up less than the reportedlist prices because of more discounting by sellers. Increases in list prices accompaniedby larger discounts may reflect hedging against the possible returnof price controls.WAGESThe rate of increase in wages, although high by historical standards, waslower in 1976 than in 1975 (Table 11). Real wages, when measured by theadjusted average hourly earnings index deflated by the CPI, increased by 2percent in 1976 after declines of 2.5 percent and 0.3 percent in 1974 and1975 respectively. The continued high rate of increase in nominal wageslast year was in part due to the lagged adjustment of wages to the veryhigh rate of inflation in 1974 and 1975. It may have also reflected continuedexpectations of relatively high inflation.TABLE 11.—Changes in labor costs and productivity in the private nonfarm businesssector, 1974-76[Percent change; quarterly changes at seasonally adjusted annual rates]Period19741975 _1976 21975:1 . . .__IIIIIIV-1976:1IIIII..IV2Adjustedaveragehourlyearnings 1 8.28.96.99.07.38.48.06.96.57.16.2Compensationperhour9.39.78.012.17.66 67.29.38.46.79.2Outputperhour-3 52.24.01.913.18 4_.74 94.02.5Unitlaborcosts13.27.43.810.0-4.9-1.78.04.24.34.18.91 Adjusted for overtime (in manufacturing only) and interindustry shifts.2 Preliminary.Note.—Data for adjusted hourly earnings relate to production or nonsupervisory workers; all other data relate to allemployees.Source: Department of Labor, Bureau of Labor Statistics.66

A broader measure of labor costs, compensation per hour of work in theprivate nonfarm business economy, covers all employees and includes supplementsto wages and salaries. It represents the sum of labor costs toemployers. Compensation per hour increased faster than average hourlyearnings in the first quarter of 1976, partly because of the January increasein the base earnings subject to social security taxes. The rate of increase incompensation per hour was lower in the following quarters, and it was lowerin 1976 than in 1975.While only 11 percent of the employed are covered by major collectivebargaining settlements (those which cover 1,000 or more workers),these settlements may have a disproportionate impact on wage settlementsthroughout the economy as the result of a demonstration effect. The rate ofwage increases negotiated in such contracts declined in 1976 (Table 12).The first-year annual wage increases averaged 10.2 percent for contractsnegotiated in 1975, covering 3 million workers, and 8.9 percent during thefirst 3 quarters of 1976, covering 2.7 million workers. (Approximately 4*/imillion workers were under major contracts scheduled to expire during thefull year). The effective wage rate change under collective bargainingagreements is the actual wage change going into effect in a quarter becauseof settlements negotiated in that year, deferred increases agreed to in thepast, and escalator or cost-of-living adjustments (COLA). The effectiveTABLE 12.—Changes in major collective bargaining settlements, 1974-76[Percent]197519761Type of change and industry group 1974 1975II III IVIIIIIWage settlements:First-year wage change (annual rate)_9.810.212.19.09.78.210.1Percent of workers covered in current quartersettlements 25029137Effective wage rate change: 3Total effective changes.9.41.72.13.31.51.22.62.0Adjustment resulting from:Current settlementPrior settlementEscalator provisionManufacturingNonmanufacturing, excluding contract constructionConstructionTransportation and public utilitiesWholesale and retail tradeServices4.82.61.910.38.39.17.610.37.02.83.72.28.59.38.19.79.26.4.6.6.41.81.9.81.72.52.0.71.1.32.11.24.5.82.1.81.51.02.84.32.25.33.02.2.6.5.41.61.8.61.81.51.4.3.6.41.41.3.7.91.82.21.21.2.22.12.64.02.72.81.6.61.0.32.21.91.51.92.5.51 Preliminary.2 Percent of estimated number of workers under major collective bargaining settlements. Individual quarterly datafor 1976 are based on preliminary estimates that do not add to the current total for the year.3 Effective wage rate changes are wage rate changes actually going into effect per worker under major contracts in therespective quarters resulting from major collective bargaining settlements made that calendar year, plus deferred increasesin accordance with prior-year contracts plus escalator adjustments.Note.—Data relate to settlements covering 1,000 or more workers in private nonfarm industries. Effective wage rateadjustment for the year is the total of the four quarterly changes, except as noted.Detail may not add to totals because of rounding.Source: Department of Labor, Bureau of Labor Statistics.67

wage rate change during the first 3 quarters of 1976 was 7.9 percent at anannual rate, and was smaller than the increase in 1975 both because oflower first-year settlements and because the lower rate of inflation resultedin smaller cost-of-living adjustments.PRODUCTIVITY AND UNIT LABOR COSTSLabor productivity, or output per hour of work, increased by 4 percentin 1976 reflecting the cyclical improvement in the economy (See Table11). Labor productivity rises sharply in the trough quarter of most recessionsor in the following quarter and remains substantially above the trendgrowth rate for the first 2 or 3 quarters of recovery. Perhaps becauseof the severity of the 1974-75 recession, labor productivity growth wasabove the trend rate for 1976 as a whole.Both the slowdown in compensation per hour and the rise in productivitycontributed to a sharp deceleration in the rate of increase in unitlabor costs last year (see Table 11). The rate of increase in unit labor costsin 1976 is consistent with further declines in the rate of inflation. However,as the economic recovery continues and the rate of growth in productivitysettles to its long-run trend, unit labor costs will rise more rapidly unlessthe growth rate of nominal compensation per hour continues to fall.CORPORATE PROFITABILITYPretax corporate profits were up 30 percent last year to about $149 billion.Inflation-based adjustments for inventory appreciation and for depreciationbased on replacment cost increased moderately from 1975, andhence the rise in NIPA profits was also 30 percent. Inventory appreciationrose about $3 billion. The excess of the depreciation based on replacementcosts used in the NIPA over the book depreciation that is still basedon historical costs grew by $4 billion, about half of the 1975 increase. Theslower rise of the excess of NIPA depreciation over book depreciation wasdue to the substantial deceleration of the rise in prices of investment goodslast year.Last year's sharp growth in profits was a typical cyclical increase reflectingthe marked rise in output and productivity characteristic of the early partof a business cycle recovery. Although productivity in the corporate sector,as in the economy as a whole, rose about 4 percent in 1976, the rate of increasehad tapered off to under a 3 percent annual rate in the second half.This moderation, in combination with current rates of increase in compensationper hour of labor of 7/ 2 to 8 percent, means that the normal cyclicalincrease of the share of profits in gross product has now tapered off.The share of after-tax operating profits in the net domestic product ofnonfinancial corporate business exceeded 5 percent in the second half of1976 after reaching a cyclical low of 1 percent in the third quarter of 1974(Table 13). Because of the large increase in debt financing in the past 15years, it is more revealing to examine the share of corporate income accruingto holders of both equity and liabilities. This share is measured by net interest68

TABLE 13.—Output, profits, net interest, and profit measures of nonfinancialcorporate business, 1960—76Percent of net domesticproductYearNetdomesticproductCorporateprofitsafter taxwith IVAand CCA iNetinterestCorporateprofitsafter taxwith IVAand CCA»Corporateprofitsafter taxwith IVAand CCA iplus netinterestIMillions of dollars1%01%1196219631964250.3256.7282.3301 1326.618.318.024.227 232.83 53 94.54 85.37.37.08.69.010.08.78.510.210.611.71%«>1966196719681969359.3394.9413.6455.4494.038 941.739.638.533.16 17.48.710.113.110.810.69.68.56.712.512.411.710.79.4197019711972197319741975507.5544.2608.4683.3729.3773.824.328.838.536.317.032.817.017.919.123.129.030.84.85.36.35.32.34.28.18.69.58.76.38.21976 2874.844.935.85.19.2Seasonally adjusted annual rates197 1 )-IIIIII...IV731.5756.1793.3814.219.432.540.838.530.030.230.832.02.74.35.14.76.88.39.08.71976- 1III844.8866.1885.042.142.346.033.935.236.55.04.95.29.08.99.3* Corporate profits after tax with inventory valuation and capital consumption adjustments.2 Preliminary.Note.—All data relate to nonfinancial corporate business.Source: Department of Commerce, Bureau of Economic Analysis.plus after-tax operating profits as a percentage of net domestic productof nonfinancial corporations. It rose to 9 percent in the third quarterof 1976. While this figure is well above the cyclical low of 5 percent reachedin the third quarter of 1974, it is well below the peak of 12/2 percent in 1965.Low profitability may therefore still be exerting a damping effect on investmentexpenditures.GOVERNMENT BUDGETS AND FISCAL POLICYThe objective of fiscal policy in 1976 was to maintain the degree ofstimulus provided during 1975 in order to keep the economy on a course ofmoderate, sustained expansion. The full-employment surplus, which haddeclined sharply in 1975, was expected to remain relatively unchanged in1976. However, fiscal policy unintentionally became less expansionary in69

the first half of 1976, when expenditures were lower than anticipated whilereceipts remained close to target. Had Federal expenditures followed theprojected pattern, the level of GNP would have been higher and the economicslowdown following the spring of 1976 would have been less severe.The overestimate or shortfall in Federal spending in 1976 was small relativeto the size of the budget and was typical of recent years (Table 14).These errors in estimating spending suggest that the ability to forecast Governmentexpenditures precisely is limited, and that the textbook notion ofa truly deterministic level of Government spending is too simple. To theextent that a regular pattern exists in the difference between actual andpredicted levels of Federal spending, appropriate adjustments can be madewhen predicted expenditures are incorporated into economic forecasts. Theshortfall last year is an important reminder of the difficulties in attemptingto fine tune the economy with fiscal policy. This experience suggests that it ishard to measure the precise magnitude of the policy instruments as well asto assess their economic effects.TABLE 14.—Comparison of projected and actual Federal expenditures, nationalincome and product accounts, fiscal years 1970-76[Billions of dollars, except as noted]Actual less projectionFiscal yearProjection 1ActualAmountPercent ofactual197019711972...1973197419751976 . . .196.0212.4238.2259.7286.4324.4378.7195.6212.7232.9256.2278.9329.5373.0-0.4.3-5.3-3.5-7.55.1-5.7-0.2-2.3-1.4-2.71.5-1.51 Projections made in the Budget of the United States Government published in January of the current fiscal year and, exceptfor fiscal year 1976, adjusted for revisions by applying projected percent changes to revised data.Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council ofEconomic Advisers.FEDERAL EXPENDITURES AND THE SHORTFALLThe 8.7 percent increase in total Federal expenditures in 1976* was a returnto a more typical rate of growth after the exceptionally large increasesin 1974 and 1975 caused by the high rates of unemployment and inflation inthose years (Table 15). The deceleration in 1976 was due mainly to muchsmaller increases in transfer payments to individuals and grants-in-aid toState and local governments.*Unless otherwise noted, reference is to calendar years and to the Federal sectorin the national income and product accounts (NIPA). The Congressional Budget andImpoundment Control Act of 1974 changed the fiscal year from July 1-June 30 toOctober 1-September 30, beginning with fiscal 1977. The change necessitated a3-month "transition-quarter" from July 1, 1976 to September 30, 1976.70

TABLE 15.—Federal Government receipts and expenditures, national income andproduct accounts, calendar years 1975—76[Billions of dollars]1976Receipt or expenditure category 1975January 1976budgetprojectioniActual'Federal Government receipts-286.5330.0330.6Personal tax and nontax receiptsCorporate tax accrualsIndirect business tax and nontax accruals-Contributions for social insurance125.742.623.994.3143.655.222.8108.4145.355.923.5105.8Federal Government expenditures357.8391.6388.9Purchases of goods and services.124.4135.4133.4National defense..NondefenseTransfer payments __ _To personsTo foreigners_Grants-in-aid to State and local governments ___Net interest paidSubsidies less current surplus of government enterprises.Surplus or deficit (-).84.340.1148.9145.83.154.423.56.5-71.288.746.7163.0159.23.859.528.65.1-61.688.245.2162.2159.03.260.227.55.6-58.3i January 1976 projected percent changes applied to revised 1975 data.* Preliminary.Note.—Detail may not add to totals because of rounding.Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.The composition of Federal expenditures in 1976 continued the shift awayfrom defense and toward domestic programs that has been under way since1967. Defense purchases as a share of total spending were 23 percent in 1976,down from 48 percent in 1960. Conversely, transfer payments—now the largestsingle component of Federal spending—and grants-in-aid to State andlocal governments have grown markedly in recent years as a result of widercoverage, higher benefit payments, and new programs. These two categoriesaccounted for 57 percent of Federal expenditures in 1976, compared with32 percent in 1960.There was much discussion about the unexpected shortfall in Federalexpenditures in 1976, its relation to the slowing of real growth during theyear, and its implications for spending in 1977. Actual spending should becompared with the January projections presented in the 1977 Federal Budgetbecause the latter incorporated the Administration's plans and expectationsearly last year. Moreover a complete translation from the unified budget toNIPA concepts is readily available only for this set of estimates. On anNIPA basis the shortfall from the January projection for fiscal 1976 was 1.5percent of actual expenditures, a difference within the range of recent experience(see Table 14). Despite the fact that the underspending for the yearas a whole was neither exceptionally large nor unprecedented, it was concentratedin a short period and produced a rather sharp rise in the fullemploymentsurplus in the second quarter (see Table 18).71

A shortfall in Federal spending of about $3 billion, distributed over ayear as shown in Table 16, could be expected to produce a decline in theannual growth rate of real GNP of roughly 0.2 to 0.3 percentage point.Because the shortfall was not sustained throughout the year and because amajor portion was in transfers, which have a low GNP multiplier relative topurchases, the expected impact of such a change would be smaller. But itdoes help explain the weakness in the economy after the spring of 1976.The Federal expenditure shortfall was concentrated in the second quarter(Table 16). By the third quarter the underspending was much reduced, andin the fourth quarter total spending was substantially above projected levels.TABLE 16.—Federal expenditure shortfall, national income and productaccounts, calendar year 1976[Billions of dollars; quarterly data at seasonally adjusted annual ratesi)Category1976Yeara II IIITotal expenditures-2.8-5.5-13.8-1.810.0Purchases of goods and services..-2.0-3.5-4.6-.4.5National defense..NondefenseTransfer payments..To personsTo foreigners..Grants-in-aid to State and local governments.-~L5-.9-.2.7-1.4-2.2-2.8-2.2-.6.4-.7-4.0-4.7-3.8-1.0-3.0.0.0.6-.5-.9.1.43.74.46.3Net interest paid-1.1-.3-.9-1.3-1.6Subsidies less current surplus of government enterprises.5.8-.51.11 Actual expenditures less adjusted January 1976 projections. See note below.2 Preliminary.Note.—January 1976 Quarterly projections have been adjusted to revised 1976 data by multiplying the adjusted annualprojection (see Table 15) by the ratio of the original quarterly projections to the original annual projections.Detail may not add to totals because of rounding.Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council ofEconomic Advisers.The shortfall can be attributed to a combination of lower-than-expectedrates of inflation, unemployment, and interest, as well as to delays in makingnew obligations and outlays and to an apparent bias toward overestimationof expenditures in the budget. The obligation and payment lags primarilyaffected purchases, particularly for defense, where unused obligationalauthority unexpectedly rose about $10 to $12 billion in the 15-monthperiod between July 1,1975 and September 30, 1976. Obligation delays werealso responsible for the slowdown in the Federal highway aid program,which affects the grant component of total expenditures. The spending overrunin the last quarter of 1976 was almost entirely in transfers and grantsand was due to legislation which differed from that assumed in January.This increase does not appear to have been the result of spending delayedfrom earlier in the year.72

In the unified budget the total shortfall from the January estimate for fiscal1976 and the transition quarter was $11.4 billion. This figure was significantlylarger than in the NIPA Federal sector (Table 17) and was theTABLE 17.—Reconciliation of estimates of Federal expenditure shortfall, unifiedbudget and national income and product accounts, fiscal year 1976 andtransition quarter[Billions of dollars]Expenditure shortfall *CategoryTotalFiscal year1976Transitionquarter 2Federal budget outlays 3-11.4-7.9-3.5Less: Financial transactions and other asset transfers..-3.9-1.5-2.4Plus: Defense timing adjustmentForeign military sales.Other purchases4.43.6.82.13.0-.92.3.61.7Coverage, netting and other timing differences_-3.1-1.4-1.7Equals: Federal expenditures in national income and product accounts..-6.2-5.7-.51 Actual expenditures less January 1976 projections.»July-September 1976.3 Excludes outlays of the Export-Import Bank.Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.basis for most of the public discussion about the shortfall. Differences betweenexpenditures on the two bases result from financial transactions andother asset transfers included in the unified budget but not in the NIPA, certaindifferences in coverage and netting, and timing discrepancies betweenforeign military deliveries and payments, and between cash payments recordedin the unified budget and actual deliveries recorded in the NIPA. Mostof the difference between the unified and NIPA spending shortfalls in 1976represents unforeseen changes in financial transactions and other asset tranfersand advance payments for military sales abroad. In addition, the shortfallin defense outlays in the unified budget was not completely reflectedin NIPA defense purchases. The slowdown in these outlays was a consequenceof delays in making new obligations, largely because of the delayin passage of the 1976 defense appropriations bill and a lag in adjustingto substantial increases in budget authority.While the unified budget presents a fairly comprehensive record of allreceipts and outlays of the Federal Government, the Federal sector of theNIPA is generally considered a better measure of the Government's impacton current economic activity. If unified spending deviates from targetedlevels because of unexpected asset transfers or advance payments, the Federalsector in the NIPA is unaffected, since such transactions are likely tohave little direct impact on economic activity. On the other hand, becausethe economic effects resulting from defense spending for major procurementitems may occur well before there is a change in NIPA defense purchases,73

the latter may not immediately reflect the impact of a significant changein defense activity. Such a phenomenon happened in 1965-66 and mayhave occurred in 1976. The shortfall in new obligations and defense spendingon a unified basis could explain the softness in defense orders inmid-1976.In 1977 the residual economic impact resulting from the shortfall will stemfrom a combination of delayed multiplier effects and possible revisions ofspending levels where a catchup or continuing shortfall is expected. In the1978 budget the fiscal 1977 outlay projections have been revised to incorporatethe delayed effects of the shortfall. Outlays for some programs areexpected to be higher than estimated in last year's budget. In other casesoutlays will continue to lag somewhat in 1977. But on balance no significantnet increase or decrease in Federal spending is anticipated in 1977 as aresult of last year's shortfall.TAX LEGISLATION AND FEDERAL RECEIPTSThe antirecession tax cuts enacted in 1975 were continued throughout1976. The Revenue Adjustment Act of 1975 extended the personal andcorporate tax cuts in the Tax Reduction Act of 1975 for the first 6 monthsof calendar 1976. For corporations this legislation included a doubling ofthe surtax exemption from $25,000 to $50,000 and a lowering of the regularcorporate income tax rate on the first $25,000 of taxable profits from 22percent to 20 percent. In addition, the maximum investment tax credit onqualified equipment was increased from 4 to 10 percent for utilities andfrom 7 to 10 percent for all other businesses. Altogether these provisionsyielded a net reduction of about $2.5 billion in corporate tax accruals in1976 from what they would have been under 1974 law.For individuals the Revenue Adjustment Act provided somewhat largertax reductions than the earlier legislation in order to maintain the lowerwithholding rates in effect during the last 8 months of 1975. The majorprovisions were:1. A $35 tax credit per dependent, or a credit equal to 2 percent oftaxable income up to $9,000, whichever is larger.2. An increase in the low-income allowance (minimum standard deduction)from $1,300 per return to $2,100 for a joint return and $1,700for a single person.3. An increase in the percentage standard deduction, from 15 percent ofadjusted gross income (with a maximum of $2,000) to 16 percent ofadjusted gross income (with a maximum of $2,800 for a joint return,or $2,400 for a single return).4. An extension of the refundable 10 percent earned income credit forfamilies with dependent children and incomes below $8,000.The tax credit on purchases of new homes was not extended beyond 1975.74

The permanent changes in the Tax Reduction Act together with extensionof the temporary provisions in the Revenue Adjustment Act yielded a reductionof about $13.5 billion in personal taxes in 1976 from what they wouldhave been under 1974 law.Although the Administration had proposed that the personal and corporatetax reductions due to expire in mid-1976 be enlarged and made permanent,the Tax Reform Act ob 1976 merely extended the provisions of theRevenue Adjustment Act. In particular, the higher low-income allowanceand percentage standard deductions were made permanent; the personal taxcredits, the reduction in the tax rate on the first $25,000 of corporate income,and the increase in the corporate surtax exemption were extendedthrough calendar 1977; and the 10 percent investment tax credit was extendedthrough 1980. Thus the Tax Reform Act of 1976 did not produceany general tax cuts beyond those enacted at the end of 1975. Nor did itcontain any of the special tax incentives proposed by the Administration toencourage specific types of economic activity. The total of the tax reductionswas about $16 billion in 1976, compared with $18/ 2 billion in 1975.The Tax Reform Act of 1976 also made the first extensive changes in thetax code since 1969. These changes increased receipts by $0.6 billion in 1976and are expected to yield a $1.6-billion gain in 1977. Among the more importantmeasures enacted in the new law were unification of estate and gifttaxes, a narrowing of allowable deductions for tax sheltered losses, tighterrules on personal deductions and exclusions, an increase in the minimumtax, and an expansion of loss-carryover provisions. Numerous other revisionswere made in the tax law which modified existing tax preferences and addednew ones. Despite these changes the Tax Reform Act of 1976 did not achievefundamental reform or simplification of the tax code.The other tax legislation passed in 1976 was a temporary increase in theFederal unemployment insurance tax rate from 0.5 percent to 0.7 percentto become effective January 1, 1977. The amount of wages subject to thistax was also raised permanently from $4,200 per worker to $6,000 per worker,effective January 1, 1978. These measures are designed to replenish Stateunemployment insurance trust funds. The legislation also extended coverageunder the regular State unemployment compensation tax and benefit systemto about 9 million additional employees in State and local government andfarm and domestic workers, effective January 1, 1978. The Congress did notenact the Administration's proposed increase in the social security tax rateto 12.3 percent. Under current law, however, the rate will rise from 11.7percent to 12.1 percent on January 1, 1978, and the taxable wage base willrise $1,200 in both 1977 and 1978.Federal receipts increased by $44 billion to $331 billion in 1976, yielding aFederal tax share of nominal GNP of 19.5 percent. The strong economy,continued inflation, and the absence of the 1975 tax rebate were responsiblefor the large growth in receipts.75

THE FISCAL BALANCESThe Federal deficit fell to $58.3 billion in 1976, $3.3 billion less than thedeficit projected in January. The full-employment surplus rose by $2.2billion for the year (Table 18). The full-employment surplus measures thedifference between total receipts and expenditures under the assumptionthat the economy is operating along its potential GNP path. Because the fullemploymentsurplus is calculated at a constant operating rate for the economy,changes in receipts and expenditures that occur automatically in responseto the cyclical behavior of output and employment are eliminated.Since full-employment expenditures are intended to measure discretionaryshifts in fiscal policy, they include temporary expansions of unemploymentcompensation programs designed to counteract cyclical variations in theeconomy. For example, full-employment expenditures for 1975 and 1976include benefits under the Federal supplemental benefits (FSB) programand the supplemental unemployment assistance (SUA) program created inDecember 1974. The full-employment budget numbers presented in Table18 are based on the Council of Economic Advisers' new estimates of poten-TABLE 18.—Actual and full-employment Federal and State and local governmentreceipts and expenditures, national income and product accounts basis,calendar years 1970-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Federal GovernmentState and local governmentCalendar yearReceiptsSurplus or deficit (—)AmountChangeReceiptsExpendituresExpendituresSurplusordeficit(-)Operatingsurplusordeficit(-) 1Actual:19701971197219731974 -. .__19751976 21976:1IIIII192.1198.6227.5258.3288.2286.5330.6316.5324.6333.8204.2220.6244.7265.0299.7357.8388.9380.3378.7391.1-12.1-22.0-17.3-6.7-11.5-71.2-58.3-63.8-54.1-57.4-20.6-9.94.710.6-4.8-59.712.95.69.7-3.3134.9152.6177.4193.5210.2234.3260.5251.6254.3262.0132.2148.9163.7180.5203.0227.5246.6239.5245.0249.32.83.713.713.07.36.913.912.29.212.7-4.0-3.85.64.1-2.8-5.1.8-.6-3.8-.6Full-employment:197019711972197319741975197621976:1II.... ___III201.0210.0222.1257.5311.8337.6371.6358.5365.3376.1203 6219.1243.6265.4297.7350.1381.9372.6371.9384.3-2.6. -9.2-21.5-7.914.1-12.5-10.3-14.1-6.7-8.2-6.3-6.6-12.313.622.0-26.52.2.67.4-1.5138.1157.3179.4192.9219.3255.6277.7269.2271.7279.7132.2148.9163.7180.5203.0227.5246.6239.5245.0249.36.08.315.712.416.428.131.229.726.730.41 Surplus or deficit excluding social insurance funds.2 Preliminary.Note.—Detail may not add to totals because of rounding.Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council ofEconomic Advisers.76

tial output and the full-employment unemployment rate, which are discussedin Chapter 1. Thus the levels of the surplus are different from thosereported in previous years. The new benchmarks, however, have little effecton the period-to-period change in the full-employment surplus, which is theappropriate measure of the thrust of fiscal policy.The difference between movements in the actual deficit and full-employmentsurplus is an indicator of the normal cyclical changes in receipts andexpenditures. Over four-fifths of the drop in the actual Federal deficitin 1976 was due to an improving economy which automatically raised taxcollections and reduced unemployment insurance payments. The remainderwas largely the result of the unintended shortfall in spending.The State and local surplus rose to $13.9 billion in 1976. Of the totalincrease, slightly more than one-half was the result of higher tax receipts producedby the cyclical economic upturn and a significant increase in Federalgrants. The rest—as shown by the $3.1-billion increase in the State and localfull-employment surplus—was due to trend economic growth and discretionaryreductions in the growth of expenditures relative to receipts. Themost significant aspect of State and local finances in 1976 was the restorationof a surplus in their operating accounts (exclusive of social insurance trustfunds) in the last quarter of the year. This was made possible by the unusuallysmall increase in State and local expenditures in 1976, together with therapid growth in revenues. This fiscal conservatism at the State and locallevel reinforced the unexpected restraint coming from the Federal sector.THE NEW CONGRESSIONAL BUDGET PROCESSIn 1976 Congress fully implemented its new budget procedures for the firsttime. The Congressional Budget and Impoundment Control Act of 1974established a process whereby the Congress is forced to consider overallreceipts and outlays and commit itself under a binding resolution to thesetotals. The First Concurrent Resolution on the budget, which must be passedbefore May 15 of each year, sets targets for total receipts and outlays and forthe division of outlays among the major functional categories to guide congressionalcommittees in considering new legislation. These targets arerevised in the light of the normal authorization and appropriations process,and the changes are incorporated in the Second Concurrent Resolution,which sets a binding floor on receipts and a ceiling on outlays for the comingfiscal year. The second resolution must be passed before the new fiscal yearbegins on October 1. After the Second Concurrent Resolution has beenapproved, legislation that raises outlays above the ceiling or reduces receiptsbelow the established floor cannot be considered unless both Houses of Congressfirst pass a revised concurrent resolution.The most obvious benefit of the new procedures is that Congress nowconsiders the budget as a whole and its impact on the desired course of fiscalpolicy and resource allocation. In earlier years, legislation was enacted in apiecemeal fashion, with little attention to the overall macroeconomic and al-77224-250 O - 77 - 6

locative implications of the resulting tax and spending totals. By setting anoverall ceiling on outlays and a floor on receipts, the Congress is now forcedto consider the tradeoffs among alternative programs. It must also weighhigher spending against lower taxes for stabilization purposes in makingthe long-term choice between a larger or smaller Federal sector. The newbudget process also requires current and future cost estimates for all newprograms, thereby making more explicit the effects of current legislation onfuture budgets. The new budget process has thus institutionalized a morerational procedure for legislative deliberations on the budget and shouldmake the Congress more aware of the costs and consequences of the programsit enacts.MONETARY POLICY AND FINANCIAL MARKETSMonetary policy in 1976 must be interpreted in the light of financial andeconomic developments affecting monetary growth and interest rates duringthe year. Less extensive use of demand deposits for transactions purposeshas apparently continued to shift the demand for money downward, reducingthe growth of Mi which would otherwise be needed to sustain theeconomic expansion. An unusually low rate of growth of Mi relative toGNP growth is hence not necessarily evidence of a restrictive monetarypolicy. But neither is the decline in interest rates during 1976 evidence ofan expansive monetary policy. Both a slowing of economic growth in mid-1976 and falling inflationary expectations as inflation rates declined duringthe year have contributed to lower interest rates than had been expected.Appraisal of monetary developments in 1976 therefore requires a carefulexamination of monetary growth and the behavior of interest rates duringthe year.GROWTH OF THE MONETARY AGGREGATESOver the 4 quarters of 1976 the monetary aggregates Mi and M 2 grewby 5.0 and 9.8 percent respectively. The very slow growth in Mi whichbegan in the latter half of 1975 continued in the first quarter of 1976,when Mi increased by only 2.7 percent at an annual rate. In the secondquarter Mi expanded rapidly, spurred on by a significant drawdown ofU.S. Treasury deposits, which transferred funds to private demand depositaccounts in April. After another slowdown in the third quarter, the growthrate of M x reaccelerated in the fourth quarter (Chart 5).The growth of M 2 did not vary as much as the growth of Mi during1976. In the first quarter the growth rate of time and savings deposits atcommercial banks increased sharply because some market interest rates fellbelow the rates paid at banks. Thus M 2 increased at a 10.1 percent rate inthe first quarter while Mi increased at only a 2.7 percent rate. By the last2 months of the second quarter, however, the increase in market interestrates had caused some slowdown in the inflow to time and savings deposits.78

For this reason, although the rate of growth of M x increased by 5.9 percentagepoints in the second quarter, the rate of growth of M 2 increased byonly 1.1 percentage points. As interest rates on marketable securities beganto decline in the second half of the year, the growth of time and savingsdeposits picked up again and resulted in a substantial increase in M 2 .Chart 5Growth in Money StockPERCENT CHANGE^15SEASONALLY ADJUSTED ANNUAL RATES1974 1975 19761/ BASED ON AVERAGE OF DAILY FIGURES FOR THE QUARTER.SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.The velocity of M ± —the ratio of nominal GNP to Mi—grew by about a3 percent annual rate during the last 3 quarters of 1976, much more slowlythan in the previous 3 quarters. Both a faster rate of Mi growth and aslower rate of nominal GNP growth contributed to this slowdown. The importantquestion thus raised is whether velocity will again accelerate in1977 when nominal GNP growth is expected to increase. Some of the slowervelocity growth in the last 3 quarters can be explained by the usual lag in theadjustment of money balances to changes in nominal GNP growth. This samelag could provide some stimulus to velocity growth in 1977 if GNP growthaccelerates.Over the recovery as a whole Mi velocity growth has been somewhathigher than in previous recovery periods—averaging more than 6 percentat an annual rate over the last 6 quarters—despite the moderate decline ininterest rates. Regulatory changes and financial innovations, partly inducedby the high interest rates which peaked in 1974, have apparently beena factor in this higher velocity growth, as was noted in Chapter 1. Estimatesof how these changes affect Mi demand are necessarily imprecise, however,79

and should be used with caution in interpreting monetary developments andprojecting actual monetary growth rates.Another possible reason for the slow growth in demand for Mi is the unusuallyweak behavior of business loans at commercial banks during thisrecovery. Many banks require compensating balances for their loans in theform of demand deposits, and businesses sometimes build up deposits atcommercial banks to establish lines of credit in anticipation of loan needs.If loan demand is unusually weak, as has been the case in this recovery,Mi growth thus tends to be unusually small. It is therefore possible that arecovery of loan demand in 1977 could cause an acceleration of the growthin the demand for M x .Econometric estimates of the demand for M 2 as a function of GNP, amoney market interest rate, and the average rate on savings deposits provideevidence that some factors, perhaps the ones mentioned above, have shiftedthe demand for money downward. Such an estimated money demand functionincorporating lagged adjustments, which has explained the data wellduring most of the postwar period, began to shift in early 1974. This shift hascontinued during 1976, though at a moderately diminished rate.FEDERAL RESERVE TOLERANCE RANGES FOR MONETARY GROWTHIn May 1975 the Federal Reserve began to report prospective ranges forannual growth rates in the monetary aggregates. This practice has continuedwith quarterly reports of projected growth rate ranges for the three mainaggregates Mi, M 2 , and M 3 . These ranges represent Federal Reserve projectionsof monetary growth rates using the available information about economicconditions and policy intentions at the time projections are made.The ranges have been at least 2 percentage points wide in each case, thewidth of the ranges giving some flexibility to the projection procedure whilepreserving the information about the longer-run intentions of the FederalReserve. The quarterly updating of the base period adds flexibility, butwhen actual growth deviates significantly from the projected range someadjustment in the range may be necessary to prevent further deviations.Moreover the ranges themselves are not inflexible and are modified whenemerging economic developments require a change.Experience with this practice of announcing monetary growth ratesindicates that it can become a constructive addition to the economic policymakingprocess, helping to stabilize inflationary expectations. The rangeshave also provided information which permits a more enlightened discussionof monetary policy. Their forward-looking perspective has helped topromote general understanding of the tradeoffs between short-run andlong-run economic goals and to clarify policy makers' intentions.With the exception of the first projection for the period from March1975 to March 1976, each range has referred to growth from an averagetaken for the most recently completed quarter to an average for the same80

quarter a year later. The actual growth rates for the 1-year intervals endingin 1976 have not significantly deviated from the projected ranges (Table 19),though this alone is not an indication that monetary policy has been successfulin achieving ultimate stabilization goals. The growth rate of M 2 hasbeen inside the projected range for all but one of the four periods, withmore frequent deviations of M 3 above the upper boundary and of M x belowthe lower. The largest deviation for M x was from the third quarter of1975 to the third quarter of 1976, when Mi grew by only 4.4 percent. Someof this shortfall, however, may have been due to the unusually high base forthis period, a result of the 1975 tax rebates' effect on the money stock. Thusa moderate smoothing of the path of Mi from May through September 1975,to adjust for the impact of these special payments, would bring the growth ofM x above the lower boundary of 5 percent.TABLE 19.—Projected and actual growth rates of monetary aggregates, 1975—76PeriodMiM 2March 1976:Projected range *Actual.. _ _ _4.9 29.6M 310-1212.2Percent change from a year earlier:1976 11:Projected range 1 _ __ __Actual5-7^5.2BMrlOMi9.610-1212.01976 111:Projected range i _ _Actual5-7^4.4WrWA9.39-1211.51976 IV:Projected range 1Actualio799-1212.81 Range of percent changes in Mi, M2f and M3 forecast by Federal Reserve for the period and actual percent changesbetween periods indicated. Actual quarterly changes are based on quarterly averages.Source: Board of Governors of the Federal Reserve System.INTEREST RATESShort-term interest rates generally fell during 1976 and by Decemberwere at their lowest levels since 1972 (Chart 6). Only one marked fluctuationoccurred during the year. In the last 2 weeks of April the Federal Reservetook actions to slow the accelerating growth in the aggregates; and the Federalfunds rate began to rise, reaching 5/2 percent in late May. Accompanyingthe rise in the key money market interest rate, the Treasurybill rate and the commercial paper rate also increased; but by June theshort-term interest rates again began to decline.Long-term interest rates also fell during 1976. Moody's Aaa corporatebond yield fell to 8.0 percent by early December from an average of 8.8percent in December 1975. Interest rates on less highly rated corporate bondsfell more sharply, as indicated by the 144 basis point decline in Moody'sBaa corporate bond yield. Mortgage interest rates in the secondary marketalso fell during 1976 but by the end of the year had only a negligible impacton home mortgage rates in the primary market.81

Chart 6Interest RatesPERCENT PER ANNUM141210- V' \\ FEDERAL FUNDS\ CORPORATE Aaa BONDS\HIGH-GRADE MUNICIPAL BONDS3-MONTH TREASURY BILLS(New issues)i i i i I i i i l I I i i i | i I i i i i i I | 1 | i i I i i i i i '1974 1975 1976SOURCES: DEPARTMENT OF THE TREASURY, BOARD OF GOVERNORS OF THE FEDERAL RESERVESYSTEM, MOODY'S INVESTORS SERVICE, AND STANDARD & POOR'S CORPORATION.At the end of 1976 both short-term and long-term interest rates werewell below the levels reached at the start of the recovery in early 1975.Declines in interest rates are not typical of an economic expansion. The 1976experience results in part from a decline in the expected rate of inflation,which has apparently accompanied the decline in actual inflation rates. Thedecline in longer-term interest rates, however, may have been smaller thanthe decline in the expected long-term rate of inflation. If so, the real rate ofinterest—one measure of the impact of monetary policy on the economy—has not decreased.OTHER FINANCIAL DEVELOPMENTSNonfinancial corporations have lengthened the average maturity of theirdebt during the recovery. With severe liquidity problems at the start of1975, brought on by unusually large short-term borrowing in previous years,most businesses aimed at restructuring their balance sheets by increasingtheir long-term borrowing relative to short-term borrowing and by holdingmore liquid assets such as Treasury bills. The U.S. Treasury's borrowingstrategy has shifted in a similar direction in 1976, with 89 percent of the increasein marketable interest-bearing public debt in the form of longermaturitycoupon issues, compared to 53 percent in 1975.

Partly as a result of the desire of business firms for increased liquidity,commercial and industrial loans at commercial banks declined throughoutthe first half of the year, as they have generally done during the recovery,but a marked upturn in business loans began in October 1976. As was trueof the temporary turnaround in late 1975, a large proportion of thisincrease was in the form of bankers' acceptances—short-term money marketinstruments counted as bank loans—an indication that the turnaround againmight be temporary.In 1976 internal financing covered about 90 percent of total capital outlaysfor nonfinancial corporate business compared with more than 100 percentin 1975 when inventories were being liquidated. The fraction, however,remains well above any seen since the mid-1960s, and business use of externalfunds remains relatively weak. As the growth of investment continues in1977, the internal financing fraction should continue to decline and thedependence on external finance should increase.Proportionately more of the increase in long-term funds raised from externalsources by business corporations in early 1976 was in the form of equities(Table 20), but this trend was interrupted in the third quarter. Stock marketprices were higher in 1976 than in 1975, although they remained relativelysteady during the year.Increased borrowing in the household sector absorbed most of the decliningshare of U.S. Government borrowing in 1976. Home mortgage borrowingincreased sharply in the third quarter and accounted for most of the netchange in total mortgages during this period. Flows into thrift institutions,especially into savings and loan associations, were stimulated by decliningmarket interest rates relative to deposit rates, and they provided the majorshare of funds to support this demand for mortgages.TABLE 20.—Funds raised in credit markets by nonfinancial sectors, 1971—76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Sector and credit market instrument1971-74average1II1975IIIIV11976IIIIITotal funds raised _178.6156.9211.6222.0250.9233.6250.3258.8U.S. GovernmentState and local government _Nonfinancial business l ..15.116.682.959.611.743.3102.016.040.994.016.343.885.215.462.673.412.060.574.221.465.578.918.956.0Corporate debt instrumentsCorporate equities56.78.627.37.719.212.924.36.937.912.232.812.634.114.031.96.1Households 256.433.944.054.266.671.174.687.0ForeignHome mortgagesConsumer credit37.715.47.728.5.98.338.51.38.842.214.313.848.217.721.151.518.116.653.220.614.760.619.218.01 Also includes farm and nonfarm noncorporate not shown separately.2 Also includes mortgages other than home, bank loans n.e.c, and other loans.Note.—Detail may not add to totals because of rounding.Source: Board of Governors of the Federal Reserve System.83

EMPLOYMENT, UNEMPLOYMENT, AND INCOMETRANSFER PROGRAMSThe improvement in the economy last year was reflected in the labormarket: employment increased, unemployment declined, and benefits fromincome transfer programs were lower in comparison with 1975. The improvementin employment was stronger in the first half of 1976. While theunemployment rate fell during the first half, it increased during the secondhalf.EMPLOYMENTTotal civilian employment estimated from household survey data increased3.2 percent last year over the 1975 average (Table 21). The increase wasTABLE 21.—Labor market indicators, 1974-76[Quarterly data seasonally adjusted]Indicator1974 1975 19761975IV1976IIIEMPLOYMENT STATUSMillions of personsCivilian labor forceEmploymentUnemployment91.085.95.192.684.87.894. 887. 57. 393. 185. 27. 993.686.57.194. 587. 57. 095.387.87.595.788.17.6Percent *Civilian labor force participation rate*...UNEMPLOYMENT RATESAll civilian workersUnemployed 15 weeks or longer'___Demographic groupsMen 20 years and overWomen 20 years and overBoth sexes 16-19 yearsMarried men, spouse present-Occupation61.25.61.03.85.516.02.761.28.52.76.78.019.95.161.67.72.55.97.419.04.261.18.43.16.97.919.65.161.27.62.75.87.419.24.161.67.42.25.77.118.84.161.87.82.46.07.718.84.461.87.92.66.27.619.14.4White-collar workers..Blue-collar workers...Industry3.36.74.711.74.69.44.811.24.69.34.69.04.79.84.69.7Nonagricultural private wage and salaryworkers 4ConstructionManufacturingDurable goodsNondurable goods..Transportation and public utilities...Wholesale and retail trade.Finance and service industriesGovernment workersAgricultural wage and salary workers5.710.65.75.46.23.26.44.63.07.39.218.110.911.310.45.68.76.64.010.37.915.67.97.78.15.08.66.54.411.79.017.510.110.59.65.29.16.94.211.07.915.87.87.97.74.78.66.54.411.07.615.37.57.47.74.78.36.34.511.68.116.48.07.68.75.18.86.54.311.18.114.98.27.98,75.58.76.84.412.9» Unemployment as percent of civilian jabor force in group specified, except as noted.3 Civilian labor force as percent of civilian noninstitutional population.1 Unemployment as percent of total civilian labor force.4 Includes mining, not shown separately.Source: Department of Labor, Bureau of Labor Statistics.84

widespread among demographic groups. Since the first quarter of 1975,when the trough in employment was reached, civilian employment hasincreased by 4.4 percent, compared to 3.9 percent in the 7 quarters followingthe trough of the 1957-58 recession.Payroll employment increased 2.8 percent in 1976 over the 1975 level and2.7 percent from the fourth quarter of 1975 to the fourth quarter of 1976.The rate of increase in jobs from the last quarter of 1975 to the last quarterof 1976 varied substantially among the sectors of the economy. Employmentrose by 4.2 percent in durable goods manufacturing and in the privateservice-producing sectors by 2.8 percent. In other sectors, however, there waslittle or no change. Perhaps most notable is that State and local governmentpayroll employment, after growing by 4.8 percent from the fourth quarter of1974 to the fourth quarter of 1975, increased by only 1.8 percent from thefourth quarter of 1975 to the fourth quarter of 1976. The 3.7 percent increasein payroll employment since the first quarter of 1975 was little more thanhalf the increase recorded during the 7 quarters following the 1957-58recession trough.UNEMPLOYMENTAlthough the unemployment rate declined in 1976 it remained substantiallyabove the 1974 level (Table 21). The official seasonally adjusted unemploymentrate decreased from the fourth quarter of 1975 to the secondquarter of 1976 and increased in the last 2 quarters. The unemployment ratein the last quarter exceeded that of the first quarter.The quarterly movements in the seasonally adjusted unemployment rateare sensitive to the seasonal adjustment procedure that is adopted, particularlywhen there are large swings in unemployment because of a severerecession or sudden changes in seasonality. The Bureau of Labor Statistics(BLS) recognizes that analytically there is no unique or unambiguouslysuperior seasonal adjustment procedure and provides data adjusted underseveral alternative procedures. The procedure used to compute the officialunemployment rate gives a heavier weight to the more recent experience thanthe procedure applied to other statistics. Because large changes in unemploymentoccurred during the course of 1974 and 1975, the official seasonaladjustment procedure may have exaggerated the movements in the unemploymentrate last year.One of the alternative seasonal adjustment procedures used by BLS is toassume that there has been no change over time in the seasonality in employmentand in unemployment within age-sex groups for the years 1967 to 1973and to exclude the experience of the recent recession. Unemployment ratesadjusted according to the stable seasonality procedure suggest more gradualchanges throughout the year than the official statistics and about the sameunemployment rate during the last quarter as during the first quarter of1976. Under this procedure the unemployment rate was 8.3 percent in thefourth quarter of 1975, 7.8 percent in the first quarter of 1976, 7.5 percent in85

the second quarter, 7.7 percent in the third quarter, and 7.8 percent in thefourth quarter. This approach, however, does not allow for possible changesover time in the seasonality of age-sex specific unemployment rates that mayhave accompanied the dramatic changes in the composition of the laborforce. Of course differences in seasonal adjustment procedures have noeffect on the unemployment rate for the year as a whole.Last year's decline in unemployment rates was widespread among demographicgroups, though the rate fell more sharply for men than for women.One reason is the greater concentration of male workers in cyclicallysensitive blue-collar jobs. Another was the rapid increase in the participationof females in the labor force, an increase which retarded the decline in theirunemployment rate in spite of the rise in female employment.The decrease in unemployment rates by occupation and industry in 1976mirrored the cyclical increase in 1974-75. By occupation, the unemploymentrate of white-collar workers was essentially the same in 1975 and 1976,but blue-collar workers' unemployment rate fell by over 2 percentage points.In 1976 the unemployment rates in construction, manufacturing, and transportationand public utilities were lower than in 1975, but in the other privateservice-producing industries the unemployment rates in 1976 aboutequaled the 1975 levels. Unemployment rates in 1976 were substantiallyhigher than in 1975 and 1974 for government workers and agricultural wageand salary workers.The persistence of relatively high unemployment rates in 1976 for governmentand agricultural wage and salary workers may in part reflect the slowgrowth in government employment and a continued adjustment to SUA,which came into effect in the first quarter of 1975. SUA provided unemploymentcompensation coverage for the first time for the 12 million wage andsalary workers not covered by a regular Federal or State program, most ofthese being State and local government or agricultural wage and salaryworkers. The availability of these benefits may have encouraged some personswho became unemployed for seasonal or other reasons to extend theirperiod of unemployment and job search rather than take a less desirable jobor drop out of the labor force. (The effects of the unemployment compensationsystem on the unemployment rate are discussed in greater detail inChapter 4.)LABOR FORCE PARTICIPATIONThe civilian labor force participation rate increased sharply last yearcompared to 1974 and 1975 (Table 21). The increase was largely concentratedamong women. For women aged 20 and over the participation raterose from, 46.0 perecent in 1975 to 47.0 in 1976,.more than offsetting a 0.4percentage point decline in the participation rate among adult men whichcontinued a long-term trend. The teenage labor force participation rate increasedsomewhat, by 0.5 percentage point to 54.6 percent in 1976.The increase in female labor force participation is in part a continuation86

of longer-term trends. Over the past 2 decades, for example, the labor forceparticipation rate of women aged 20 and over has risen 11 percentage pointsfrom 36 percent in 1956. This change reflects a combination of relatedfactors: increased potential earnings in the labor market; later marriages; adecline in birth rates; more efficient production in the home because of suchtime-saving consumer durables as freezers and dishwashers, and such nondurablesas frozen foods and wash-and-wear clothing; and a change inattitudes concerning the roles of men and women. The expanded employmentopportunities in 1976 compared to the previous year may also haveencouraged greater labor force participation by women.The increase in labor force participation by adult females last summerappears to be larger than one would have predicted on the basis of thesecular and cyclical factors. The rise in the participation rate from 46.6percent in the first 5 months to 47.3 percent in July and August, and thedecline to 47.2 percent in the following 3 months may be traceable in partto the effect of SUA, which provided a new incentive for women in the educationalservices industry, and perhaps in other sectors, to remain in thelabor force rather than withdrawing during the summer.In summary, the substantial increase in employment (2.7 million persons)last year was accompanied by a very strong growth in the civilian laborforce (2.2 million persons). The labor force growth resulted mainly from theincrease in the population aged 16 and over, the secular increase in overalllabor force participation rates, and the economic recovery to the extent that itencouraged persons to enter or remain in the labor force. The result of thesefactors was that only a moderate decline occurred in the number of unemployedpersons (0.5 million).INCOME TRANSFER PROGRAMSA major concern of public policy in a recession is to mitigate the loss offamily income among those who become unemployed. Cushioning this losshelps to maintain consumer purchases and thereby facilitates economic recovery.It also provides for a broader sharing of the economic burden createdby a recession. With the improvement in the economy in 1976, benefits underincome transfer programs declined (Table 22).Unemployment compensation is the most important countercyclical incometransfer program. As unemployment increases because of layoffs, thenumber of recipients increases; with the recall of workers the number ofrecipients declines. This pattern appeared in the last 2 years during thedecline in economic activity and in the subsequent recovery (Table 22).The ability of the unemployment compensation system to respond to theeconomic downturn was strengthened by two temporary programs. UnderFSB the duration of entitlement for persons covered by a regular programwas extended in two 13-week installments to a maximum of 65 weeks. Benefitdurations under FSB were reduced in 1976 in States with lower insuredunemployment rates, and FSB is scheduled to terminate this March.87

TABLE 22.—Income transfer programs, 1974-76ProgramUnit1974IV1II1975IIIIV11976II IIIIVUnemployment:Total number of personsUnemployment Compensation:Beneficiaries: TotalPermanent programsFSB and SUA*Benefit payments: TotalsPermanent programsFSB and SUAFood Stamp Program:BeneficiariesBenefit payments _Aid to Families with DependentChildren:Beneficiaries: TotalUnemD 1 oved fathersBenefit payments 3__Old-age, Survivors, and DisabilityInsurance:Beneficiaries: Total 9Retired workers and dependents.Disabled persons and dependentsBenefit payments 7Medicaid:BeneficiariesBenefit paymentsMedicare:Benefit paymentsSupplemental Security Income:BeneficiariesBenefit payments 3Millions . .Millions*dodoBillions of dollars *_. do...do . .Millions»Billions of dollars

ment and earnings show little cyclical sensitivity (Table 22). These programsare nevertheless major sources of income redistribution. In 1976 total benefitswere $10 billion under AFDC, $73 billion under social security, and $6billion under SSI.The AFDC program for unemployed fathers (AFDC-UF), now availablein 28 States, grew significantly in 1976, though it is still a small program.AFDC-UF benefits had been available only to families with low incomeand few assets and with an unemployed father not eligible forunemployment compensation. In June 1975, however, the Supreme Courtruled that a State with the program could not deny AFDC-UF benefitssimply because the father was eligible for unemployment compensation,thus permitting such fathers to choose between the programs. For low-incomefamilies with several dependents, benefits under AFDC-UF may exceedthose available under unemployment compensation. The average monthlycash benefit among AFDC-UF families was $325 in the first half of 1976,about the same as the average monthly unemployment compensation benefit.Because they tend to have low earnings when they work, the average AFDC-UF claimant would have a lower than average unemployment compensationbenefit. In addition, participation in AFDC-UF includes categoricaleligibility for food stamps and medicaid. As more low-income familiesbecame aware of these greater benefits and as more workers exhausted theirFSB entitlement, AFDC-UF participation increased. From June 1974 toJune 1975, when the unemployment rate increased from 5.3 percent to8.7 percent, AFDC-UF participation rose from 86,000 families to 112,000families. By June 1976 the unemployment rate had fallen to 7.6 percent,but participation had increased to 146,000 families.There are three major in-kind income transfer programs: medicaid, medicare,and food stamps. Medicaid subsidized medical care for persons onAFDC, and for other low-income persons who are medically indigent, at acost of $15 billion in 1976. Medicare provided medical insurance at a costof $18 billion for the aged and disabled receiving social security benefitsand for persons with end-stage renal (kidney) disease. These programs exhibitsome cyclical sensitivity. The food stamp program, which providessubsidized food vouchers for low-income families, is the most cyclicallysensitive in-kind income transfer program. With the improvement in theeconomy the average monthly participation in the food stamp program decreased,although at an annual rate the program costs were about thesame as in 1975 (Table 22).One measure of the adverse impact of a recession is its effect on thepoverty rate, the proportion of the population represented by families orunrelated individuals with money incomes below the poverty level. Thepoverty threshold in 1975 for a nonfarm family of four was officially definedas $5,500 in money income as measured in the March 1976 supplement tothe Current Population Survey. Because of the growth over time in realfamily money income, the poverty rate declined from 22.4 percent in 195989

(the earliest data available) to 11.1 percent in 1973. In the recessionsoccurring during this period poverty either declined more slowly or actuallyincreased, while during periods of rapid economic expansion the povertyrate fell sharply.The most recent period is no exception. The poverty rate increased by 0.5percentage point (1.3 million persons) from 1973 to 1974 and by 1.1 percentagepoints (2.5 million persons) from 1974 to 1975. Given the severityof the downturn, as measured by the unemployment rate and real disposablepersonal income, the increase in poverty is somewhat smaller than wouldhave been expected. Past experience suggests that the increase would havebeen 0.7 percentage point from 1973 to 1974 and 1.3 percentage points from1974 to 1975. Moreover the extent of the increase in poverty would havebeen smaller if the value of in-kind income transfer benefits, such as thefood stamp subsidy and the insurance premium value of medicaid werecounted as income.ENERGY DEVELOPMENTSSince late 1973 world petroleum prices have risen by over 350 percentas the posted price of crude oil produced in the Persian Gulf increasedfrom $2.59 per barrel to about $12 per barrel. The economic recovery in1976 promoted an increase in energy consumption, though higher pricesheld consumption below the previous peak. Adjusting the quantity and mixof sources of energy consumed in the United States has been slowed becausesuch adjustment requires extensive changes in the capital stock of the countryand because the prices of domestic petroleum and natural gas are held belowworld price levels by controls. The United States has apparently adjustedless rapidly than other developed countries. This has contributed to increasedU.S. dependence upon imports, exposing the economy to greater risk of externallyimposed damage.CONSUMPTIONEnergy consumption increased in 1976 after 2 consecutive years of decline.The economic recovery was sufficiently strong to increase energy consumptionby about 3 5/2 percent in spite of higher prices, an abnormally warmwinter, and a cooler than usual summer. Energy consumption has beenlowered compared with the level that would have existed if it had not beenfor the price increases of 1973-75. In the household-commercial sector,changes in energy usage followed movements in real disposable income forthe first 2 years after the late 1973 price increase (Table 23). In themost recent 4 quarters, however, changes in energy consumption have beenfar smaller than the growth in real disposable income, suggesting a graduallygrowing response to price increases. In the manufacturing and transportationsectors as well, energy consumption has increased less rapidly thanwould have been predicted on the basis of the growth in manufacturing90

production or real GNP, and this also implies a continuing response to theprice rise.The amount of substitution of alternative energy inputs for petroleumto date has not been great. While coal is being substituted for petroleum,increased amounts of petroleum are being used to make up for shortages ofnatural gas. Petroleum as a percentage of total energy inputs in manufacturingincreased from 27 percent in 1973 to 30 percent in 1976. Usage ofpetroleum by utilities dropped 1 percent. The share of coal in total energyused in manufacturing remained constant between 1973 and 1976, whileutilities increased their consumption of coal from 56 to 62 percent of allfossil fuel inputs.TABLE 23.—Changes in energy consumption and relevant economic indicators by finalconsumption sector, 1950—76[Percent]PeriodEnergyconsumptioninhouseholdand commercialsectorReal disposablepersonalincomeEnergyconsumptioninindustrialsectorManufacturingproductionEnergyconsumptionfortransportationRealGNPAnnual average change:1950 to 19551955 to 1960.1960 to 19651965 to 19701970 to 1973.2.94.14 65 53.53.32.74 73.94.83.51.33 44.21.85 32.46 53 56.92.61.93 35.14.74.22.44.73.04.7Change from preceding year:19741975-1 81.9-1.61.7-2.9-8.3— 3-10.1-3.4.6-1.7-1.8Change from a year earlier to:1974: 1IIIII _IV1975: 1IIIIIIV..-4.8- .6-1.4.63.73.21.5-1.0.2-1.4-1.9-3.3-2.23.51.84.0-1.1-5.0y-4.'8-5.1-13.1-11.0-4.72 31.61.1-5.8-14.5-14.4-9.6-1.3-7.3-2.6-2.6-1.03.91.3-.6-1.9.0-.8-1.9-4.1-5.6-3.6-.32.31976: 1IIIII2.7-1 61.66.32.44.1.411.45.913.915.19.83.73.54.67.37.05.2Note.—Energy consumption includes distribution generation losses.Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Interior (Bureau of Mines)Federal Energy Administration, and Board of Governors of the Federal Reserve System.PRODUCTIONImports of oil increased while domestic production of crude oil and naturalgas declined again in 1976; however, production of bituminous coalcontinued to grow.The decline in the production of crude oil which began in 1970 continuedin 1976, although the rate of decline slowed to 2.6 percent from a4.7 percent decline in 1975. The decrease in petroleum production has tosome extent been caused by price controls on all or part of the output of91

domestic wells since 1971. From May 1973 to February 1976 roughly twothirdsof U.S. oil production was under price controls. From February1976 to September 1976 all U.S. output was controlled. In September 1976controls were lifted from stripper wells, which produce less than 10 barrelsa day and account for 14 percent of total U.S. output. The number of oiland gas wells drilled and the total footage of such wells increased in 1976 tothe level last recorded in the early 1960s, although many drilling rigs wereidle through part of the year. Production from the Elk Hills Naval PetroleumReserve was begun, and a number of problems which had preventedproduction of crude oil from offshore leases in California were surmounted.After numerous delays progress on the Alaskan pipeline set the stage fordelivery of the first production from the North Slope in late 1977.Production of bituminous coal increased by 2j/i percent in 1976 andreached a postwar record level. From 1973 to 1976 the production of coalincreased 12 percent, as coal production capacity has expanded in responseto higher coal prices.Total marketed production of natural gas, which had been decliningsince 1973, appears to have stabilized in 1976. The stabilization of productionmasks a continuing trend to withhold new production from interstatemarkets in favor of intrastate markets, where a higher price is offered. Theinterstate market for natural gas has apparently been bearing the full bruntof the declines in total marketed production since 1973. Thus Federalprice controls are not only causing reductions in U.S. production but alsodistorting the distribution of available supplies.There were only small increases in production from other energy sources,primarily nuclear power and hydropower. Hydropower production is limitedby the physical capacity of hydropower plants as well as by the amountof rainfall. Production from nuclear power plants was constrained by licensingand operating problems. Although the maximum dependable capacityof nuclear power plants increased by 10.3 percent from the end of 1975 toJuly 1976, production increased by only 6.0 percent; operating rates declinedto 52.0 percent of capacity from the average 55.0 percent recordedin 1975.IMPORTSThe increase in demand for petroleum and the decline in domestic productionimplied increased imports of petroleum during 1976. In some measurethe increase in petroleum imports represents the natural response to thegreater demand created by the economic recovery. Much of the increase,however, is the result of a policy which sets consumer prices by averaginghigher-priced imports and lower-priced domestic output. Imports, the marginalsupply of petroleum in the United States, are being subsidized by theprice controls, which discourage conservation and expansion of domesticproduction. Petroleum imports averaged 7.2 million barrels a day, up 1492

percent from 1973. The cost of petroleum imports has risen from $7.5 billionin 1973 to $32 billion in 1976. Imports currently represent 41 percent of U.S.oil consumption, compared with 29 percent in 1972. Although countries ofthe Western Hemisphere, primarily Venezuela and Canada, supplied abouttwo-thirds of U.S. imports of petroleum in 1973, less than half came fromthe Western Hemisphere in 1976.The 1976 increase in imports was concentrated in crude oil rather thanrefined products. Since 1973 total petroleum imports have increased from6.3 million barrels a day to approximately 7.2 million; but imports of petroleumproducts have declined from 3 million barrels a day to less than 2 million.This substitution is a result of expansion in refining capacity andimplementation of the Federal Energy Administration's (FEA) entitlementprograms, which provide substantial price protection to U.S. refineries.PRICESThe increase in energy prices, which had exceeded 10 percent per yearduring 1974 and 1975, slowed significantly during 1976. Contributingto this moderation was the Energy Policy and Conservation Act,which was passed by the Congress in December 1975 and became effectivein February 1976. This act caused an initial reduction of 8.8 percentin the price of crude oil produced within the United States and prescribedthat the rate of increase of crude oil prices would equal the rate ofinflation as measured by the GNP deflator plus up to 3 percent, as a productionincentive until the act expired in 1979. In its attempts to comply withthe provisions of the act, FEA froze the price of crude oil at the June 1976level as of July. Consequently, U.S. crude oil prices have fallen even fartherbelow the price of imports.Prices charged to consumers did not reflect the decline in domestic crudeoil prices last year (Table 24). The average price of crude oil entering refineries,including imported crude oil, increased during the last year, althoughthe price of domestic crude production fell 7 percent. The prices offuel oil and gasoline had surpassed the December 1975 levels by mid-1976.During 1976 price controls were removed from distillate fuel oils, residualfuel oils, and miscellaneous products. Gasoline, commercial jet fuels, propane,and certain other products remained under controls. Consumer pricesof products that were no longer under price controls rose no faster thanprices of those products still under control.The average price of natural gas continued to increase during 1976; butat about 54 cents per thousand cubic feet (mcf) it remained well below theprice of the nearest substitute, oil, owing to the effects of the continued regulationby the Federal Power Commission (FPC) of gas sold for resale ininterstate markets. Prices of domestic gas entering the regulated interstatepipelines rose from 30 cents per mcf for the 12 months ending June 1975 to39 cents for the 12 months ending June 1976. In mid-1976, prices for im-224-250 O - 77 - 793

TABLE 24.—Changes in consumer prices of energy items, 1966-76[Percent]PeriodTotal energyitems iElectricityFuel oil 2GasolinesGasAverage annual change:1966 to 19691969 to 19722.13.11.25.02.83.42.6.90.96.0Change from a year earlier:19731974197519768 029.310.67.15 018.113.215.458.88.39.835.46.84.612.519.91 Also includes coal and motor oil. not shown separately.2 Fuel oil No. 2.* Regular and premium gasoline.Source: Department of Labor, Bureau of Labor Statistics.ported and some newly contracted intrastate gas ranged between $1.67 and$1.71 per mcf.During 1976 the FPG lifted the ceiling price to 93 cents per mcf for gasfirst dedicated for sale in interstate commerce in 1973 and 1974. The priceallowed for gas first sold in interstate commerce in 1975 and 1976 was setat $1.42 per mcf. The FPC also raised the minimum price for what is termedold gas.The extent to which these price changes will affect demand is limitedby the practice of basing consumer charges on the average cost of gas, includingthe gas purchased under the previously lower regulated price. Consequentlythese price actions will not eliminate the shortage of natural gasfor interstate trade though they will help to reduce it.The average price of coal sold under long-term contracts continuedto increase during 1976 at a rate approximately parallel to the rate ofinflation in the economy at large. The price of bituminous coal in spotmarkets, however, continued to decline during 1976 from peaks reachedduring the coal strike of 1974.Electricity prices rose at a 7.2 percent annual rate through the first9 months of 1976 with rate increases awarded by regulatory authorities tooffset the past decline in revenues from electricity consumption. As growthin the demand for electricity resumed in mid-1976, requests for these revenue-sustainingincreases began to diminish.AGRICULTURAL DEVELOPMENTSIncreased crop and livestock production last year resulted in the smallestfood price increases since 1971, the food CPI averaging 3 percent above1975. At the same time, farm income remained close to the 1975 level.Last year's relatively stable situation provides a vantage point from whichto assess the adjustments of the agricultural sector to the relative pricechanges of the preceding 3J4 years.94

COMMODITY MARKETS AND FOOD PRICESWorld grain (including rice) production in the 1976-77 marketing year isestimated to be 8 percent greater than the preceding year, a record harvestand sufficient to add over 40 million metric tons to world stocks. This wouldbe the first substantial addition to world stocks in 5 years.While much attention has been given to weather uncertainties in recentyears, world production of all grains has been relatively stable. Because shortfallsin individual countries have to some extent been offsetting, world productionhas not fallen as much as 3 percent below trend levels in any yearsince 1960. However, relatively small variations in production can cause largeprice fluctuations because of the inelasticity of world supply and demand,especially with the much-reduced level of world carryover stocks of grain inrecent years. Price fluctuations in the United States during 1972-75 werefurther increased in size by policies in other countries, which attempted toinsulate their prices from world supply and demand conditions. The resultwas to leave a disproportionate amount of consumption and productionadjustment to countries which follow relatively free-trade, market-orientedpolicies. Chief among these is the United States.In response to the high crop prices of 1972-75, and accommodating farmpolicies, U.S. farmers in 1976 harvested record crops of wheat and corn forthe second consecutive year. The large crops allowed substantial rebuilding ofstocks, especially of wheat. U.S. carryover stocks from 1976 food grain suppliesare expected to be around 28 million metric tons for wheat and 2 milliontons for rice, roughly half a year's total utilization for each. At the end of1976 farm prices were substantially lower than a year earlier for wheat andrice, and slightly lower for corn. For soybeans, however, prices were muchhigher as strong domestic and foreign demand, coupled with a reduced U.S.crop, indicated that carryover stocks might be drawn down near minimumlevels in 1977.The lower food grain prices were reflected in an estimated 1 percent declinebetween the fourth quarter of 1975 and the fourth quarter of 1976 inthe cereal and bakery product component of the CPI. But grain prices influencethe food sector primarily through livestock markets. Favorable ratiosof livestock to feed prices in 1975 resulted in large increases in meatproduction in 1976. Compared to production figures a year earlier, pork productionwas up 8 percent, beef up S 1 /^ percent, and broilers up 12 percent.Milk production increased 4 percent, the largest annual rise since 1953.Beef production was high not only because of increased marketing ofgrain-fed cattle, but also because cattlemen continued to cut back theirbreeding herds, which had been overbuilt in the early 1970s. The resultingaddition to last year's meat supplies helped depress prices, but the reductionin cattle numbers set the stage for higher beef prices in the future.Consumption of red meats and poultry last year rose an estimated 7 percentfrom 1975. The relative price of meats as measured by the red meats95

and poultry CPI deflated by the overall CPI fell an estimated 6j/s> percentbelow the 1975 average. Taking into account changes in income and population,the increased quantities consumed implied a larger response of consumptionto the price decline or the income increase than is found in mosteconometric studies of demand for meats.Consumer prices for other food categories, including fruits and vegetablesand dairy products, increased faster than the overall CPI during 1976.There were especially sharp increases for coffee, eggs, and fish. But cerealsand meats declined suffiiently during the year to make the increase in thefood CPI only an estimated 1 percent from the fourth quarter of 1975 to thefourth quarter of 1976 and 3 percent from year-average 1975 to 1976.FARM INCOMEPreliminary estimates indicate that last year's real income from farm andother sources per farm household was high by historical standards for thefifth straight year, even though it was substantially below the 1973 peak. U.S.Department of Agriculture data on disposable income per capita for thefarm and nonfarm populations give some basis for comparing farm andnonfarm economic well-being (Table 25). Comparison is difficult, however,because of differences in the cost of living and in the number of persons perhousehold, as well as nonpecuniary differences between farm and nonfarmwork and greater capital gains arising from farm real estate. Commercialfarmers with annual gross sales of $20,000 or more per year earnedhigher average incomes than the nonfarm population throughout the 1970s.This group accounted for 89 percent of the farm products sold in 1975. In1975 they earned a mean income per household of $24,980, after tax butincluding income in kind, but the aggregate conceals wide variations in returns.In particular, many cattle feeders and sugar beet and cane producersexperienced losses last year, although in some recent years they earnedlarge profits.The changes in product and factor prices that lay behind the farm incomechanges of the 1970s show the influence of sharply rising export demand forgrains and oilseeds. In fiscal 1976 farm exports attained a seventh consecutiveyearly record of $22.1 billion, of which $13.7 billion was accounted for bywheat, feed grains, and soybeans. In addition, domestic demand for foodhas continued to increase. Total domestic utilization of farm food commoditiesincreased 6 percent between 1970 and 1976, while the CPI forfood consumed at home increased 8 percent relative to the overall CPI.Between 1970 and 1976 the prices farmers received for crops rose 35 percentrelative to the GNP deflator and the relative prices received for livestockrose 2 percent.The associated increases in factor prices reflect not only a greater deriveddemand but also the effects of energy price increases on productioncosts. The prices of all important groups of farm inputs increased in compari-96

TABLE 25.—Real income per farm and per capita disposable personal farm income aspercent of nonfarm income, 1961—75PeriodTotalincomeper farm(1967dollars) iPercentof farmopeiators'income fromfarmingPer capitadisposablepersonalincome,farm aspercentof nonfarm1961-65 average1966-70 average$6,7978,89351.245.961.772.0197119729 32710 86541.346.474.783.41973197414,18312,68555.851.3109.392.7197510,96944.489.6i Net farm income excluding inventory change plus off-farm income of farm households divided by the index of pricespaid by farmers for family living items, 1967=100.Source: Department of Agriculture.son with the general price level. The indexes for farm prices paid, deflatedby the GNP deflator, were up 44 percent for fertilizers, 28 percent for tractorsand self-propelled machinery, 23 percent for fuels and energy, and 21 percentfor agricultural chemicals between 1970 and 1976. The index of farm realestate prices relative to the GNP deflator rose 42 percent, and the hourlyreal wage rate of hired farm workers rose 12 percent during this same period.FARM AND FOOD POLICYThrough the Rice Production Act of 1975 a rice program that restrictedoutput was replaced last year by the market-oriented approach alreadyexisting for wheat, feed grains, and upland cotton. That approach, introducedin the Agriculture and Consumer Protection Act of 1973, providesincome support by means of deficiency payments based on the differencebetween a legislated target price and the market price or support pricereceived. The market price is supported at a lower level by way of the"loan rate," the price per bushel which is provided as a loan to qualifyingfarmers who put grain in storage and may then pay off the loan by turninggrain over to the Commodity Credit Corporation. The higher targetprice has little effect on acreage because deficiency payments are made onlyon an allotment base which a farmer cannot increase by expanding acreage.Unlike that for wheat and feed grains the target for rice established for the1976 crop is above market prices. Consequently deficiency payments on the1976 crop of an estimated $140 million will be made to rice growers.The loan rate on wheat was increased by 75 cents to $2.25 per bushelin October 1976, with smaller increases for feed grains. This increase putthe wheat support price near enough to market prices so that any furthersignificant increase in the support price would threaten to reduce exportand feed use of wheat.97

Following a recent emphasis on international approaches to commoditypolicy, the United States proposed in the International Wheat Council asystem of nationally held food grain reserves. The reserves, to consist of 30million metric tons of wheat and rice, would be used to add to supplies duringyears of exceptionally low production rather than to defend any particularprice band. They would be acquired and released with reference toquantitative triggers, when world supplies exceeded or fell short of trend bya fixed percentage. No progress was made toward implementation of thisplan. By year-end, however, prospective private carryover stocks of wheatand rice above working stocks in the United States amounted to perhaps 20million tons of the proposed 30-million world total.There were significant policy developments in several other areas in 1976.The Administration attempted unsuccessfully to move toward a marketorientedprogram for peanuts to replace the current reliance on acreagecontrols and high support prices. Dairy price supports were reviewed atquarterly intervals and were raised in April and October to keep the priceof milk used in manufacturing at 80 percent of parity. By the end of theyear substantial Government purchases of butter, cheese, and powdered milkwere being made at the support prices. The President vetoed a bill whichwould have raised dairy supports to 85 percent of parity and under whichthe accumulation of dairy products would have been still larger and theyear-end prices still higher.Other international policy developments concerned imported coffee, sugar,and meat, which in fiscal 1976 accounted for $5.0 billion of the $10.1 billionU.S. agricultural imports. The Senate ratified U.S. participation in a new InternationalCoffee Agreement, which contains provisions intended to stabilizeprices within a band agreed upon by producers and consumers. As withmost such arrangements, there is a danger that the agreement will bemore effective in holding prices above the price floor than in holding pricesbelow the price ceiling when a short crop occurs. The devastating Brazilianfrost of July 1975 is likely to keep prices well above the highest possiblesupport price for at least 2 more years. In regard to sugar and meat, measureswere taken to protect domestic producers from imports. The tariff on sugarwas increased 1.25 cents per pound, and quantitative restrictions were imposedon imports of beef.Government regulation of agriculture continued to grow last year. TheEnvironmental Protection Agency suspended most uses of the pesticidesheptachlor and chlordane. The Grain Standards Act of 1976 will greatly increaseFederal supervision of the weighing and grading of grain for export.The Farmer-to-Consumer Direct Marketing Bill was enacted to encouragethe purchase of food in places other than grocery stores. Other regulatorydevelopments included increasing health and safety regulation, the banby the Food and Drug Administration of several food additives, and thedecisions, first to permit and then to deny the use of mechanically debonedred meat for human consumption.98

While circumstances have enabled a movement away from restrictive programsfor grains and upland cotton, most of last year's policy developmentswere not in the direction of less regulated markets. With farmers pressingfor intervention to forestall lower grain prices, and with increased interestin achieving grain price stability through grain reserves, the potential existsfor a further turn from the market orientation that has been brought about inthe last decade. The costs of such a turn are discussed in Chapter 4.99

CHAPTER 3The World Economy in 1976S. 1976 DREW TO A CLOSE, there appeared to be some doubt\ regarding the strength, if not the sustainability, of the economicrecovery. After moving very fast early in 1976, the recovery began duringthe summer to slow in many countries. This slowdown, combined withpressures in foreign exchange markets associated with external paymentsstrains in a number of countries, brought about a renewed sense of uncertainty.Whereas policy concerns early in the year had centered on the riskthat simultaneous recoveries in the industrial economies might reinforceeach other and bring about an unsustainable pace, in the second half of 1976the concern shifted to the possibility that the flattening of the recovery mightlead to an insufficient rate of growth.Nevertheless the record for 1976 is quite positive in many respects. Outputin the industrial countries is estimated to have risen about 5 percent aboveits 1975 level in real terms, the volume of world trade expanded by about 10percent, and inflation rates, though not diminished as much as would bedesirable, are significantly below earlier levels. Despite the pessimism ofthe summer months, it should be clear that a cessation of growth is notexpected this year. The consensus of government and private forecastersis that expansion in output will continue, at a pace only slightly below theaverage rate of growth achieved in 1976, but nevertheless a pace that maynot be sufficient to allow a significant reduction in unemployment. In fact,although employment has been growing in many countries, unemploymenthas remained high and has begun to rise again in some.The experience of the past several years has shown that high and risinginflation rates are incompatible with the achievement of sustainable growth.In recognition of this fact it was agreed at the Ministerial Meeting of memberstates of the Organization for Economic Cooperation and Development(OECD) and at the meeting of Heads of State and Government of the majorindustrial countries in the summer of 1976, that the restoration of fullemployment and normal levels of capacity utilization in the OECD areawould take a number of years. It was also agreed that sustained recoverycould be achieved only in a climate of price stability. For this reason excessivelyexpansionary policies, which would be interpreted as carrying theseeds of renewed inflation, might at best bring only temporary relief fromunemployment.100

The policy actions taken in 1975 and early 1976 were aimed at establishinga sustainable recovery. Although several autonomous events in 1972-73helped create severe inflationary pressures, it is clear that overly expansionarypolicy measures bore part of the responsibility and eventually contributedto the worldwide recession of 1974-75, and it is this costly experience thatauthorities are determined not to repeat. Nevertheless, the strategy set outin mid-1976 envisaged a considerable period of growth well above longerrunaverage rates to ensure a steady move toward full employment. But italso implied caution lest inflationary expectations revive. Therefore, it shouldnot be interpreted as a failure of policy if a mid-course correction now mayprove to be necessary to keep the recovery on track in a number of countries.The fiscal program recommended in the United States (see Chapter 1) andthe possible adoption of fiscal measures supporting the recoveries in Japanand Germany reflect the conviction that demand management policies mustaim at sustaining the recovery but should recognize the need to remain prudent,even in the face of an apparent pause. This is particularly true sincethe latest indicators in some countries point to a strengthening of activity.Attainment of sustained growth after a prolonged period of rapid inflationand recession as well as adjustment to the higher cost of energy requirea rising share of investment in national output, at least for some time. Nowmore than ever this necessity implies an avoidance of policies that in theend lead to abrupt shifts. Above all, it involves a commitment by governmentas well as the public at large to realistic goals for the growth in incomesand the distribution of these incomes within and among nations.THE DEMAND SITUATIONAt the beginning of 1977 the recovery from the deepest and most widespreadrecession of the post-World War II period was entering its secondyear. As one frequently finds at this stage, some 18 months after a turningpoint, cyclical indicators in many countries are sufficiently mixed as toraise the question whether the recovery might lapse into insufficient growthor whether a broadening out into a sustainable expansion is imminent.In late 1975 and the beginning of 1976 substantial increases in output wereregistered in most industrial countries. These increases in activity weretransmitted to the developing countries, in particular the primary commodityproducers, through a strong expansion in international trade and asharp upturn in commodity prices that came unusually early in the cycle.The early phase of the recovery was associated in part with the substantialamounts of fiscal and monetary stimulus that had been put in place during1975 and early 1976, and in part with the cyclical recovery of inventory andconsumption demand.Because inventory decumulation in 1974-75 had been unusually sharp andprivate consumption demand had been weaker than in previous recessions,101

there was considerable room for expansion in both these demand componentsonce confidence in a stable recovery began to be established. Accordingly,the main impetus to the expansion in output in late 1975 and early 1976came from a shift in inventory behavior, which turned from significantdecumulation to moderate accumulation. As confidence about the economicoutlook improved, consumer spending began to contribute strength to therecovery. The historically high saving rates of the preceding period of inflationand recession began to decline to more normal levels, especially inthose countries where inflationary tendencies were subsiding, as consumersbegan to feel more secure about their jobs as well as about a restoration ofthe value of their inflation-eroded savings (Table 26). As a consequencepent-up consumer demand, reflecting earlier postponement of both replacementneeds and new purchases of durable goods, was released. And industrialproduction in OECD countries expanded at an annual rate of nearlyTABLE 26.—Personal or household saving rates in selected industrial countries,1965-76[Percent; seasonally adjusted]PeriodUnitedStatesCanadaJapanFranceGermanyUnitedKingdom1965-72 average..19731974 ..19751975: First half.Second half1976:1...II—IIIi Estimate.6.77.87.37.88.17.56.97.16.46.29.39.410.210.99.69.811.619.122 524.323.023.222.923 621.822.213.317.317.417.71 U6.3Note.—For the United States, Canada, and the United Kingdom, the rate is personal saving as percent of personal disposableincome. For other countries, the rate is household saving as percent of disposable income.Sources: Organization for Economic Cooperation and Development (OECD) and national sources.20 percent in the first quarter of the year (Table 27). Most of this increasewas concentrated in the growth of output of industrial materials and consumergoods. Clearly industrial activity could not be sustained at such apace, and growth of output moderated in the second quarter of the year.But as the summer passed and the temporary impetus to activity stemmingfrom the reversal of the inventory cycle and the partial release of pent-upconsumer demand spent itself, the rate of increase of economic activity continuedto be slow, largely because investment demand did not revivesignificantly.13.014.215.215.816.914.814.514.515.0DEMAND AND OUTPUT IN MAJOR INDUSTRIAL COUNTRIESThe continued slow pace of the world recovery after the vigorous upswingearlier in 1976 raised questions about whether or not the recoverymight be faltering, especially in the United States, Germany, and Japan,where considerable progress had been made in reducing inflationary expec-8.811 614.014.014.513.612.913.3

TABLE 27.—Changes in industrial production in selected industrial countries,1975-76[Seasonally adjusted monthly rates]Percent change from preceding periodPeriodOECDtotalUnitedStatesCanadaJapanFranceGermanyItalyUnitedKingdomLatest month from prerecessionpeak1975: L.IIIIIIV1976: 1April..MayJuneJuly .__ _Aug.._Sept -OctNov-0.8-1.8-.3 3.91.5.8.0.80.1-3.1.31 8.81.0.2.9.4.5.5-.3-.41 2—2.9_ 9—'2.41.0.31.0-1.2-.71.3-.4-1.3-3.3-2 61.0.31.93.0-1.81.32.2-1.7-.4.22.2-2.3-1.1-1.0-.11.31.7.0.0.8.8.04.0-4.7-2.4-0.9-.7-.51.2.92.7-.91.8-2.6.9.9.9-.90.4-.3-1.0- 61.9.8.54.5-2.51.8-9.113.4-7.7-.2-1.4_ 2.3.5.12.2-4.11.7-.91.6.1Sources: Organization for Economic Cooperation and Development (OECD) and national sources.tations, and where, therefore, policy could be more flexible than elsewhere.Current economic indicators in all three countries do not yet provideclear evidence whether and to what extent stimulative measures inaddition to those already instituted or currently contemplated might beneeded.In Germany the economic recovery had started earlier than in most othercountries, partly because inflationary pressures there had been containedearlier than elsewhere. Because of the early reining in of demand pressures,inventory accumulation in Germany was not as extensive in 1973-74 as elsewhere.Therefore, with demand reviving, the shift in inventory behavior didnot contribute as much to the early stages of the recovery as in other countries.Initially, the recovery was carried by the effects of a large incometax cut and a temporary subsidy on investment instituted in late 1974. Bythe end of 1975 it seemed that the impetus to final demand provided by thefiscal stimulus and by strongly rising export orders might broaden the recovery.Private consumption and investment demand were growing at annualrates of 8 percent in the first quarter of 1976. Surveys of business intentionand consumer sentiment pointed toward a continued firming of domesticdemand.After the first quarter, however, the pace of recovery slowed markedly.Not only was there no further improvement in unemployment, but employmentremained below year-earlier levels. Domestic order inflows to industrybegan to weaken. Part of the slowdown in the pace of economic activityreflected a weakening of consumption demand. The saving rate stoppedfalling and stabilized well above its 1965-72 average, though considerablybelow its recent peak, and the volume of retail sales was flat through most of103

1976. Only exports seemed to remain an expansionary force. Thus, considerableconcern arose about the ability of the German economy to move intoa sustained expansion.However, industrial production began to pick up again toward the end ofthe summer. Later in the year, order inflows, especially from domesticsources, appeared to strengthen and unemployment fell slightly. But businessintentions remained weak through the third quarter of 1976, accordingto surveys, and some part of the rise in domestic orders reflects subcontractingof export orders rather than a broad upturn of domestic investment.Monetary policy has been accommodating, and it appears that the targetfor monetary expansion set by the Bundesbank for 1976 will be exceeded. For1977, the monetary authorities have announced that their target for monetaryexpansion in terms of Central Bank money will be 8 percent, implying agrowth rate of 6*/ 2 percent from the last quarter of 1976 to the last quarterof 1977. In order to help ensure that the projected growth of gross nationalproduct (GNP) of 5 percent for 1977 over 1976 will materialize, the authoritieshave instituted a number of selective measures to increase labormobility and curtail unemployment, and a scheduled increase in value addedtax has been postponed. In addition, further measures to stimulate privateinvestment are being contemplated.Developments in Japan in certain respects appear to be similar to thosein Germany. The early phase of the recovery was sparked by fiscal stimulus,and activity picked up sharply toward the end of 1975 with a revival ofexport demand. In early 1976 the recovery appeared to broaden asprivate consumption demand rose rapidly and investment demand, thoughnot buoyant, registered its first significant increase in 2 years. Underlyinginflationary tendencies seemed to have moderated substantially, althoughprice indicators were rising at a somewhat faster pace than in 1975. Thefaster rise of consumer prices largely reflected reductions in the subsidy elementsof certain government services as well as other government pricedecisions. A regeneration of cost pressures did not appear to be a factor. Infact wage settlements, last year at an average 8% percent, were well belowpast trends and indicate that the moderation in price increases that occurredin the third quarter of 1976 may well continue. Furthermore the rate ofsaving in Japan, as in Germany, appears to have stabilized at levels aboveits long-run average, and consumption demand is consequently a lesserexpansionary factor than had been expected.The Japanese recovery seemed to come to a virtual halt during the summermonths. Industrial production fell toward the end of the summer, andthe growth in real GNP decelerated sharply from an annual rate of 8%percent during the first half of the year to somewhat less than 2 percent inthe third quarter of 1976. This slowdown reflected a decline in the volumeof exports from the very high levels of the first half of the year and a flatteningout in private investment demand. Finally, in Japan as in the United104

States some underspending by public authorities may have contributed tothe slowdown in the growth in output. In the case of Japan this underspendingwas associated with parliamentary delays in approving publicfinancing bills.Because of the sluggish growth in the third quarter of 1976, the Japaneseauthorities announced a number of stimulative measures in November. Theeconomic package consisted primarily of fiscal measures on the expenditureside of the budget, and the direct effect of this fiscal stimulus is estimated toamount to about 1 percent of GNP. However, because last year the Governmentfailed to effect the usual annual cut in income taxes designed to reducefiscal drag, overall fiscal policy may not prove quite so stimulative on balance.The formulation of budgetary policy in Japan in 1976 was complicatedby the tenuous political situation. Now that the December elections are overand a Government has been formed, the course of fiscal policy may well beclearer in 1977.The slower growth in activity in the three large industrial economies, theUnited States, Japan, and Germany, was accompanied by similar developmentsin the other major industrial countries. In these countries, however,the fact that internal demand grew more slowly or stopped growing duringthe summer months of 1976 largely reflected domestic policy measures aimedat containing accelerating price pressures.In Italy, partly because the Government was under strong politicalpressures, fiscal and monetary policies had turned decisively expansionaryin the second half of 1975. As a result output expanded rapidly from theend of 1975 through May 1976. This expansion in output was accompanied,however, by accelerating price pressures, largely reflecting rising wagecosts, a budget deficit that rose to 13 percent of gross domestic product(GDP), and an apparent loss of control of monetary expansion. These developmentswere in turn reflected in growing trade deficits and pressureson the exchange rate. The authorities attempted for some time to containexchange rate pressures by foreign borrowing and heavy intervention in theexchange markets. But growing reluctance by foreign lenders to extend furthercredit and mounting pressures in the exchange markets, partly causedby capital flight, brought about a significant change in economic policy.Systematic support of the exchange rate was discontinued early in1976, and monetary policy was tightened, as was fiscal policy. Partlyto reduce domestic liquidity, but mainly to arrest the drop in the exchangerate, the authorities instituted a prior deposit scheme on most foreign currencytransactions. Later in the year a temporary surcharge on all purchasesof foreign exchange was imposed.Stabilization measures which could strike at the root of Italy's economicproblems—wage push which was largely self-perpetuating in a climate ofaccelerating inflation because of tight indexation schemes and excessivegovernment deficits financed in large part by the central bank—proveddifficult to effect because of political uncertainties. Following the June elec-105

tions the authorities began to formulate a more comprehensive economicprogram partly in preparation for reopening negotiations with the InternationalMonetary Fund (IMF) for financial assistance. The Government'sprogram took more definite shape in October with the announcement andsubsequent parliamentary ratification of a series of increases in taxes, administeredprices, and public traiffs. Monetary policy was tightened further, anddiscussions with business and labor were begun to seek ways of reducinglabor costs and in particular of modifying the linkage between wages andprices. These discussions are continuing, and completion of the IMF negotiationsawaits presentation of a satisfactory program of wage restraint.Italy's Communist Party, which made considerable gains in the June elections,as well as the country's other major political parties have supportedthe Government's stabilization efforts and have agreed, along with key membersof the union leadership, that wage restraint must form an essential partof any stabilization package. However, the form such restraint is to take stillremains to be worked out.In the meantime, the recovery slowed, though not quite as much as hadbeen expected. Real GDP in the third quarter of 1976 increased at an annualrate of less than 2 percent, after strong increases in the preceding 2 quarters of10.2 percent and 6.3 percent respectively. Growth in the second and thirdquarters was largely sustained by exports and stockbuilding. Investmentspending, except for energy-related projects, leveled off after some improvementearly in the year. If the Government's stabilization efforts are effective,income growth may remain weak in 1977. In addition, high nominalinterest rates, a weak demand outlook, and poor profit opportunities maycontinue to inhibit private investment demand. A successful stabilizationprogram and strong export orders, however, might do much to release longdeferredreplacement demand for capital equipment.In the United Kingdom it was hoped that an export-led recovery wouldbring about the structural shift of resources into exports and private investmentthat was needed for a sustainable expansion, but these hopesflagged in the spring of 1976. The growth of exports began to slow, andin volume terms they fell by 3 percent in the third quarter of 1976. At thesame time, the recovery of private investment expenditures, except onNorth Sea oil installations, appeared to have come to a halt in the secondhalf of 1976. Real GDP fell in the second quarter; and although industrialproduction stopped falling in September, by November it was only fractionallyabove its early 1976 level. As a consequence unemployment rose throughmost of the year.The disappointing performance of the British economy was largely associatedwith continued high rates of inflation, despite the wage restraintinstituted in August 1975 and the agreement for further restraint reachedin May 1976 in return for some tax relief. The high rates of inflation—over 15 percent at an annual rate as measured by the CPI in the first halfof 1976—to some extent reflected higher import prices, as commodity pricesrose and the exchange rate weakened. But to a larger extent they reflected106

continued strong domestically generated price pressures, partly emanatingfrom the public sector.The British Government therefore reassessed its policies toward the endof 1976. In a policy statement, formulated partly in conjunction with theneed to obtain conditional credit from the IMF, the authorities set out theirprospective policy guidelines and the reasons for them. An essential requirement,aside from the necessity of further reducing inflation rates and of ensuringcontinuing support from the unions for the Government's wage policy,is the need to improve the nonprice elements of British competitiveness athome and abroad. Furthermore resources must be shifted from public andprivate consumption into exports and productive investment. The Governmentstated that "for this purpose an essential element of the Government'sstrategy will be a continuing and substantial reduction ... in the share of resourcesrequired for the public sector. It is also essential to reduce the publicsector borrowing requirement in order to create monetary conditions whichwill encourage investment and support sustained growth and the control ofinflation." Accordingly the Government is effecting public expenditurecuts, phased over several years, and raising some indirect taxes. Thesemeasures, combined with earlier expenditure cuts, an increase in employers'social security contributions, and some other revenue-raising provisions, areexpected to bring the public borrowing requirement down from its currentlevel of 9 percent of GDP to about 6 percent in fiscal 1977-78. The fiscalmeasures are coupled with limits on the expansion of domestic creditdesigned to bring the growth of bank lending and of the monetary aggregatesinto line with the Government's overall objectives of reducing therate of price inflation and bringing down interest rates.The economic program adopted by the British authorities was hammeredout under intense political difficulties, since the longer-term strategy clearlywas difficult to accept in the face of high and rising unemployment. However,the authorities decided that the past record of consumption-led growthpolicies had only weakened the industrial structure in the longer run.Equally, strong pressures to impose direct controls on imports, which were toreduce both external payments pressures as well as pressures on the internalprice level stemming from rising import prices, were resisted successfully,mainly on the grounds that such controls would help to perpetuate thestructural weaknesses in the economy, but also in recognition of internationalobligations agreed to within the framework of the General Agreementon Tariffs and Trade (GATT) and the IMF. If the recent measuresremove some of the uncertainties that have clouded the economic outlookfor Britain, and if the forthcoming budget, as expected, removes some ofthe tax disincentives to business expansion, the outlook for the growthof economic activity in 1977 and beyond may have improved substantiallycompared with the trends apparent around mid-1976.In France, as in the other major industrial countries, the recovery initiallysparked by fiscal measures and a turnaround in inventory investment slowed107

after the first quarter of 1976. The domestic economic situation is dominatedby concerns about continued high inflationary pressures. Wholesaleprices, which had been falling in 1975, rose at annual rates of almost20 percent in the second and third quarters of 1976, and consumer pricesincreased at about a 10 percent annual rate from early 1975 through late1976. The revival of domestic activity and the relatively high inflationrates were reflected in a growing current account deficit and downwardpressure on the exchange rate.Although a severe drought and the effects of the depreciation of theFrench exchange rate contributed to the rise in the domestic price level,the main pressures came from internal sources. Wages rose at an annualrate of 16 percent through the third quarter of 1976, in part led by settlementsin the government sector well in excess of the inflation rate. Thebudget deficit in 1975 had been financed largely by bank borrowing, andmonetary policy at that time was decidedly expansionary. As a result thegrowth of the broader money supply (M 2 ) accelerated sharply.Faced with internal price pressures and external financial constraints,the authorities tightened monetary conditions progressively during 1976.The budget for 1976 was designed to halve the public deficit comparedwith that of 1975. However, aid to farmers to alleviate the effects of thedrought and subsidies to the social security fund exceeding planned amountsmay keep the deficit above anticipated levels. The proposed budget for1977 is in balance. The growth rate of public expenditures is to be lessthan that of nominal GNP, and increases in personal and corporate incometaxes, partially offset by a cut in indirect taxes and some investment incentives,are to close the remaining gap between expenditures and revenues.In addition^ monetary policy is to continue to support the anti-inflationarymeasures. M 2 is to grow by 12J/2 percent in 1977 over 1976, compared witha 20 percent annual rate during the first half of 1976. The growth of regulatedbank credit (about 80 percent of all bank credit extensions) is to beheld to 5 percent for the large banks.The authorities also instituted a general price freeze from mid-Septemberto the end of 1976 and will keep public utility charges unchanged untilApril 1, 1977. The price pressures built up during the 3/2-month freezeon private sector prices were to be offset by a reduction in value added tax inJanuary 1977, and tighter control of profit margins is to limit price risesfurther. Finally, the Government proposed a voluntary wage restraint underwhich real wages would remain constant.The inflationary environment, coupled with political uncertainties reflectedin an early focusing on the 1978 parliamentary elections, hasbrought about a pessimistic turn in business and consumer confidence accordingto latest surveys. Nevertheless capacity utilization has continued torise moderately; and private consumption, reflecting somewhat larger risesin real incomes than elsewhere, has continued to support economic activity.108

GENERAL DEMAND TRENDSEconomic developments in the individual countries clearly show a considerabledivergence among underlying conditions and therefore amongpolicy concerns. In those countries where marked progress had been madein turning around inflationary expectations—Germany, Japan, and theUnited States, for example—concerns centered on the sufficiency of thepolicy stimuli effected earlier. In a number of other countries inflation rateshad diminished only little or were accelerating once more, partly becauseauthorities in these countries had generally not moved to contain inflationarypressures during 1974-75 to the extent that other countries had done.The authorities in these countries, notably Britain, Italy, France, and Canada,were thus forced, partly by external pressures, to institute measuresaimed at cooling the inflationary climate during 1976. Despite the growingdivergence of policy aims among major countries, however, the shapeof the recovery revealed a number of striking similarities.The slowdown in the growth of output over the summer months of 1976,aside from the expected diminution of the stimulus derived from earlierexpansionary policy measures and inventory changes, generally reflectedone major shift in the demand outlook: private investment demand failedto revive to the extent that might have been anticipated on the basis ofsurveys of investment intentions and general economic developments. Thissluggishness occurred in many countries, despite the fact that replacementneeds have been cumulating for some years and a general recognition thata return to sustained full-employment levels in most countries presupposesa shift of resources toward investment.In Germany and Japan, for example, past recoveries have usually showna considerable rise in investment demand following an export-led upturn.In the current cycle this pattern has not been repeated, despite the fact thatthe early stages of the recovery were clearly export led. Further, in a numberof other countries as well, investment is turning out to be less strong than pasthistorical relationships would indicate. Econometric evidence based onmodels for a number of countries participating in Project LINK supportsthis view.The financial position of the business sector in many countries does notappear to be a factor restraining investment decisions at this time. The considerableimprovement in the liquidity positions, and in the structure ofbalance sheets of nonflnancial corporations, that had been evident in 1975apparently continued at least into the first half of 1976. The cyclical risein corporate profits and the improved climate in bond and equity marketsallowed corporations to bring their internal financing and debt-to-equityratios into better balance. Flow of funds data for the United States, Japan,Germany, France, and the United Kingdom collected by the OECD show224-250 O - 77 - 8109

that this phenomenon was general among industrial countries. Of course,it reflects to some extent the weakness of investment demand, but the structureof the financial flows themselves was a significant contributing factor.If neither the low level of capacity utilization nor financial constraints canfully explain current investment behavior, the explanation for the failureof investment demand to turn up decisively in the second year of recoverymay be linked to a number of the longer-run factors discussed in Chapter 1.Data for most countries show that there has been an erosion of profitsapparent since at least the late 1960s and earlier in some countries. Atthat time, however, concerns regarding the downward trend of profitabilitywere alleviated by a growth-oriented business climate. Hence privateinvestment demand responded strongly in the 1972-73 upswing. The currentpause in investment spending appears to reflect a stronger awarenessof the earlier underlying uncertainties and the addition of new ones.The risks associated with committing capital for long periods thereforeappear to be weighing more heavily on the appropriation process and therisk premiums required have increased. The costing out of rates of returninto the future, never easy, is compounded by the fact that recent experienceshave led to greater uncertainties regarding future changes in demand,inflation rates, and financial conditions. The lack of clear guidelinesregarding government policies in various areas, but more generally also afear that governments may have lost control over economic conditions andthat the economy in a number of countries may fall into stop-go cycleshave added to the difficulties involved in the forward projection of profitability.A major new element affecting investment decisions is the large increasein the relative price of energy that was effected in 1973-74 by the OPECcartel. By raising inflation rates and making many processes in industrialand agricultural production uneconomic, the sextupling of the exportprice of OPEC oil since 1970 has had much more far-reaching effects thanthe directly obvious ones of deepening the world recession and creatingserious international financial problems. The success of the OPEC cartelhas also raised uncertainties regarding future price decisions and the securityof supply. Investment decisions have become vastly more complicated underthese circumstances; and adjustment, while creating new needs for physicalcapital, may take a long time. In the meantime, capital shortages mayappear in various sectors and intensify inflationary tendencies, which in turnwill inhibit the adjustment.In countries where for one reason or another nominal interest rates haverisen to recent cyclical highs, the problem surrounding investment decisionsis further complicated by the fact that interest payments on debt create cashflow problems. Under such circumstances the longer-run problem of buildingand sustaining confidence is therefore compounded by the more immediatefinancial situation.110

PUBLIC SECTOR DEFICITSThe economic programs adopted or proposed by the British, Italian, andFrench authorities, as well as some others, during 1976 all stressed the needto stabilize the growth of the public sector and to reduce budget deficits.In most of these countries it was felt that both inflationary tendencies anddisincentives to private sector initiatives were closely linked to the fact thatthe longer-run trends and the past years of inflation and recession hadled to an excessive growth of government expenditures. The expenditurelevels that have resulted are not expected to be sufficiently reduced as recessioneffects wear off. During 1976 government efforts in a number of countrieswere therefore largely concentrated on achieving immediate cuts inpublic expenditures as well as better longer-run control of the governmentsector. The focus on expenditure policy was owing in part to the fact thatin a number of countries it was felt that marginal tax rates were approachingeffective limits. In Britain and Italy efforts were also directed specificallytoward reducing the very large public borrowing requirement, since financingof the deficit during the year involved a high rate of monetization, thusgiving impetus to inflationary expectations and, toward the end of theyear, to rising nominal interest rate levels. The latter lessened the effectivenessof the governments' policies directed toward increasing private investmentdemand.By itself the growth of the public sector does not necessarily imply a lossof vitality in the economy. In fact at times there is a perceived need for theexpansion of certain public sector activities, such as infrastructure investment,which while leading to a growing absorption of resources by thepublic sector sustain or increase the vitality of the private sector. Germanyis a good example of this proposition. If the public sector provides the typeof services the public desires and is willing to pay for, there is no loss ineither productivity or private incentives. However, if public sector servicesare such as to cast doubt on the willingness of the public at large to pay forthem, they imply an increase in the tax burden that the public would bereluctant to bear. In such a case the struggle between business and laborabout the distribution of net income could be exacerbated. Such strugglesinevitably lead to inflationary pressure and to a loss in efficiency for theeconomy at large. In this sense the growth of the public sector may beseen as inhibiting growth in the economy.The closest link between transactions by the public sector and their effectson the overall economy is the direct claim on output and labor that derivesfrom government spending on goods and services. A large part of suchspending is concentrated on consumption or on investment in areas thatmay not necessarily reflect an optimal use of resources. One example is extensivegovernment aid to ailing sectors of industry or individual firms,when aid directed at phasing out such activities might represent a better111

use of resources. In such instances the overall ability of the economy to growmay be affected negatively.One element in the rise in government spending has been the increasingclaim of the public sector on labor over time (Table 28). In some casesTABLE 28.—Private and public employment in selected industrial countries, 1960-75Sector and country1960Percent of total civilian employment1965 1970 1972 19741975Private sector:United StatesCanadaJapanFrance .GermanyItalyNetherlandsSwedenUnited Kingdom_88.2192.597.191.389.891.078.186.993.196.989.889.090.977.685.893.196.888.488.289.890.191.074.985.593.096.687.887.488.789.390.371.885.393.096.487.386.788.488.92 90.273.682.696.286.985.471.8Public sector:UnitedStates . . . _CanadaJapanFrance - .GermanyItalyNetherlandsSwedenUnited Kingdom 311.817.52.98.710.29.021.913.16.93.110.211.09.122.414.26.93.211.611.810.29.99.025.114.57.03.412.212.611.310.79.728.214.77.03.612.713.311.611.12 9.826.417.43.813.114.628.21 Data for 1961.2 Data for 1973.a Includes public corporations.Sources: Organization for Economic Cooperation and Development and national sources.a shift of labor to the public sector has been part of a general change inresource allocation that, as noted above, has been conducive to—or atleast has not hampered—overall growth. But sometimes it has led to increasedinflationary tendencies, particularly in countries where the governmenttends to be a wage leader. This appears to have been a problem, especiallyin the United Kingdom in the early 1970s and in France during1976.In a more indirect way government policies may have influenced wageformation and price pressures through the timing and extent of increasesin social insurance contributions. When such contributions represent alarge, and in some cases rising, share of total employment compensationthey may create problems. These problems, however, do not lie in the programsthat are financed but in the fact that in wage negotiations workersdo not normally regard employers' contributions to social security fundsas a part of compensation. To the extent that unions in a numberof countries have begun to negotiate on the basis of after-tax compensation,rising contributions by employees have also added to wage demands andthus to price pressures. The need to increase contributions to social insuranceprograms has become apparent in a growing number of countries as recessionand inflation have reduced surpluses or have increased deficits of social112

insurance funds. The requirement that such programs be put on a solventbasis has necessitated increases in contributions, and to the extent that suchincreases put pressure on wages and prices, they provide a good exampleof the problem, mentioned earlier, that can arise with regard to incomedistribution.The unpredictability of changes in social policies as well as their increasedcost may also be inhibiting investment decisions. There is some evidence thatthis may have been a significant factor in the United Kingdom and Italy. Inthis connection the recent decision to raise employers' social security contributionsin the United Kingdom may well hinder the industrial revitalizationwhich other British policy actions were designed to foster.The size of the public sector and the way it is related to inflation andoverall growth of the economy must be viewed in terms of a balance betweenpublic services and private output representing a social consensus. In particular,expansion of public sector expenditures for purposes of short-term demandmanagement without an appropriate linkage to longer-term publicobjectives can disturb this balance. Because programs once phased in to filla temporary need tend not to be phased out with matching speed, there maybe an unintentional residue of additional public expenditure after eachcycle that is possibly wasteful from a longer perspective. However, somecountries, Sweden for example, have institutional arrangements that minimizesuch effects.Because it has proved difficult in most instances to restrain the growthof public expenditures, or in any event to increase tax revenues at an equalpace, public sector deficits, aside from cyclical effects, have been growing inmost countries. A number of countries have been able to keep domesticconsumption high by drawing on foreign savings to finance their publicdebt. But it has become increasingly clear that there are limits to the willingnessof foreign lenders to extend such credit. Although in some countriesexternal debt levels might have reached excessive proportions in any event,the time was telescoped by the need to finance external deficits resultingfrom the increase in the export price of OPEC oil. Consequently in somecases the level of external debt has begun to force authorities to adoptdomestic retrenchment programs. The situation has become increasinglyacute in those countries where inflationary expectations have remainedhigh and where inflation is eroding trade positions.THE EXTERNAL SECTORThe recovery was accompanied by a sharp upturn in the volume ofworld trade. In contrast to 1975, when world trade in volume terms fell by5 percent, trade is estimated to have expanded by 10 or 11 percent in 1976.Clearly, this substantial growth of world trade has helped to sustain therecovery, but it has also brought to light the serious underlying imbalanceswhich exist among countries but which had been masked by the recession.113

Among the industrial countries, those with the most stable domestic conditionshave apparently had a larger share in the expansion of world exportsthan those with continued high inflationary pressures. This developmenthas occurred despite the large exchange rate adjustments during 1975and 1976 which helped to offset differential developments in inflationrates (Chart 7). The full effects of changes in relative exchange ratesare felt only after a considerable lag. Given the existing slack in capacityutilization and the vigorous upturn in world trade, however, one might expectthat countries with depreciating currencies would have shared atabove-average rates in the trade expansion. In the event, throughout 1976the United Kingdom, for example, has been unable to maintain its exportmarket shares, at least in trade in manufacturers, compared with other industrialcountries. Italy's share was reduced through the first half of theyear, and France may have begun to lose shares as well (Table 29).The failure of trade flows to respond quickly to changes in exchange ratesis often attributed to the failure of such changes to show up immediatelyand fully in transaction prices. But the price side tells only part of thestory. If export prices, expressed in foreign currency, are not adjustedquickly to reflect exchange rate changes, profits on export sales will riseand selling abroad will become significantly more lucrative comparedwith domestic sales. It is therefore reasonable to presume that, particularlyat times of low general profitability, the leverage exerted by exchangerate changes on the supply side may be greater—at least in the shortrun—than the leverage on demand arising from increased price competitiveness.Because there is considerable evidence that some countries which haverecently experienced relatively large depreciations of their currencies havenot adjusted their export prices in foreign currency to the extent that mightbe expected, the profit argument would have provided further grounds forexpecting these countries to maintain, if not to improve, their export marketshares.In view of the above discussion, it may be surprising that some "strongcurrency" countries, especially Germany and Japan, have not only maintainedbut increased their shares in export markets. Several explanationssuggest themselves. Countries with relatively low inflation rates tend tohave lower interest rates and may therefore be able at a time of highdomestic liquidity to offer more competitive financing terms. Unfortunatelydata on such nonprice components of export transactions arenot available. But because a number of countries exempt export credittransactions from the effects of tight domestic monetary policies, andbecause the cost of forward cover may partly offset differences in uncoveredrates, this explanation takes one only part of the way. Stronger circumstantialevidence exists for a structural explanation relating largely toso-called big ticket items. It is thought that countries with a relativelystable price performance and relatively little social strife and labor disruption,such as Germany and Japan, have a structural advantage in cap-114

TABLE 29.—Export shares in trade in manufactures of 11 industrial countries, 1966—76[Seasonallyadjusted]PeriodUnitedStates iUnitedKingdom 2Germany France Italy Japan Others 3Percent of total value *1966..1970..1972..1973..1974.1975.1975: III.IV..1976: L._.II5..III K20.118.516.116.117.217.718.718.317.217.517.513.410.810.09.48.89.39.29.49.28.88.719.319.820.222.121.720.320.119.620.520.421.18.68.79.39.59.310.210.19.99.710.39.76.97.27.66.86.77.57.97.96.66.37.59.711.713.212.814.513.613.613.514.814.714.722.023.323.523.321.821.420.421.522.022.020.7Percent of total volume *1966..1970..1972.1973.1974.1975.1975:111....IV...1976:1l|_.III 5 .20.818.517.518.920.320.220.919.918.618.918.812.610.89.79.89.39.69.49.59.29.28.919.119.819.520.020.418.918.918.719.519.319.68.08.79.28.89.39.49.39.08.89.69.16.87.27.57.27.17.67.97.86.96.67.610.011.712.912.113.013.613.514.115.815.415.322.723.323.723.220.620.720.121.021.221.020.71 Excluding special category exports.2 Including reexports, and adjusted for underrecording.3 Belgium-Luxembourg, Netherlands, Sweden, and Switzerland.* Total value and total volume refer to total exports of manufactures of the 11 countries in this table.5 Partly estimated.Note.—Details may not add to totals because of rounding.Source: National Institute Economic Review, London.turing large contracts. The certainty of timely delivery and the relative assurancethat contracts will not be reopened because of cost overruns apparentlymake it worthwhile for the purchaser not to speculate on the possibleexchange rate advantage that might derive from placing contracts ina "weak currency" country. If this interpretation is correct, improvement inunderlying deficits may take a long time to become evident, even after theadoption of adequate measures to correct the underlying conditions.The large swing in world trade from an actual decline in 1975 to abovenormalgrowth rates in 1976—equaling about twice the rate of growthin GNP—has eased external payments strains for a number of countries,especially the primary producers. The worldwide trade expansion was reflectedin a shift in the U.S. trade balance of about $20 billion (at an annualrate) from a surplus of almost $9 billion in the fourth quarter of 1975 to adeficit of about $12 billion in the fourth quarter of 1976. This change in theU.S. trade position, which was in large part cyclical, was not, however, accompaniedby similar changes in the trade positions of Germany and Japan.115

Chart 7Exchange Rates for SelectedIndustrial CountriesINDEX, 1973 = 100 (RATIO SCALE)140_ UNITED STATES12080 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 i1974 1975 1976120 JAPAN140 GERMANYI I I I I I I I I I I I I I I I I I I I I1974 1975 19768 0 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 i1974 1975 1976100i i t 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 i1974 1975 1976NOTE: INDEXES ARE BASED ON TRADE-WEIGHTED AVERAGE EXCHANGE RATES AND ARE FOR THELAST WEEK IN THE MONTH.SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.116

Chart 7—ContinuedINDEX, 1973=100 (RATIO SCALE)140Exchange Rates for SelectedIndustrial Countries80 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 i120FRANCE80 i i i i i I i i i i i I i i i i i I i i i6 0 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 i100UNITED KINGDOM806 0 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 i i1974 1975 1976NOTE: INDEXES ARE BASED ON TRADE-WEIGHTED AVERAGE EXCHANGE RATES AND ARE FOR THELAST WEEK IN THE MONTH.SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.117

In fact trade surpluses of both these countries toward the end of 1976were larger than they were the year before, a reflection not only of theirstrong export performance but also of a relatively slower growth rate ofimports, particularly in Japan.As the recoveries in Germany and Japan—as well as in the United States—proceed, demand for imports is likely to rise concurrently. But the totaleffect on world trade in 1977 exerted by about 1 or 2 percent faster growthin each of the big countries—which would imply rates of growth that areat the upper limit of what authorities currently judge to be compatible withnoninflationary growth—might raise the currently projected 8 percent rateof growth of the volume of world trade to 9/ 2 percent. This increasewould help smooth the adjustment problems of the rest of the world, but itcould not be enough to make a crucial difference to those countries whichstill find themselves in payments difficulties despite the large growth in aggregateforeign demand registered in the past year.ECONOMIC OUTLOOK AND GOVERNMENTPOLICIESThe slowing of the world recovery after the vigorous upswing earlier in1976 raised questions about whether or not the recovery may be faltering.Nevertheless, with the policy measures now in place or contemplated, estimatedgrowth of real GNP in 1977 for the OECD area as a whole based onnational projections may amount to 4/ 2 to 5 percent. This rate of growthapproximates the 5 percent or so achieved for 1976.In the three big industrial economies, recovery paths actually may not divergesubstantially from earlier recoveries. Further, it must also be rememberedthat the breadth and sustainability of every upswing in the recent pasthas been put into question at some time or other before it moved into thebroader expansion phase. The difference in the current recovery lies in thegreater role that inflationary expectations and other uncertainties may beplaying in business decisions. Thus the judgment must be that demand managementpolicies in the three large economies need to remain prudent if thegains achieved so far are not to be jeopardized—especially because the riskinherent in stimulating considerably faster growth than the 5 to 6 percentrates now aimed for may be too high. Nor would faster growth lead to anappreciable easing of the policy problems that are being faced by othercountries.A growing number of OECD countries are facing large and in some casesrising external deficits as recoveries proceed. In many of these countries theprogress on the inflation side has been less than satisfactory, particularlycompared with achievements in the three major industrial economies.Consequently, after underlying deficits which were masked by the recessionsurfaced once more, private capital inflows proved insufficient tocover such deficits. In fact inflation fears have in a number of cases causedsuch capital inflows to shrink at the same time that current account deficits118

widened and the possibility of borrowing abroad began to reach its limits.As a result adjustment policies are being forced on a number of countries.Besides Italy and the United Kingdom, a growing number of smallercountries are now experiencing problems in attracting a sufficiency of foreigncapital. Consequently in late 1976 the monetary authorities in severalcountries moved to raise interest rates and tighten monetary conditions. Thiswas particularly evident in countries adhering to the European snakearrangement, where exchange rate policy forced an adjustment in monetarypolicy. Nominal interest rate levels in the second half of 1976 were approachingrecent cyclical highs in Italy, the United Kingdom, the Low Countries,and the Scandinavian countries (Chart 8). These policy actions clearlybring out the dilemma faced by many authorities: how to deal with continuedinflationary pressure without diminishing private investment incentives,since the latter are requisite to a resumption of a stable growthpath and a lasting reduction in unemployment. In this respect the strongreliance on monetary policy exhibited in a number of countries raises questionsregarding the appropriateness of the policy mix given longer-termpolicy goals.The reliance on monetary policy reflects what are perceived to be politicalconstraints in a number of cases. Where social friction is growing and unionsupport of demand management policies has been gained on the basis of understandingsregarding transfer payments and public sector employmentopportunities, it is proving difficult to change the policy mix. Partly becauseof such dilemmas a number of these countries have looked increasingly torising demand in the United States, Germany, and Japan to resolve theirexternal payments difficulties as well as to encourage domestic investment.As noted above, however, stronger demand emanating from the three largeindustrial countries can help to smooth the adjustment process, but it cannottake the place of well-conceived domestic stabilization programs.STABILIZATION POLICY AND EXCHANGE RATE POLICYCountries have recently had to make difficult adjustments as a result ofthe severe shocks the world economy has undergone in the past several years.The large exchange rate changes that occurred during 1975 and 1976 partlyreflect this process. The task of formulating domestic stabilization policies,never an easy one, has been made even more difficult by these circumstances.Serious social and political problems had to be faced by authorities as theyattempted to bring their economies back to a path of balanced growth. Becauseof these difficulties, it is not surprising that there has been a search forexternal sources of stability which might ease the hard choices faced by governmentsand the social partners in the private sector, business and labor. Inparticular, some have looked to exchange rate stability as a means of reducinginflationary pressures.119

Chart 8Interest Rates in SelectedIndustrial CountriesPERCENT PER ANNUM16- UNITED STATES-12-••* *\SHORT-TERM RATE84 -ni l I I I I i i i1973LONG-TERM RATEI i I l I ii i i MI1974MI'-••••' /DISCOUNT RATEl I I I II1975I I I I II I I I I I I I I197616- JAPAN-128- ^ .y*—'* I••'.--*"'N-4-016i i i i i ! i i i i i I i i i i i I i i i 1 1 1 I I I I I I I I II i i i i i 1 i i i i i1973 1974 1975 1976- GERMANY128401612i i i i i I i i i i i I i i i i I i i i i19731974SWITZERLANDi i i I i i i i i I i i i i i I i i i i i1975 1976-840J*,t-*• —I l I l I I l l i i I I I l I• •vui^.tr.^^. ^I I I I I I I 1I I I I I I I I I I I I^T ,I I II 1 I I I I 1 11973 1974 1975 1976NOTE: SHORT-TERM RATES ARE GENERALLY 3-MONTH MARKET RATES AND LONG-TERM RATES AREGENERALLY GOVERNMENT BOND YIELDS; THESE RATES ARE FOR THE LAST WEEK IN MONTH.SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.120-

Chart 8—ContinuedInterest Rates in SelectedIndustrial CountriesPERCENT PER ANNUM161284_CANADADISCOUNT RATELONG-TERM RATE/^*"\ -^.r-—^;|> ' I -•--"- 4...•*.. •••.„.* VSHORT-TERM RATEI I I I I 1 I I I I I 1 I I I I 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 I I I -1973 1974 1975 1976- FRANCE/ ...... / \ ,J \ : I •••-. ^^^04 I I 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 I I i I i J I I 1 I I I I I I I I 14197319741975197620- ITALY161?8402016/r•'*•%.../• - - 1 ""' \*^*^ V'vAJy'/11 11 11 1111 i I 111 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 I1973 1974 1975 1976UNITED KINGDOMIi i120 4 I I I I I I I l I I l I I I I I I I I I I I l I l I I I l I l I I l l I I I I l I I l I I I1973 1974 1975 1976NOTE: SHORT-TERM RATES ARE GENERALLY 3-MONTH MARKET RATES AND LONG-TERM RATES AREGENERALLY GOVERNMENT BOND YIELDS; THESE RATES ARE FOR THE LAST WEEK IN MONTH.SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.121

One of the theories put forward in support of substantial intervention inexchange markets is that currency fluctuations as they occur under the floatingrate system provide an independent source of inflationary pressure. In itsflattest terms this view is that wherever inflation has led to currencydepreciation the decline in the exchange rate will create further inflationaryimpetus, because of its effect on the domestic price level, and will thereforemake stabilization policies increasingly ineffective. In other words, exchangerate changes under these circumstances have a destabilizing effect by creatingmore inflation, leading in turn to further depreciation, and so on. Someproponents of this theory conclude that this so-called vicious circle can bebroken by official intervention in the foreign exchange markets because thisaction will prevent further depreciation of the exchange rate.That theory, however, ignores the usual basic cause of the initial depreciationof a currency: domestic policies that have allowed inflationary tendenciesin a particular country to diverge substantially from those in surroundingcountries. Stabilization of the exchange rate through interventionor borrowing abroad subsidizes imports and thereby suppresses alreadypresent domestic inflation and prevents needed adjustment. This effect ispossible only for a limited period and when differentials in inflationary expectationsare moderate. In the longer run an exchange rate change must beseen not as an independent cause of inflation but as a release of inflationarytendencies that had been suppressed earlier.A more sophisticated variant of the vicious circle theory states that evenwhen adequate adjustment measures are in place import prices may beforced to adjust to anticipated inflation. Because adjustment takes a considerableperiod of time, depending on the size of the disequilibrium needing tobe corrected, the exchange markets may in some cases bring about an initialrate of depreciation that anticipates the length of the adjustment process. Insuch instances, the longer the expected adjustment period, the greater theinitial overshooting of the exchange rate. Such overshooting at the beginningof the adjustment period may indeed cause inflationary pressure. In the shortrun, therefore, downward pressure on the exchange rate, resulting eitherfrom overshooting or from autonomous movements in exchange rates independentof inflation trends, may complicate the effectiveness of stabilizationpolicies. This possibility is all the stronger in relatively open economies inwhich indexing arrangements establish a close link between price and wagemovements. But, clearly, such a process will be sustainable only if policies arefollowed that validate the resulting inflation. Thus, even this more sophisticatedvariant of the theory of a vicious circle is incomplete. To the extentthat adjustment measures cause a reversal of inflationary expectations andreestablish a stable economic environment, the likelihood that a reflow ofcapital will occur is increased, with a consequent tendency for the exchangerate to move upward. The changes occurring through the current and thecapital accounts are hence likely to be offsetting. Thus the notion of a generalizedvicious circle phenomenon is unwarranted.122

Where stabilization policies are perceived to be adequate and are firmlyin place, bridging finance to cover the period until external deficits can bereduced adequately and intervention in the market to counter disorderlyconditions that can arise without being related to inflation trends may behelpful. In most cases where sound programs are in place and governmentintentions to hold to them are felt to be firm, the need for such interventionwill usually be small. One should also note that the inflationary impact ofexchange rate depreciation often conceals the important role of these adjustmentsin restoring competitiveness and accommodating a reallocation ofresources toward the external sector.It is not useful to ascribe the possible overshooting of exchange ratechanges and their consequences on the domestic price level to one exchangerate system or another. If domestic policy goals diverge, and in consequenceinflation rates also diverge among countries linked together by trade andcapital movements, participants in the foreign exchange market will actupon their expectations regardless of the international monetary systemunder which they are then operating. If a fixed exchange rate system prevails,considerable speculation will occur and capital flows will after a whilepush the rate off the peg. If the system is flexible, the response will besimilar. The underlying economic conditions and how market participantsperceive a government's determination to deal with underlying problemsare what determine actions in the market. And market participants willuse whatever system is available to them to obtain the adjustment theyconsider necessary. Because they have perceived the reluctance on the partof various governments to institute politically difficult measures, their actionsin the exchange market have leaned toward the pessimistic side.But under these circumstances most observers would judge such reactionsto be realistic rather than pessimistic. Hence it is not clear that marketactions have ordinarily led to an overdepreciation of exchange rates, orindeed that they have been destabilizing.Government intervention in the exchange markets aimed at holding arate when there is increasing evidence that this rate is not in line withunderlying economic conditions is likely to prove costly and wasteful ofscarce official financial resources. If anything is to be learned from the experienceof the 1960s and early 1970s it is surely that intervention policyby itself does not bring about needed adjustment and that the markets arefully aware of this fact. In recognition of this reasoning the Heads of Stateand Government of the six major industrial nations agreed in November1975 that the aim of intervention policies should be "to counter disorderlymarket conditions or erratic fluctuations in exchange rates," and furtherthat stable underlying economic conditions are requisite to stable exchangerates. This agreement was affirmed in a wider context by the meeting of theInterim Committee of the IMF in early 1976.123

CURRENT ACCOUNT POSITIONS AND FINANCINGThe changes in the world payments pattern from 1975 to 1976 largely reflectedthe upswing in economic activity. Thus the current account deficit ofthe industrialized countries as a group increased substantially, while thedeficit of the non-oil developing countries (non-oil LDCs) shrank and thesurplus of OPEC rose (Table 30). But current account positions of individualcountries reflected both the recovery itself and underlying disequilibriathat became apparent once more during the recovery. For a numberof countries the appearance of a current account deficit, or a diminutionof a surplus, is a healthy sign from the point of view of both domestic activityand international equilibrium. As long as the oil-producing countriesare unable to spend all their current earnings on imported goods and services,a corresponding current account deficit must be shared among theoil-importing countries. However, the distribution and the size of suchdeficits are compatible with international equilibrium only if the countriessustaining them exhibit a sufficient degree of economic vitality to attractoffsetting capital inflows.TABLE 30.—Current account balances for OECD, OPEC, and other countries, 1973—77[Billions of U.S. dollars]Group of countriesOECDOPECNon-oil developing countries.Other countries 3...Unexplained discrepancy19732H-V4l A1974-3370H-21-VA-71975-6^39H-2914-15H121976119772-23-254145-20-22-12 -1414 161 Partly estimated.2 Projection.3 Sino-Soviet area, South Africa, Israel, Cyprus, Malta, and Yugoslavia.Sources: Department of the Treasury and Organization for Economic Cooperation and Development (OECD).OECD CURRENT ACCOUNT POSITIONSThe shift in the current account balance of the United States from a surplusof $6.3 billion in the second half of 1975 to an estimated deficit of $1 *4billion in the second half of 1976 contributed to smoothing the internationaladjustment process (Table 31). No such support to better internationalequilibrium was apparent in the shifts in the current account positions ofthe other two major industrial countries. The Japanese current accountswung from a deficit of about $1/2 billion in the second half of 1975 to a$^4-billion surplus in the second half of 1976. This shift, however, maskedthe diminution during the second half of the year from the very large surplusaccumulated in the first half of 1976. The recent downward trend in Japan'scurrent account balance indicates that some further cyclical adjustment maystill be expected. Nevertheless the persistent Japanese surplus has complicatedadjustment for other countries and has led to voluntary agreements torestrict certain trade flows. In Germany the current account surplus in 1976was about unchanged from its 1975 level. But because import demand in124

Germany grew more in line with output than it had in Japan, there is lessreason to believe that Germany's current account surplus is likely to dimmishsignificantly in the coming year.TABLE 31.—Current account balances for OECD countries, 1974—76(Billions of U.S. dollars; seasonally adjusted]19751976Country1974FirsthalfSecondhalfFirsthalfSecondhalfiOECD: Total.__United StatesCanadaJapanFranceGermanyItalyUnited KingdomOther OECD-_ _-33.0-.6-1 7-4.7-6.09.7-8 0-8.7-13.0-1.05.4-2 5.9.63.31-1.9-6.8-5.56.3-2 3-1.6-.7.6- 6-1.8-5.3-m.8-2.63.5-1.92.3-1.9-1.1-6.5-1%-2H X-4IH- 3 4-2-71 Estimate.Sources: Organization for Economic Cooperation and Development (OECD) and national sources.Because of the strong current account positions of Japan, Germany, anda number of other countries, including Switzerland and the Netherlands,the shift in the combined position of the OECD countries, from a deficit of$55/2 billion in the second half of 1975 to a deficit of more than $15 billion inthe second half of 1976, included substantial increases in the deficits ofOECD countries other than the United States. Particularly large shifts wererecorded for France 1 and some smaller OECD countries. The improvement inthe Italian position reflects in part the adjustment measures taken throughoutthe year, but it also results from the direct actions taken to curtail increasesin imports and to limit purchases of foreign exchange. The positionof the United Kingdom was little changed on a year-to-year basis, but a deteriorationoccurred during the year, partly reflecting an export performancethat was somewhat disappointing, even after initially perverse effects of theexchange rate depreciation were taken into account.Thus, for the OECD countries, 1976 was a year of adjustment difficultiesand of wide disparities. However, measures taken toward the end of 1976to help sustain the recovery, as well as further actions contemplated forearly 1977 in some "strong currency" countries, should help smooththe adjustment process this year. Nevertheless, remaining difficulties mustnot be underestimated, nor must the danger that they could lead to growingpressures for restrictive trade measures be taken lightly. Because suchpressures may be increasingly difficult to resist, it is important that progressin the Multilateral Trade Negotiations (MTNs) be substantial. In particular,aside from the increase in general welfare that would result from tradeexpansion associated with tariff cuts and the removal of nontariff trade barriers,the strengthening of the general framework of the GATT is importantin this context.125224-250 O - 7 7 - 9

OPEC SURPLUSESAdjustment problems of many countries continue to be complicated bythe large surpluses accruing to OPEC. In line with the upswing in economicactivity, the OPEC current account surplus began to rise again in1976. Import absorption possibilities have turned out to be very highfor most OPEC member states, even for Saudi Arabia and the UnitedArab Emirates. Nevertheless the rise in the current account surplus forOPEC in 1976 is a reflection of increases in the surpluses of the lattercountries and Kuwait as import expansion possibilities for these countrieslag well behind the inflow of oil revenues. The increase in the exportprice of OPEC oil agreed upon at the end of 1976 will serve to raise theOPEC surplus further in 1977. Because of port congestion, disarray in developmentprograms that were accelerated too quickly, and surfacing financialconstraints, a number of OPEC members have begun to reconsider theirdomestic requirements. For this reason and because much of the prospectiveincrease in production will probably be in Saudi Arabia, it is not likelythat much of the addition to oil incomes from price increases will quicklybe translated into foreign orders. Thus the investible surplus of OPEC islikely to increase in 1977, assuming that economic growth in oil-importingcountries will continue, albeit at a moderate pace.The way in which OPEC members have invested their financial surpluseshas changed markedly over time (Table 32). Whereas OPECfunds in 1974 were largely invested in short-term assets, the flow intobank deposits and Treasury bills has declined sharply since then, whileequity investments and purchases of bonds and notes have continued togrow. With the termination of the Oil Facility in the IMF and some diminutionof OPEC grant aid in 1976, a larger share of OPEC's investible surplusflowed to the market. However, considering the decline in the current accountsurplus, investible funds in 1976 are likely to have totaled about $40billion compared with almost $60 billion in 1974.The geographical distribution of OPEC's investment flows has alsochanged considerably over the past 3 years. Investments in the United Stateshave risen from 20 percent of the total in 1974 to an estimated 30 percent orso in the third quarter of 1976. On the other hand, OPEC's placements inthe United Kingdom fell from 12% percent of the total investible surplus in1974 to nearly zero in 1975; and for the first 3 quarters of last year there wasa net liquidation of $1*4 billion of sterling assets,NON-OIL LDCsThe increase in the OECD's current account deficit last year was reflectedlargely in a narrowing of the deficits of the non-oil developing countries.Because official financing flows to the non-oil LDCs from both OECDcountries and OPEC were little changed from 1975, the diminution of thenon-oil LDCs' deficit reflected primarily market transactions. Adjustment126

TABLE 32.—Estimated disposition of OPEC investible surplus, 1974-76[Billions of dollars]DispositionUnited States .Banking and portfolio placements.Short-term bank deposits and Treasury billsLong-term bank depositsU.S. Treasury bonds and notesOther domestic bonds and notesEquitiesOther (includes real estate and other direct investment,prepayments on U.S. exports, debt amortization, etc.)__.United KingdomOther developed countriesLess developed countriesNon-market countriesEuro-banking market 4International financial institutions (including IMF Oil Facility).Total investible surplus (identified above)ESTIMATED INVESTIBLE SURPLUSError of estimates of surplus and unidentified investments._1 Preliminary.2 Includes shift of over $1 million from prior year "direct investment" in a U.S.-incorporated petroleum company tobanking and portfolio assets.3 Less than $0.5 million.4 Claims on banks in currencies other than that of the country in which bank resides; excludes banks in the UnitedStates.« Not available.Note.—Detail may not add to totals because of rounding.Source: Department of the Treasury.measures taken by a number of non-oil LDCs in late 1975 and in 1976 werereflected in lower import flows. But a more important factor in the smallerdeficit was the resumption of growth in the volume, and even more in thevalue, of exports. Commodity prices began to rise early in the recovery. TheLondon Economist's "Index of Commodity Prices" in dollar terms showeda rise of 40 percent between July 1975 and July 1976. With the pause in therecovery at midyear, price increases appeared to come to a halt for somecommodities and to moderate for others. The overall result, however, wasthat by the end of 1976 commodity prices on average, at least as measuredby the Economises index, had reached the inflation peaks reported in 1974.This upward shift in the price level for commodities will continue to bereflected in the export earnings of commodity producers.EXCHANGE RATE CHANGESThe financing of external deficits in 1976 was accompanied by a very highrate of activity in foreign exchange markets. The trade-weigh ted exchangerates for certain major currencies showed considerable movement despiterelatively large balance of payments financing and heavy intervention by for-127

eign central banks in exchange markets (Chart 7). The strains experiencedwithin the European snake arrangement were a major factor in the heavyintervention activity. Early in the year heavy pressure on the French francled the authorities to break the link with the currencies adhering to the snake.Upward pressures on the German mark, reflecting both the large Germancurrent account surplus and the continued significantly better inflationperformance of the German economy compared with its trading partners,caused considerable strain among the currencies remaining in the snake. Inthe fall of 1976, therefore, the central values of the currencies within thesnake were realigned, with the mark appreciating by 2 percent, the Swedishkrona and Norwegian krone depreciating by 1 percent, and the Danish kronedepreciating by 4 percent. The largest changes in the foreign currency markets,however, involved the pound sterling, the Italian lira, and the Mexicanpeso, which depreciated by 16 percent, 2134 percent and 37J/i percentrespectively against the U.S. dollar between the end of 1975 and the endof 1976.INTERNATIONAL FINANCIAL MARKETSThe unrest in the exchange markets and the financing difficulties thatsurfaced during the year for a number of industrial and developing countriesobscured the relative ease with which deficits of many other countriescontinued to be financed. Activity in the international capital market wasbrisk during 1976. On the demand side, expectations that borrowing costswould rise in 1977 buoyed activity; in addition, there was an exceptionallystrong surge in Canadian demand for long-term funds. Concurrently thesupply of funds to the bond markets was encouraged by low demand fordomestic credit in the United States and Europe resulting in declines inshort-term interest rates during the year. As funds became more abundant,bond yields began to fall. Medium-term credits arranged in the Eurocurrencymarket also showed a substantial increase last year, as risingdemands for finance from almost all the main categories of borrowers weremet by increases in supply sufficiently large to allow borrowing costs to decline.Total borrowing in the markets for medium-term Eurocredits, Eurobonds,and foreign bonds amounted to $48 billion in the first 10 months ofthe year, representing an annual rate of $58 billion, an increase of more thanone-third from the 1975 total.New issues of Eurobonds during the first 10 months of the year at $12j/2billion were well above the volume issued in the corresponding period of1975, a previous peak for the Eurobond markets. Industrial countries issued69 percent of all bonds during the first 9 months of 1976, taking a considerablylower share of loanable funds than in 1975. Japan was very active in themarket, but some borrowers from countries in deficit—for example, theFrench, the British, and especially the Canadians—also increased their use ofthe Eurobond markets. Canadian issues of $2% billion in the first 10 monthsof last year were more than twice as large as in all of 1975 because ofexceptional needs for long-term finance, relatively high domestic interest128

ates, and tax changes that facilitated foreign issues by private companies.Developing countries floated loans whose volume in the first 3 quarters of1976 was more than twice that of the preceding year; their share of themarket consequently rose to 20*4 percent, 5 percentage points of which wereaccounted for by oil-producing countries (Table 33).TABLE 33.—Borrowing in international capital markets, 1974-76[Billions of dollars]19751976Capital market1974TotalFirsthalfSecondhalfFirsthalfThirdquarter *October *Total borrowing40.842.719.223.530.311.26.9Medium-term Eurocredits 228.520.68.512.012.34.75.0Industrial countries..DenmarkFranceSpain _. _United KingdomOther19.0.43.31.15.78.56.4.3.51.0.64.02.80'.5.31.63.6.3'.6.42.23.6.31.01.22.50ilḷ 31.01.500.1.68Oil-exporting countriesAlgeria .IndonesiaIranVenezuelaOtherOther developing countries.ArgentinaBrazil __MexicoPhilippines .Other.8o .4.1.1.27.2.51.61.5.92.73.251.6.3.2.67.9f] 2.2.33.31.4.11.10.202.6( 3 ).7.11.11.8620.65.3n1 5.12.31.74.3 .704.7.11.2.72.0.4120.11.6.1.7.4.1.31.100.11.002.0( 3 )9.1.5Nonmarket countries andorganizations1.12.71.11.61.4.2.3International organizationsand other _ __.4.4.3.1.9.1Eurobonds.. _ _CanadaFranceJapanOther4.5.433.610.21.21.31.26.55.6.3.8.63.94.6.95.62.68.41.9.8.75.03.1.6.3.31.91.0.2.1.1.6Foreign bonds __ ._Canada.IBRD .Other7.82.03.12.711.93.42.46.15.11.3.63.26.92.01.73.29.63.41.64.63.41.1.51.8.9.30.6i Preliminary.3 Publicized credits of over 1-year maturity; represents commitments.3 Less than $50 million.Source: International Bank for Reconstruction and Development (IBRD).The brisk activity in the Eurobond market was in part related to a shiftin interest rate differentials that may have contributed to the willingness ofinvestors to reduce their liquidity positions and extend the maturity of theirholdings. Short-term rates exhibited a sharp cyclical decline, while long-termrates fell relatively little, partly because inflationary expectations appearedto change slowly. Thus yield differentials changed greatly. Whereas at thetime of historically high short-term interest rates the differential betweenEurodollar deposit rates and Eurobond yields had been as high as 3 percentagepoints, Eurodeposit rates in 1976 were generally below Eurobond yields.129

Bank lending also rose substantially in 1976. Like the rising activity in theEurobond market, the expansion of Eurocurrency loans and the increase inclaims on foreigners by head offices reflect the high level of liquidity in theprivate sector in the main financial centers and the low loan demand fromdomestic borrowers. Although there has been considerable discussion in privateand government circles regarding the structure of the balance sheets ofthe banking system, particularly regarding the exposure vis-a-vis certaincountries, bank lending to foreigners has risen briskly, at least through thethird quarter of 1976 (the latest date for which overall data are available).Publicly announced Eurocurrency bank credits for 1976, at over $28*/2 billion,exceeded credit extensions in 1975 by 36 percent. Morgan Guarantyestimated that the size of the market, net of interbank deposits, expandedfrom about $250 billion at the end of 1975 to nearly $285 billion in September1976.In the first 10 months of last year U.S. banks increased their short-termclaims on foreigners by $10 5/2 billion, $8^2 billion of which was accountedfor by loans to Latin America. The continued extension of bank credits todeveloping countries was not confined to U.S. banks: European banks havealso increased their assets vis-a-vis this group of countries. The risks associatedwith some of these loans are reflected in the rates that are beingcharged. For example, in the medium-term Eurocurrency markets the premiumcharged some developing countries has risen to at least $/$ percentagepoint at a minimum in recent months. There seems to have been a markedshift in the way banks view the creditworthiness of certain countries.Whereas in earlier periods the fact that a government had not touched itsreserve position in the IMF was taken to indicate a relatively low risk inextending loans, banks now seem to favor lending to countries operatingunder IMF-suggested surveillance. Because banks cannot attach macroeconomicconditions to their loans, or in any event monitor them, theyapparently feel more comfortable with debtors operating under IMFconditionality.OFFICIAL FINANCINGOfficial financing flows in 1976 constituted a somewhat larger proportionof the financing of external deficits than they did in 1975. Totalborrowing from the IMF in 1976 amounted to SDR 6.0 billion as comparedwith SDR 3.9 billion in 1975. Although this change appears relatively small,funds drawn from the IMF in 1976 reflected a higher amount of drawing onregular IMF facilities subject to stricter conditionality as the Special OilFacility came to an end in March 1976. Access to IMF resources was easedbecause credit availability in the IMF had been increased temporarily by 45percent of quotas pending the ratification of the Amendments to the Articlesof Agreement, which among other things will put into effect the particularquota increases agreed upon in Jamaica at the beginning of 1976.Access to official financial resources was also considerably increased byliberalization of the Compensatory Financing Facility in the IMF. This130

facility is designed to help countries overcome shortfalls in export earningswhich are largely beyond their own control. During 1976 drawings approvedunder this facility amounted to SDR 2.3 billion compared with a total usagefor the preceding 13-year period, 1963-75, of SDR 1.2 billion. The moreliberal access to the Compensatory Financing Facility has clearly done muchto ease external financial constraints and cyclical payments problems thatnon-oil primary producing countries, both developed and developing, wereexperiencing during the year. In fact, the non-oil LDCs as a group were ableto increase their reserve positions by SDR 7^4 billion during the first 10months of 1976. However, this aggregate increase combines a number ofcountries that experienced increasing external financing problems withothers that experienced an easing of financial constraints.Finally, official financing resources available to developing countries arebeing augmented by the disposal of part of the IMF's gold holdings. Onesixth(25 million ounces) of the IMF's 150 million ounces of gold is beingsold at public auction over a 4-year period for the benefit of developingcountries. A portion of the profits are being transferred directly to developingcountries in proportion to their quotas in the IMF. The remainder ofthe profits is being used to finance a Trust Fund, separate from the IMF butmanaged by the IMF as trustee. This Trust Fund will provide balance ofpayments support on concessional terms to the IMF's poorest members. Anadditional 25 million ounces of the IMF's gold holdings are being sold to allmembers in proportion to their quotas, or "restituted," at the present officialprice of gold in exchange for currency usable by the IMF. Restitution isbeing carried out in four annual installments of approximately 6% millionounces each.In May of last year the IMF announced a program of 16 auctions atroughly 6-week intervals over a 2-year period covering sales of 12 5/2 millionounces of gold, with 780,000 ounces to be offered for sale at each auction.Five auctions were conducted under this program during 1976, in which atotal of 3.9 million ounces of gold was sold at an average price of $122 perounce and at a profit for the Trust Fund of $320 million. The first loansunder the Trust Fund program were being approved by the Executive Boardof the IMF at the turn of the year.In late 1976 the Executive Board of the IMF reviewed the results of theauction program and decided that it would be desirable—without disturbingany of the basic tenets of the general agreement on gold—to shift to a definiteschedule involving somewhat more frequent auctions at which slightlysmaller amounts of gold would be sold. The first installment of restitutionwas to take place in the first weeks of January 1977, to be followed on January26 by the last auction to be held at the 6-week intervals established inMay of last year. Beginning March 2, 1977, auctions will be conducted onthe first Wednesday of each month, each involving the sale of 525,000ounces.13.1

The general assessment of the experience gained so far, following someinitial uncertainty about the potential effects of the IMF's sales and aboutmarket interest and participation, is that the IMF's sales program has beenquite successful. All of the auctions were oversubscribed, and the IMF wasable to obtain prices on each occasion that were very close to prices prevailingin the market. The absence of a definite timetable for sales, however, gaverise to questions about the timing and amounts of auctions, and has raisedneedless questions and speculation in the market about the IMF's intentions.The IMF's announcement in late 1976 of a definite schedule of dates andamounts for auctions over the next few months should remove any remaininguncertainties about the periodicity of IMF sales or the amounts to beoffered.ADEQUACY OF OFFICIAL FINANCIAL RESOURCESDespite the fact that official financial resources were augmented considerablyduring 1976, there is some question about the adequacy of such resourcesfor the period ahead. As noted earlier, the financing of external deficits,except in a few instances, was managed relatively smoothly during 1976.Extension of bank credit remained large, although during the year there wasa growing perception of the need for banks to become increasingly selectivevis-a-vis their debtors, and this was reflected in a growing desire on thepart of private lenders to see commitments backed by some kind of conditionallyin terms of adequate economic policies. As a result a number ofauthorities may have become less reluctant to draw on their credit with theIMF.Since the large increases in OPEC's export price of oil, external debtlevels in nominal terms have cumulated well beyond historical highs formany countries. The OECD has estimated that current account deficits forthe OECD area since 1974, the first year of the high oil prices, have cumulatedto $56 billion. The comparable figure for non-oil LDCs is $72 billion.In a number of instances debt levels are such as to make private lendersreluctant to extend further credit.It is important that countries which have adopted satisfactory adjustmentmeasures to deal with underlying external disequilibria and high externaldebt positions have access to international financial resources to carry themthrough the adjustment period. The need for such bridging financing isobvious because adjustments cannot take place quickly. Furthermore in theabsence of such financing there is a growing risk that political pressures toinstitute trade restrictions cannot be resisted.But, in addition, because of the continuing need to adjust to higher importprices for energy, further financing may need to be available. As long asOPEC surpluses persist, there can be no reversal in total debt positions. Onthe contrary, external debts will continue to grow. In the interest of internationalequilibrium and the continuation of economic growth worldwide, it132

is necessary that the strongest economies be willing not to resist either a wideningof their current account deficits (or lessening of surpluses) or an increasein purchases of their assets by foreign investors.For a large number of countries balance of payments financing continuesto be available from private sources. But a very high proportion of suchfinancing flows through commercial banks, which perform a large share ofthe intermediation between OPEC surpluses and the deficits of other countries.There are internal risks in this situation: banks may at times makefinancing too easy for certain countries and thus delay needed adjustment; inother instances banks may be reluctant to promote adequate financial flowsto a particular country although the country in question could reasonably beexpected to be able to service such flows. In terms of the world financial structurethere are therefore advantages to conditional multilateral financing ofsome proportion of the oil-importing countries' current account deficits. TheIMF is the indicated institution to provide intermediation between thestrong creditor countries on the one hand (certain members of OPEC aswell as certain industrial countries with strong payments positions) and thedeficit countries on the other. It is important, from this point of view aswell as to strengthen the IMF's liquidity position, that the enlarged quotasagreed to under the Sixth Review of Quotas should go into effect as early aspossible in 1977. This will require that the second Amendment to the Articlesof Agreement be ratified by many members who have not yet done so. Further,in recognition of the possible greater financing needs, the OECD countrieshave negotiated a Financial Support Fund, submitted to the Congresslast year. In addition, the IMF has advanced the date of the normal quinquennialreview of its resources by 2 years. However, needs may materializesooner than the advanced completion date of that review would allow; and,in any case, additional means may be required to augment the IMF's resourceseither generally or in terms of certain currencies.NORTH-SOUTH ECONOMIC RELATIONSThe growing external financial problems that have followed the inflation,the large increases in the price of energy, and the recession of the past severalyears make it more important than ever that the economic interdependencebetween the developed and the developing countries be fully recognized.During 1976 discussions between developed and developing countries werecarried on mainly at the United Nations Conference on Trade and Development(UNCTAD) in Nairobi and the Conference on International EconomicCooperation (CIEC).The central issues raised by the developing countries were: (1) Generalizeddebt relief; (2) preservation of the purchasing power of exportearnings; and (3) official development assistance.With regard to generalized debt relief, the view of most developedcountries was that adequate channels already exist to handle acute cases offinancial crisis efficiently. During 1976, for example, there was a need to re-133

schedule the external debt of Zaire. This was dealt with promptly throughthe so-called creditor club channel. Apart from the specific instances of acutecases of financial crisis where countries are forced to seek debt rescheduling,it is not in the interest of debtor countries to seek debt relief. Indeed, anabrogation of debt contracts would put into question their creditworthinessand would inevitably hamper their future access to capital markets. In fact,the easing of such access is an agenda item of considerable importanceto a number of developing countries.In addition, the question of generalized debt relief really involves thebroad external financial situation of developing countries. Debt constitutesonly one aspect of the overall financial situation in a particular country;therefore general debt problems address the basic question of the adequacyof transfer of resources to developing countries. The availability of and needfor such resources are reviewed periodically. Such reviews may lead to theconclusion that increases in aid flows are required either on a multilateral oron a bilateral basis. It is important, however, that questions regarding debtproblems and possible defaults not be confused with those relating to theadequacy of development assistance.The level of export earnings of developing countries constitutes a crucialelement in their economic development. The purchasing power of exportearnings is therefore of considerable importance to policy planning. It isdirectly related not only to economic conditions in the country in questionbut also to those prevailing abroad. Stable noninflationary growth worldwideis thus the basic prerequisite for continuing growth in the purchasing powerof domestic incomes and export earnings.It must be recognized that developed and developing countries, each intheir own way, need to seek improvements in the conduct of their economicpolicies with a view to achieving the most effective use of available resourcesand assuring steady growth in years to come. Artificial ways of achieving suchstable conditions in lieu of appropriate policy measures will, of their nature,be self-defeating in the longer run. Such artificial means, exemplified by attemptsto relate the price of a particular good to that of some other good orbundle of goods, or to freeze the so-called terms of trade of a particularcountry, will inevitably introduce distortions into the economy in question aswell as into the world economy. If prices thus determined tend to be higherthan normal supply and demand relationships would produce, they will addto the inflationary impetus in both consuming and producing countries. Thiswill occur directly through the price mechanism and indirectly through overinvestmentin production facilities either for the goods in question or for substituteswhose production was uneconomic at competitive prices. If the pricewere to be lower than market forces would indicate, underinvestment wouldoccur. In each case the eventual outcome would be detrimental to producersas well as consumers. Further, competition, the major catalyst for economicgrowth, would be adversely affected domestically and internationally.134

A freezing of relative prices, either partially or fully, would thus inhibit theattainment of the stated goals of both developed and developing nations.It has long been recognized that large fluctuations in export earnings thatcan arise outside the control of the exporting countries can have importantdetrimental effects on the well-being and growth of developing countries.But it is not realistic, or useful, to attempt to introduce new mechanismswhen existing ones are being improved and are likely to deal adequatelywith the basic problems. The recent liberalization of the CompensatoryFinancing Facility in the IMF is an example of a major improvementeffected in an already existing mechanism. The scheduled review of thisfacility will determine the extent to which participants consider currentaccess to be adequate. In order to help minimize economic fluctuations,which are detrimental both to the countries in which they occur and totheir trading partners, systematic consideration in producer and consumerforums of ways to improve the stability and efficiency of specific commoditymarkets can be useful. More generally, in the interest of both commodityproducers and other trading nations the consultative machinery on generaleconomic developments and on their interaction among countries couldbe improved. The possibilities for recognizing and solving mutual problemsand mutual needs could thereby be strengthened.135

CHAPTER 4Policies to Increase SupplyMACROECONOMIC POLICIES are designed to encourage growth inaggregate demand and to ensure full utilization of our resources withoutaccelerating inflation. However, there are limits to what demand managementpolicies by themselves can do in achieving these objectives. It is thereforenecessary to supplement such policies with programs that will promotethe efficient use of human and material resources and thereby increase productivecapacity. This microeconomic approach has received less emphasisthan monetary and fiscal policies in the past. Nevertheless more efficientmarkets and greater effective supply can complement increases in aggregatedemand to bring about larger gains in employment and real growth withless inflationary pressure.In Chapter 1 we discussed the sources of the recent productivity slowdownin the private sector. To some extent the lower rate of productivityincrease and the accompanying decline in the growth of potential outputare related to the impact of the Federal Government on various sectors ofthe economy. This chapter discusses some major issues and possible approachesto policy in several areas where Government is involved in economicactivity: labor markets, the regulation of business, agriculturalmarkets, and tax policy.STRUCTURAL AND INDUCED UNEMPLOYMENTOutput and employment can be increased by improving the efficiencywith which labor resources are utilized. Improvements can be accomplishedby a redesign of public programs to reduce involuntary unemployment andby lessening the incentives that induce unemployment. Unemploymentproblems and proposed policies have been discussed in some detail in recentEconomic Reports. This section summarizes some of the major issues regardingstructural and induced unemployment, focusing on policy measuresintended to generate a more efficient use of the Nation's labor resources.An examination of policies to reduce unemployment requires an understandingof the kinds of unemployment and their causes. Frictional unemploymentarises from the normal operation of the labor market; cyclicalunemployment is the result of a less than full utilization of productivecapacity due to a recession; induced unemployment is a consequence of136

implicit and explicit subsidies built into public programs; and long-term orstructural unemployment is caused by rigidities that create an imbalancebetween the skills and other characteristics possessed by workers and thosedemanded in the labor market.FRICTIONAL AND CYCLICAL UNEMPLOYMENTFrictional unemployment exists even in periods of very low overall unemployment.In a dynamic free-market economy layoffs occur as employersadjust their level of employment to such factors as changes in the relativedemand for goods and services, changes in the relative efficiency of firms,and seasonality in production or consumption. In addition, workers leavejobs to search for better employment opportunities, and they enter andleave the labor force at will. These layoffs and quits facilitate the process ofreallocating workers to more productive activities. Furthermore, whenworkers enter the labor force for the first time or reenter after having beenoutside the labor force for a time, they engage in a period of job search.There is usually a time lag in finding an acceptable job offer, in part becauseworkers, regardless of the cause of their unemployment, may not acceptthe first offer they receive. These lags result in periods of unemploymentthat are generally short and are required if labor resources are to be usedefficiently.Other types of unemployment are likely to be socially wasteful. Much attentionhas been given to the hardships and waste associated with cyclicalunemployment. Cyclical unemployment, the primary target of macroeconomicstabilization policy, will be eliminated when unemployment is reducedto a level where further increases in aggregate demand will affectprimarily the rate of inflation, with little impact on employment and output.Policies to reduce cyclical unemployment are discussed in Chapter 1.Yet even at what economists regard as full employment, some unemploymentmay exist in addition to that which is purely frictional. A part ofthis unemployment is a consequence of, or is induced by, public policy;and some is structural, the result of rigidities in the labor market that makeit difficult for some persons to find a job and remain employed for a longperiod.INDUCED UNEMPLOYMENT AND UNEMPLOYMENT COMPENSATIONInduced unemployment arises from incentives built into some public programs.One source of induced unemployment is the unemployment compensationsystem. Unemployment compensation has proved to be an extremelyuseful instrument for macroeconomic and income distributionpolicies. It serves as an important automatic stabilizer. Without the necessityfor new legislation, additional benefits are paid as unemployment fromjob layoffs increases, thereby helping to maintain the purchasing power ofthe unemployed. The system also serves as a means of distributing the costs ofa recession more equitably: it replaces part of the earnings lost as the result137

of a downturn in economic activity. For some, an important function of thesystem is to enable an unemployed worker to decline an offer during theearly stages of job search if the wages are low and the working conditionspoor compared with the worker's previous job.Despite its highly beneficial effects, the unemployment compensation systemhas some undesirable consequences. The system tends to increase unemploymentabove the socially efficient level largely because workers and theiremployers do not pay the full cost of their increased unemployment. Theimplicit subsidies in the system are the result of the weak "experience-rating"in the payroll tax paid by employers and the favorable income tax treatmentof benefits relative to earnings from employment. In principle, the employerpaidpayroll tax that finances the unemployment compensation system isexperience-rated. That is, the tax levied on an employer should vary indirect proportion to the benefits received by the employer's workers;and this in turn varies with the unemployment experience of the firm'sworkers. In practice, however, the difference between the maximum andthe minimum tax rates is small, and for many employers a reduction inlayoffs does not lower their tax liability. There is therefore an economicincentive during periods of slack work arising from cyclical, seasonal, orother factors for the employer to place workers on a job layoff, or keepthem on the layoff for a longer period, rather than retaining them on thepayroll. For this reason firms in seasonal and cyclical industries tend to besubsidized at the expense of those in more stable industries, and the extent ofseasonal and cyclical variations in employment and output is increased.The unemployment compensation benefits that workers receive are notsubject to Federal payroll or income taxation. Employers and employeesmay view the system as a means of providing tax-free income to workers.The implicit subsidy tends to promote more and longer layoffs.The failure to tax benefits also creates inequities among workers. Theextent to which the benefits replace earnings net of taxes depends in parton the other income of the family. Because of the progressive tax schedule,for workers with the same earnings and work history the benefits willreplace a larger proportion of after-tax earnings, the higher the income ofother family members. This situation is clearly contrary to conventionalnotions of equity.If unemployment compensation benefits were taxed as earnings and pretaxbenefits were raised so that average after-tax benefits for low-income workerswere unchanged, the average unemployed low-income worker would beunaffected. Raising pretax benefits would also require an increase in theemployer-financed payroll tax, and if the tax were fully experience-ratedthe tax increase would reduce the incentive for layoffs.In recent years there has been extensive research by economists on variousaspects of the unemployment compensation system. Although the estimatedmagnitudes of the impacts vary, the studies tend to arrive at the same138

qualitative conclusions. For example, they find that increased coverage of thework force and a longer duration of benefits tend to increase the unemploymentrate and lengthen the duration of unemployment. In addition, thelarger the unemployment compensation benefits relative to earnings net oftaxes, the longer the duration of unemployment is likely to be. The requirementthat recipients actively search for, be available for, and accept suitableemployment appears to be unevenly administered. Some research suggeststhat more stringent enforcement of these requirements results in a lower Stateunemployment rate.Reduction of the implicit subsidies currently built into the unemploymentcompensation system would lead to a more efficient utilization of laborresources. This may be accomplished by greater use of experience-rating ofall employers in the payroll tax and by taxing benefits as if they were earnings.These changes would not reduce the effectiveness of unemploymentcompensation as an automatic stabilizer. These and other issues concerningthe unemployment compensation system are to be studied by the NationalCommission on Unemployment Compensation, due to be established inaccordance with legislation enacted in 1976.STRUCTURAL UNEMPLOYMENTEven after the economy has returned to full employment some groupsin the population may still have considerable difficulty finding and retainingemployment. Unemployment among such groups may arise from the lackor obsolescence of skills, from regional mismatching of workers' skills andjob requirements, and from wage rigidities. The mobility of workers andenterprises makes it likely that the decline in unemployment in the comingyears will be fairly widespread across the country. Although regional growthrates of employment will differ, it is not likely that large depressed areas, likeAppalachia in the 1950s, will emerge as a serious problem. The long-durationunemployment rate—the number unemployed 15 weeks or longer as a percentageof the labor force—was 2.5 percent in 1976. However with the approachto full employment, it can be expected to decline toward the prerecessionlevel of about 0.9 percent.A number of groups, however, including youths with little schooling, andin particular black youths, and older workers laid off during the recessionwho have had a long period of unemployment, may continue to encountersubstantial problems in finding work. Policies that reduce the barriersthat are chiefly reponsible for structural unemployment would do muchto promote equality of employment opportunities. It is therefore usefulto review current and proposed policies designed to expand job opportunitiesfor persons with difficulties in finding and retaining employment. Thesepolicies include public service employment, job training programs, and anemployment tax credit.139

YouthEmploymentYouths have much higher unemployment rates than adults (Table 34).Most of this higher unemployment, however, is frictional and arises fromthe frequency with which youths enter and leave the labor force. Laborforce entry generally entails a period of job search during which the personis unemployed. Many unemployed youths are entering the labor force forthe first time. Others are entering it again after leaving it for a time,frequently because of the dovetailing of schooling and work—or, for youngwomen, the dovetailing of household responsibilities (including child care)and work in the labor market. In addition, in an attempt to gain experiencein different types of employment youths are more likely than adults to quita job and search for another. Thus, although the unemployment rate ofyouths in 1973, the most recent year of low unemployment, was substantiallyhigher than that of adults, there was little difference in unemployment ratesarising from the loss of a job.The average duration of unemployment among youths is about half thatfor adult males: in 1973, 7.1 weeks for teenagers compared with 14.0 weeksfor men aged 25-59. However, the long-duration unemployment rate—thoseunemployed 15 weeks or longer as a percentage of the labor force—wasgreater for teenagers: 1.6 percent compared with 0.7 percent for adultmen aged 25-59.Although teenagers are less likely to be employed than adults are, thenumber of youths who are neither enrolled in school nor working is notlikely to be large when the economy is near full employment. Of the 15.8million teenagers (aged 16-19) in the civilian noninstitutional population inOctober 1973, only 1.9 million (of whom 1.4 million were females) werenot enrolled in school and not employed. Most of the female teenagers not inschool and not employed were providing home care for their own children.TABLE 34.—Civilian unemployment rates under alternative definitions by age andsex, 1973[Percent)Age and sexAll civilianworkers *Job losers andjob leavers 216-19 years, both sexes14.54.7Job losers 8 2.820-24 years:MenWomen7.38.44.84.03.42.125 years and over:MenWomen2.54.02.02.31.71.71 Percent of civilian labor force.2 Percent of civilian labor force excluding new entrants and reentrants.8 Percent of civilian labor force excluding new entrants, reentrants, and job leavers.Note.—All unemployment rates are based on civilian labor force (as indicated in footnotes) for age and sex groupspecified.Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers.140

For some youths unemployment is involuntary, and they have considerabledifficulty in finding and retaining jobs. This may be especially true forthose who come from disadvantaged families and those with little schooling.An appropriate role of public policy has been to expand job opportunities,particularly for the youths who, on their own, would not easily findand keep jobs in the private sector.Youths need to develop the skills, habits, and job-related experience inproductive activities that lead to successful employment in the private sector.About 85 percent of all civilian employment is in the privatesector; and as youths mature, this is where most will find jobs. The shelteredenvironment of prolonged public service employment appears to be an inappropriatemechanism for generating employment for youths. On a shorttermbasis, however, disadvantaged youths in particular may derive importanttraining or educational benefits from the experience provided by publicprograms.Substantial investments have been made in public programs to employ andtrain disadvantaged youths. In 1976, the Government financed at a cost of$563 million nearly 1 million job slots in local prime sponsor programs for theemployment of disadvantaged youths in the summer. The Job Corps programprovided training for 64,700 economically disadvantaged youths (the equivalentof 20,200 full-year positions) at a cost of $186 million in fiscal 1976.Under Title I of the Comprehensive Employment and Training Act, 2.1 millionpersons, the majority of whom were youths, received job training or workexperience at a cost of $1.7 billion in fiscal 1976. These programs are preparatoryto regular jobs in the private economy.For youths, job opportunities in the private sector should be expandedto permit these young people to take full advantage of the trainingthey have acquired in school or in special public training programs. Althoughaggregate job creation is largely the function of macroeconomic policy, thereare significant impediments to attaining high rates of employment foryouths even when the labor market for adults approaches full employment.The Federal minimum wage has been identified as one such impediment.A substantial body of research suggests that minimum wage legislationtends to diminish employment opportunities for teenagers, but does not havea significant net effect on adult employment. Though estimated impactsvary, some recent studies suggest that a 10 percent rise in the ratioof the minimum wage to the average wage would decrease teenage employmentby about 100,000 to 150,000. The reason is that many employers findit too costly to employ teenagers, particularly those with few skills, giventhe Federal minimum wage (currently $2.30 per hour in most jobs) andmandated payroll taxes and fringe benefits. Coverage under Federal minimumwage legislation has been extended substantially in recent years from65 percent of the private nonsupervisory workers in 1965 to 87 percent in1976. This extension of coverage, especially at a time when youths make141

up an increased proportion of the population aged 16 and over, has limitedthe increase in youth employment and labor force participation.In recognition of the adverse effects of the minimum wage on employment,there has been an expansion in the number of exemption certificates whichpermit employers in certain circumstances to pay youths and the disabled awage below the applicable minimum wage. In fiscal 1976 exemption certificatescovering 800,000 persons were issued, of which three-fourths werefor full-time students working part-time in their educational institutions.The exemption program entails a number of problems, and the effectivenessof allowing more exemptions needs to be considered. The special applicationsthat are required raise the administrative costs to the Governmentand employers. In addition, the program discriminates among employersof youths doing essentially the same job: a subminimum wage canbe paid to a student working in a private university, but because of limitationson the number of exemptions it need not apply if a student is workingin a comparable job in any other nongovernmental enterprise. The programalso discriminates between youths in school and those out of school.For these reasons, many believe the exemption program should be extendedto all employers and to all youths regardless of school enrollment.This could be accomplished by incorporating a teenage differential into theminimum wage law. Alternatively some believe it would be more appropriateto let the Federal minimum wage lag behind the growth in average wageswith the aim of promoting job opportunities not only for youths but alsofor partially disabled or low-skilled adults.Long-Term UnemploymentFor some adult workers who have experienced long periods of unemployment,reemployment opportunities may be limited even after macroeconomicpolicies have reduced the unemployment rate to nearly the full-employmentlevel. The situation would be particularly distressing for those who had exhaustedtheir unemployment compensation entitlement. Public service employment(PSE) and job training programs are often viewed as mechanismsfor expanding job opportunities for persons with long-term unemployment.Thus far, however, these spending programs have had little net impact onemployment compared to tax reductions that increase the deficit by the samemagnitude. With appropriate modification of programs, however, the favorableeffects could be larger.In terms of overall macroeconomic effect, the long-run job-creating impactof federally financed PSE programs appears to be quite limited. Initially mostof the State and local government jobs funded by the program may representa net increase in the number of jobs in comparison with what would otherwiseexist. With normal attrition and the expansion in regular State and localgovernment jobs, an increasing proportion of the funds are soon used to payfor job slots that would exist in any case. Preliminary estimates suggest, forexample, that after 3 quarters about 65 percent of federally funded PSEjobs are net additions to employment; but after 2 years the net addition142

may be as low as 10 percent. Thus the funding for the other 90 percentof the jobs becomes essentially a form of Federal revenue sharing with Stateand local governments. Then the job-creating impact of a PSE program islittle different from an expansion in revenue sharing.Persons with prospects of finding a regular job in the private sector duringthe expansion in economic activity might be less inclined to search for aregular job if they are in a PSE job. On the other hand, adults with longtermunemployment problems are the ones who would appear to be the mostsuitable candidates for the more than 300,000 public service employment jobslots currently funded by the Government.Several factors make it difficult to target PSE programs toward personswith long-term employment problems. For example, State and local governmentstend to hire the more able among the unemployed for federally fundedPSE jobs. As a result, PSE participants are more likely to be persons in theprime age groups and to have more schooling than the average unemployedworker. This has the advantage of maintaining the current employmentpractices of State and local governments. Yet persons with these characteristicsare also those who have the least difficulty in finding a job in the privatesector. There is therefore a tradeoff between attempting to maintain Stateand local government employment practices and inducing these governmentsto hire persons with difficulty in finding a job.The relatively high wages in PSE jobs also attract persons who are employablein the private sector. In 1976, for example, the average annualFederal contribution to wages and benefits in a PSE job was about $7,700(some localities supplement the Federal contribution), over 50 percentmore than a worker could receive in wages and benefits for full-timefull-year employment at the minimum wage. It has therefore been suggestedthat these jobs be limited to persons with long-term unemployment, such asthose who have exhausted their unemployment compensation entitlement,and that they be paid only the minimum wage or the subminimum permittedunder Department of Labor exemptions (generally 85 percent of the applicableminimum wage). While the 1976 amendment to the temporary employmentassistance program addresses in part the long-term unemploymentaspect of these suggestions, it retains the requirement that the PSE jobs paythe prevailing wage. The need to keep wages low has been subject to somecriticism. The payment of such low wages may adversely affect the efficiencyof workers holding these jobs. Some are also concerned that a family couldnot be adequately supported on such low wages. However, the regular incomemaintenance system (AFDC, food stamps, medicaid) would providesupplementary support to low-income families which include a participantin a PSE program. In addition, a low PSE salary would permit a programwith a larger number of participants for the same budget cost; as a result,more workers would gain job experience and fewer workers would be discouragedfrom taking a private sector job when employment opportunitiesimprove. Indeed this approach would make it more explicit that creating143

jobs and reducing poverty are separate issues, since many persons with longtermunemployment may not be in families with very low incomes.Job training programs are designed as a means of upgrading the skills ofthe structurally unemployed. These programs seem to promise a satisfactorysolution to the structural unemployment problem. The evidence currentlyavailable, however, suggests that the experience has been disappointing.If adjustment is made for the probability that a trainee would eventuallybecome employed without the program, the effects of the training programson real wages and employment appear to be small. This outcome isnot surprising since persons with good training characteristics and prospectswould acquire the training on their own or on a job. Persons with fewskills and a record of long-term unemployment are largely those for whomsuccessful retraining is most difficult. Part of the problem may be in identifyingthe programs that are most likely to be successful for particular trainees.The difficulties with past public service employment and job training programsshould be considered before expanding the present programs. Muchmay be learned, however, from careful evaluation of the present programsand from small-scale experimental programs.EMPLOYMENT TAX CREDITEmployment tax credits have been suggested as a means of increasingemployment during a recession or increasing employment opportunities forpersons who experience structural unemployment. The purpose of an employmenttax credit is to encourage the direct use of labor relative to capitaland other inputs. Under different variants of such a program, in addition tocounting wages as a regular cost of business, firms could claim a creditagainst their corporate income tax for some portion of the wages or payrolltaxes paid for all workers on their payrolls, workers added to theirpayrolls compared to some base period, or workers drawn from designatedgroups in which high rates of unemployment exist. These approaches posea number of problems.One problem in using an employment tax credit as a countercyclicaltool is that the largest effects on employment may not appear until theeconomy is well on the road to recovery. This delay could occur because thesubstitution of labor for capital and other inputs which the tax credit encouragesbecomes greater the longer the period of adjustment. To be countercyclicalan employment tax credit would need some mechanism throughwhich the subsidy gradually decreases as overall unemployment declines.If employment in a recession trough is used as the benchmark, during abusiness cycle recovery an employment tax credit would tend to subsidizefirms for increases in employment that would occur in any case. This effectmight be ameliorated if employment prior to the downturn were used as thebase. If firms anticipate a renewal of a countercyclical employment tax creditin the future, cyclical swings in employment—and hence in unemployment—would be intensified. An inequity would arise among firms—some receiving144

large subsidies through the tax credit and others, particularly those withstable employment, deriving no benefit from these subsidies. As a result of anemployment tax credit, there would be additional disincentives to firms tomaintain stable employment.There are also difficulties in attempting to use an employment tax creditto expand job opportunities for particular groups. It is difficult, for example,to identify individuals with long-term unemployment problems, unless theprogram is limited to those having exhausted the unemployment compensationbenefits available to them. Employers would have an incentive to hirethe most employable persons in any group (such as aged or disabled personsand teenagers) which is eligible for the subsidy. Jobs may therefore go topersons who would not have difficulty finding employment in any case, eventhough they are members of a demographic group broadly defined as hardto employ. Moreover the narrower the group eligible for the subsidy, thegreater the administrative costs to certify eligibility for the tax credit. Experiencewith the present tax credits for persons on welfare—for example,the WIN tax credit—suggests that an employment tax credit is not likely toexpand substantially the job opportunities for persons with difficulty findingand retaining employment. The result could be to subsidize many jobswithout achieving much increase in the employment of those individualswhom the program was intended to assist.While superficially there is much appeal to an employment tax credit, theproblems of implementation are great and the result is likely to be a lessefficient utilization of labor resources.SUMMARYMacroeconomic policy is necessarily the primary mechanism for reducingthe current excessively high unemployment. As the economy continues torecover, cyclical unemployment will decline. Much of the long-term unemployment,which currently appears to be structural, will also lessen as jobopportunities expand. As a result of increasing employment the amount ofjob training will increase, since much training occurs through workexperience.Declines in unemployment beyond those attainable by macroeconomicpolicy may be brought about by reducing the incentives for unemploymentcurrently built into the unemployment compensation system because of weakexperience-rating of employers and the tax-exempt status of the benefits.These issues will be studied by the National Commission on UnemploymentCompensation. Job opportunities for teenagers may be improved by allowingthe applicable minimum wage to be lower in relation to average wages.Public service employment programs are most likely to increase job opportunitiesfor persons having difficulty in finding employment if eligibility isrestricted to the long-term unemployed (for example, unemployment compensationexhaustees) and if the wage is low relative to wages in the privatesector. Income maintenance objectives are more successfully addressed by145

the means-tested income transfer programs which focus on family income.The summer employment program may be helpful for disadvantaged youthsby providing experience with a work environment and routine.Thus far, training programs for adults with employment difficulties havenot been shown to have more than very limited benefits and they haveincurred substantial costs. The problems of structural unemployment andtraining mismatches that remain despite private initiatives appear to be verydifficult to solve. Until we learn how to ameliorate these problems effectively,small-scale experimental programs and careful evaluation of present programsshould be useful. The current large-scale public employment andtraining programs should not be expanded at this time.Although it has much superficial appeal, an employment tax credit maycreate far more difficulties than it can resolve. The impact on employmentis likely to be small, particularly in the near term, and new distortions inthe use of resources as well as new inequities may emerge.GOVERNMENT REGULATIONThe Government regulates a substantial part of the economy in an effortto improve economic performance and promote individual welfare. Suchregulation has created costs as well as benefits, and some anticipated benefitsof regulation have never been realized. Regulation has also been difficultto reform or abandon, even when recognized as counterproductive, becauseelements of regulation frequently tend to satisfy certain special interests.Historically, some business enterprises have sought to avoid competition,and have sometimes been aided in doing so by regulation; other rules andprocedures create vested interests and capital values which reform wouldendanger.The motives behind efforts to regulate economic activity have generallybeen commendable, and the net effect of some Government regulatoryactivity has been positive. Unfortunately it often turns out that regulatoryprocesses are not capable of achieving their intended goals or have generatedgreater costs than would result from the original problem. In some instancesthe problem prompting the adoption of regulation has passed but the regulationsremain. In other cases the regulatory process has proved too inflexibleto accommodate changes in the economy, and a previously beneficial regulatoryactivity may become ineffectual or harmful. In each of these instancesreform of the regulations would lower the nonproductive use of Governmentresources and would free private resources for productive tasks. More important,some regulation is harmful as well as wasteful since it distorts theallocation of resources and thus lowers the potential output of the economy.The reform of such regulations would increase efficiency, thus making theeconomy better able to provide current consumers with goods and servicesand to ensure growth in output for the future.A major purpose of regulation is to control prices charged and servicesrendered in industries considered to be natural monopolies, especially those146

in the transportation and public utility sectors, in order to prevent firms inthese industries from exercising market power. The economic characteristicsof these industries are such that it is more efficient for a single firm to supplythe entire market. Price regulation is therefore usually accompanied byentry restrictions. Price and entry regulations have been extended, however,beyond the select cases where control of monopoly power justifies theirimplementation. They have been applied to many industries which seemcapable of vigorous and healthy competition under less restrictive regulations: for example, trucking and airlines. In these cases it is appropriate tocompare the results of price and entry regulation with the level of price andoutput that would be realized in a freely operating market.If a regulated price exceeds the market-determined price, consumers willpurchase less and output will be reduced. If a regulated price is below thecompetitive level, firms will provide less output than they would if theywere not regulated. In both cases price and entry controls reduce theproduction of goods and services in the regulated markets. Resources are thenreallocated to alternative uses which are less valuable to consumers. Theresult, coupled with the administrative costs of imposing and enforcing regulations,is to reduce efficiency and production.Most regulatory legislation since the mid-1960s affects business activity inmuch more direct ways and in much greater detail than is true of simpleprice controls. The Federal Government has intervened in such matters asproduct quality, producer liability, conditions affecting the health and safetyof employees, waste disposal, and equal employment opportunity. Much ofthis legislation is an attempt to deal with the problem of externalities—realcosts or benefits that affect individuals other than those directly involvedin a transaction. Economic efficiency requires that prices appropriately reflectthe full cost to society of producing each good or service. Externalcosts or benefits must be incorporated into each transaction, or internalized,for efficiency to be achieved. The internalization should be accomplished inthe least costly manner. Unfortunately some of the regulations concerninghealth, safety, and the environment appear to be ineffective, and we beartheir costs without enjoying much, if any, corresponding benefit. In othercases the benefits might have been achieved at a smaller sacrifice of othergoods and services.There are costs of extending regulation in a free-market economy thatgo beyond the direct impact on supply. First, the regulatory process itselfuses public and private resources which could be used to produce other,more valuable, goods or services. Second, some regulatory procedures reducethe ability of industry to respond to changing supply and demand conditionsand so create bottlenecks in regulated sectors of the economy. For example,the lag in implementing price adjustments to reflect the changing supply ordemand conditions confronting public utilities can influence the timing oftheir investment decisions, causing shortages or excess capacity. Third, regulationswhich protect existing firms from potential competitors may reduce147

incentives for technological improvement and innovation. Fourth, the uncertaintyintroduced by the regulatory process itself will cause resources tobe used in unproductive ways. Finally, if price controls lower the expectedreturns to new capital investment, capital formation will be retarded andthe economy will grow more slowly.The effects of regulation on supply can be organized into three categories:cases where the regulated price exceeds the long-run free-marketprice; cases where the regulated price is less than the long-run competitivemarket price; and cases where regulation increases the costs of production.Regulation reduces the flow of output from the regulated industry in all threecategories.REGULATED PRICE ABOVE MARKET PRICEIn a number of instances a government-dictated price has been establishedat a level exceeding the free-market price. This situation might arise froma public effort to ensure profitability and encourage investment in a newindustry. Or it might develop from a private industry's securing legislativeprotection against "unfair" price competition from another industry producinga substitute product. Or it could occur when regulation prevents relativeprices from responding to changes in supply or demand conditions.Regardless of the circumstances which bring about the excessive price, governmentprice control can develop into a legal and enforceable means ofattaining the goals of a private cartel.The establishment of a higher price is usually accompanied by restrictionson entry or output as well. When a regulated price is higher than the freemarketlevel, existing producers seek to expand output and new firms areattracted to the industry by the prospect of high profits. Alternatively, anexcessive price may deter the withdrawal of firms and production capacityfrom an industry with declining demand. At the same time, consumers confrontedby increased prices restrict their purchases. Because firms offer alarger supply than consumers wish to purchase at the regulated price, pressuresare generated for the regulatory authority to limit entry and restrictexpansion of output in order to protect the profits of the existing producers.Restricting entry, however, will not necessarily result in higher profit rates.The higher expected profits per unit of sales encourage each firm to try toincrease its total sales by using nonprice methods of competition, such asadvertising and quality competition. Because these activities are costly, profitsare dissipated. Under such circumstances competition leads to highercosts because price competition is precluded. Consumers may derive somebenefits from such nonprice competition, but they are denied the opportunityto choose among alternative price-quality options, as they can in the freemarket, and thus are made worse off.Motor CarriersTrucking provides a good example of the economic costs of regulationsthat hold prices above the free-market level. In interstate trucking an anti-148

trust exemption permits motor carriers to agree upon rates through ratebureaus, which are groups of truckers that function like private cartels.Rates tend to be set high enough to cover the costs of less efficient carriers.The result is higher prices to consumers. The Interstate Commerce Commission(ICC) regulates both the entry of new carriers and the expansion ofroute authority by existing carriers. These restrictions frequently require sometrucks to drive extra miles on circuitous routes, prohibit access to intermediatepoints on routes, limit the commodities that can be handled by somecarriers, and prohibit certain kinds of freight on the return trip. The resultis excessive truck miles and unproductive consumption of motor fuel, labortime, and other resources.Where more than one carrier gains a certificate to provide service, competitiontends to occur on the basis of service quality—frequency of departure,faster delivery, and so on—rather than through prices. As a consequencetrucks are often dispatched with smaller loads than they might otherwisehaul. Equipment and labor costs are thus spread over fewer ton-miles andcosts and prices are higher than necessary. The regulation of rates precludesprice competition, and consequently the range of price-service optionsavailable to shippers is restricted. Those shippers who would have chosenless frequent service if it were offered at a lower price pay more forservices they do not want. In markets where only one trucker has route authority,this process of rate setting may permit lower costs since the trucker,exercising his monopoly control, may reduce the frequency of scheduling,with the result that a higher proportion of trucks is dispatched fully loaded.However, because such a trucker has no competitors, he is unlikely to lowerprices to fully reflect the lower-quality service.A comparison of the transportation of small parcels with large or bulkyshipments illustrates the advantages of multiple price-service options. Shippersof small parcels have several options. The scheduled airlines carry smallpackages as baggage at substantial prices but with a guarantee of deliverythe same day. Some air freight firms collect packages at various cities, flythem first to a central sorting location, then on to their final destination eachevening, and provide overnight service at slightly lower prices than thosecharged by the scheduled airlines. Intercity bus lines and special firms thatdeliver small packages use surface transportation to furnish delivery serviceat even cheaper rates. Finally, the U.S. Postal Service offers slower butwidely available parcel delivery. The advantage of having multiple optionsis that shippers of small parcels may choose between various degrees of serviceat different prices. Although shippers of large or bulky freight have someflexibility, many are chiefly limited to motor carriers, where the range ofprice-service options is much more limited because of regulation.The problems of excess capacity, higher prices, and too few price-serviceoptions would be reduced if entry into the trucking industry were notrestricted. Unlike public utilities, trucking does not exhibit scale economies.149

Thus price competition is not likely to result in a single survivor—a monopolist.In trucking, fixed costs are low and except for Government restrictionsentry is relatively easy. Competition, not monopoly, would be the naturalcondition in the trucking industry if it were not for Government regulation.Recent research has demonstrated that common carrier truck regulationscause large losses in production and efficiency. Freight rates in countriesthat do not regulate motor carriers are significantly lower than rates incountries like West Germany and the United States where regulation isstrict. Excessively high motor carrier rates cause some shippers to substitutealternative modes of transportation, or to provide their own transportationservices. These responses to regulation reduce economic efficiency.The motor carrier reform legislation submitted by the President to thelast Congress would have increased both price competition and entry intothe trucking industry. The legislation proposed pricing flexibility, subjectonly to later ICC review, which would allow individual carriers to raise orlower their rates as much as 15 percent annually, and it would eventuallyremove the lower limit on price changes entirely (as long as the price wasnot set below direct costs). The legislation also proposed eliminating theantitrust immunity that currently protects the collusive rate setting throughrate bureaus. Barriers to entry would have been reduced by lifting the haulingrestrictions on certain existing carriers and by liberalizing the criteria forroute certification. Entrants could no longer be barred simply because theproposed service was already provided by existing carriers. This legislationwould constitute a major step in the reform of regulation inhibiting theefficiency of the motor carrier industry.AirlinesIn the airline industry, restrictions on price competition have likewiseled to higher fares and emphasis on nonprice methods of competition.In intrastate markets in Texas and California carriers are subject toFederal safety regulations but are free of Federal restrictions on fares androutes. In these markets prices have been consistently lower than prices infederally regulated markets which have similar characteristics.The regulated air carriers have not earned unusually high profits as aresult of regulation restricting price competition. Potential profits have beendissipated through advertising and service competition—most visibly in theform of in-flight stereo, free meals, and other amenities. Less visible but moreexpensive forms of nonprice competition are capacity increases and schedulingadditional flights. More frequent departures and a higher probability ofobtaining a seat on a preferred flight do yield benefits to consumers, butrecent studies have shown that the cost of operating the additional flights isconsiderably greater than these benefits. The popularity of air charter flightsillustrates the willingness of many consumers to accept the inconvenience ofless frequent service, less flexible scheduling, and fewer amenities in order to150

purchase less expensive air travel. Increased flexibility permitting adjustmentsin prices to meet market demands, liberalized entry into specific airroutes, and the removal of antitrust immunity would help assure a widerrange of consumer choices for air transportation and lead to lower air faresthan would otherwise occur.The need for reform in air transportation is compelling and is now generallyacknowledged. The 94th Congress considered reform bills submittedby the President, various members of the Congress, and the Civil AeronauticsBoard. None of the proposals recommend any change in the safety standardsenforced by the Federal Aviation Administration; they all focused on economicregulation. Each of the proposed bills would place greater relianceupon competitive market forces. Each recognizes that increased pricingfreedom must be accompanied by a significant lowering of regulatory barriersto entry if truly competitive performance is to be assured. The currentissue appears to be not whether a change needs to be made, but rather howfar and how quickly it should proceed.REGULATED PRICE BELOW MARKET PRICEAt a regulated price below the competitively determined market price,consumers want to purchase more output than producers are willing to supply.The result is a shortage: more is demanded than will be supplied at theregulated price. A shortage means that some potential customers who place avalue on the product higher than its cost of production are unable to purchaseit because the low price has discouraged its manufacture.Price ceilings also require that nonprice methods be used to decide who isto get the limited supply that is available. Although the monetary price tothose fortunate enough to meet the nonprice criteria for purchasing a regulatedcommodity or service may be lower, all those who want to purchaseit, but cannot, must pay a higher price, corresponding to the price of thebest substitute product. They are forced to seek more costly substitutes tosatisfy their demand, or else to do without. In addition, because the costsof nonprice rationing—waiting in line at a gas station, for example—aresometimes substantial, the realized price paid by those who do meet thecriteria may be greater than the free-market price would be, even thoughthe monetary price is lower. As a rule, nonprice rationing methods are lessefficient and more costly than price rationing.Natural GasPrice controls on natural gas provide an illustration of the losses resultingfrom a price fixed below the competitive market-clearing level. The FederalPower Commission (FPC) regulates the price of gas sold to pipeline companiesfor resale across State boundaries. Since the regulated price is belowthe price in unregulated intrastate markets, most new gas has gone to the intrastatemarkets. As a consequence there has been a shortage in certain areaswhere gas must cross a State line to get from producer to consumer. Many151

usinesses and institutions have had to substitute more expensive energy fornatural gas in the past few years; and where natural gas is critical for someindustrial uses, work stoppages and unemployment have also resulted. Fewresidential customers already subscribing to gas service have encounteredproblems, but some new applications for gas service have been denied. Since1972, as an example, no new customers have been accepted by the ColumbiaGas System, which serves consumers from Virginia to Ohio and New York.Recent forecasts indicate a growing shortage of natural gas to meet thecontract requirements of pipelines for gas deliveries to local distributors andportend future problems even for residential customers.The economic costs of the natural gas shortage emerge in various forms.First, under the nonprice allocation system that has been devised by theFPC, distribution companies are allocated gas on the basis of a set of FPCapprovedpriorities. This allocation system does not directly consider therelative cost of switching to an alternative energy source or the relativeproductivity of natural gas in alternative uses. The gas that is available maytherefore not be going to its most productive uses. Second, natural gas isunderutilized as an energy source in favor of more costly alternatives becausegas producers, responding to the artificially low prices, undertake less explorationand development than would occur in an unconstrained market. Duringthe last decade total annual additions to natural gas reserves declinedslightly, while demand was increasing steadily. Third, because intrastate salesof gas are not controlled by the FPC, producers prefer to sell as much gas aspossible at the higher prices prevailing within the producing States. As thecontrolled price of natural gas has lagged behind the rising price of alternativefuels, this problem has become more serious. About two-thirds of thenatural gas reserves committed to markets went to interstate marketsin the late 1960s, but this fraction had declined to less than 20 percentby 1975. The unregulated price of natural gas in gas-producing States issometimes lower than the price of equivalent energy in nonproducing areas,where businesses occasionally cannot obtain gas at any price. Moreover, forsome industrial processes, natural gas is less costly to use than alternativefuel sources which could supply the equivalent energy. As a result firms mayfind it advantageous to move from regions served by regulated natural gasto regions where supplies are available. Instead of being based on truerelative locational advantages, this migration to gas-producing States isinduced because the regulated price of gas is held below the competitive level.Last year the FPC announced a threefold increase in the regulatedprice of "new gas" (gas coming from wells on which drilling commencedafter January 1, 1976). FPC efforts to raise the price ceilings can contributeto economic growth, but any long-term solution to the natural gas shortagenecessitates legislative action to eliminate price controls. Although increasedprices will undoubtedly affect residential consumers, one shouldnot ignore the current costs to consumers caused by regulation-induced misallocation:those which are now hidden in the prices of goods and services152

produced with higher-cost energy sources, and those which primarily burdenresidential consumers who are unable to obtain gas supplies at any price.REGULATIONS THAT DIRECTLY AFFECT COSTA free-market economy cannot allocate resources efficiently unless pricesreflect all of the costs of producing and consuming each good and service,and unless buyers and sellers have adequate information on which to basetheir market decisions. If the external costs that spill over to outsiders areignored, the price of a good or service will be too low and consumers willbuy too much. The output that is purchased will entail a greater social costof production than the benefits that its consumers will derive. The effectwould be similar to a direct subsidy of certain economic activities: economicdecisions would be distorted toward the production and consumption of thesubsidized product. In addition, if producers or consumers have inadequateinformation, market decisions will not necessarily reflect relative costs. Themore prominent cases of Government efforts to correct for spillover costsand inadequate market information in recent years concern health, safety,and the environment.Unfortunately, in many instances it is extraordinarily difficult to estimatethe external cost of private decisions or the public benefits which would stemfrom policies to alter those decisions. Errors in estimating either the benefitsor the costs can result in programs which are socially more costly than theexternalities they are attempting to correct. The inadequacy of informationfrequently means that these decisions must be made in the presence ofconsiderable uncertainty.Several problems hinder the development of efficient regulations that willcorrect for external costs and inadequate information. The appropriate degreeof pollution removal or reduction of risks to health and safety must bedetermined. Eliminating absolutely all pollution or risk to health and safetywould be so expensive that it would preclude other national goals. By analogy,in their private lives individuals rarely try to lessen the risk of incurringinjury or contracting disease to the technologically feasible minimum. Peoplerecognize that the incremental benefits of health and safety are limited andmust be balanced against having more resources available to satisfy otherneeds. In those instances where the private sector is unable to generate asocially efficient amount of information, there is scope for Government researchand dissemination of data. Finally, whatever is chosen as the targetof environmental cleanup or health and safety improvement should beachieved at the minimum sacrifice of other goods and services.Electric PowerRegulations have been imposed on the generation of electric power in aneffort to internalize the spillover costs associated with air and water pollution.Although it is difficult to measure the benefits, these goals have clearlybeen expensive to achieve. Investments to meet air and water standards areestimated to add about 10 percent to the total capital expenditures in electric-153

ity generation. If the regulations are set properly, they should improve theefficient operation of our economy. The methods adopted for this task, however,have not always been consistent with another objective of cost internalization—achievingit with maximum efficiency.For example, because certain types of power plants are required to prepareenvironmental impact statements and have been hampered by frequentlegal disputes, considerable delay has occurred in the construction ofsome electric generation plants. The spasmodic and still evolving developmentof environmental regulatory policy can create an atmosphere of uncertaintyand increase the risk attached to new construction projects for generatingpower. The uncertainty of regulatory policy can have particularly severeeffects on the building of power plants because they involve long commitmentsand have little flexibility once they are constructed. Hence the cautionthat utility companies have shown in planning the expansion of futurecapacity is not surprising. However, the delay in getting power plants underway may cause a switch to alternative types of generating plants which,though less efficient, can be constructed more quickly as demand pressuresintensify. The absence of confidence in the stability of environmental regulationsmay thus lead to a less efficient and more costly mix of generationcapacity in the future.Occupational Health and SafetyGovernment efforts to improve health and safety conditions in and aroundthe workplace provide another example of the difficulty of using directregulatory efforts to achieve social goals. The Federal Occupational Safetyand Health Act of 1970 mandates the Federal Occupational Safety andHealth Administration (OSHA) to assure "so far as possible every workingman and woman in the Nation safe and healthful working conditions."Under the act each employer is required to comply with the standards promulgatedby OSHA. These standards are intended to furnish for eachemployee a job which is "free from recognized hazards that are causingor likely to cause death or serious physical harm."Without OSHA's standards employers would remove work-related hazardswhenever the benefits to them of doing so would exceed the incrementalcosts. If employers confronted the full costs of illness and injury from poorworking conditions by having to pay higher wages, or incurred other coststhat varied directly with the dangers to health and safety in workplaces,they would tend to operate at an efficient level of occupationally relatedhealth and safety. For a number of reasons, however, employers do notactually face the full costs of injuries and illnesses, and some of these costsare borne by others than the injured or ill employees.The workers' compensation system does not fully reimburse workers andthe rest of society for the loss in earnings and the additional medical andrehabilitation expenses that arise from job-related injuries and diseases. Tworeasons for this failure are the extraordinary difficulty of estimating the privateand the social cost of work-related injuries and diseases and the problem154

of establishing efficient methods of internalizing these costs. The society atlarge pays part of the costs of occupational illness and injury through othertransfer programs—for example, social security disability, medicaid, andvocational rehabilitation. In addition, the workers' compensation insurancepremium paid by the individual employer does not vary in direct proportionto the benefits paid out to its injured workers. Employers are not given the incentiveto respond optimally even to those losses for which the system providesdirect compensation. Finally, wage differences may not fully adjust to otherwiseuncompensated hazards present in the workplace if workers are notwell informed of the actual risks that they face, or do not have enough mobilityto avoid risks for which they do not feel fully compensated.A system of health and safety standards is one mechanism for furtherinternalizing accident and illness costs borne by parties other than employers.To implement an efficient system of health and safety standards,the Government needs detailed knowledge about the many different causesof accidents and disease and the relative costs in different firms of alternativemethods that may reduce them. There are important differences in therisk of injury and damage to health among occupations and employers—and perhaps also among employees. For administrative and legal reasons,however, it is difficult to impose different standards on different employers.Because of these problems any system of health and safety standards willinevitably be arbitrary and inefficient to some extent. OSHA has usuallymandated "engineering controls" for reducing workers' exposure to hazards,rather than allowing firms and employees to determine for themselves theleast-cost means of achieving health and safety goals. Given the diversityamong firms, the application of engineering standards requires more information,is less likely to result in uniform treatment, and thereby entailshigher costs than performance standards or "injury fees" for the samereduction in injuries.In situations where sufficient information exists to permit a reasonablyprecise estimate of the social loss from work-related injuries and diseases,health and safety objectives can more efficiently be achieved through theuse of performance standards or injury fees, rather than by mandatingparticular means of reducing injuries. Performance standards levy chargesagainst firms according to the incidence and severity of all job-relatedinjuries, or to increases in injuries above some predetermined level. Ifinformation permits, the fees could be tailored to the frequency and seriousnessof accident or illness and might be incorporated in a workers' compensationsystem. These charges should be large enough to fully compensatethose directly harmed and to cover the external costs as well. Individualfirms would be left to seek least-cost methods of reducing accidents anddisease, and they would adopt them to the point where the costs of reducingaccidents and illness exceeded the charges levied on the occurrence ofaccident and illness.The present state of knowledge is not sufficient to extend this approachto all problems in relation to health and safety. It is frequently difficult to155

identify the causes of a disease, and the link between health and workingconditions is difficult to establish. Many occupationally related diseasesappear long after exposure to their causes. The charges might follow solong after the hazardous conditions had caused harm that they would notplay much part in decisions affecting the health of employees. The assignmentof liability is further complicated because firms may disappear as timepasses or avoid responsibility in other ways.Information problems and the long latency of many occupational diseasesmake it very difficult to estimate costs and therefore the level of exposurethat society is willing to tolerate. In addition, even if these problems wereresolved it would be hard to embody the results in an operational systemof levying the appropriate charges and internalizing the costs. These samedifficulties confront the engineering standards approach. But for occupationalhealth objectives there is often a correct preference for standards thatprohibit or severely limit exposure, rather than for an injury fee approachthat might allow substantial exposure. In the presence of considerableuncertainty, the desire to err in the direction of too much health and safetymay require a standards approach. Where the relevant information is availableand the risks involved are not excessive, the use of performance standardsmay be a more effective means of achieving desired levels of safety and health.Because of the substantial externalities that may be involved, and thedifficulty of generating private sector financing of basic research, an importantrole for Government lies in financing research relating to occupationaldisease.IMPLEMENTING REGULATORY REFORMIn spite of the widespread recognition that reform of certain Governmentregulatory policies could yield substantial economic benefits, there remainmajor obstacles to achieving reform. Compared to those who would benefit byreform, those who would be hurt are fewer; but they are also likely to be moreaware of the losses that they would incur. Many potential losers are wellorganized and have an effective system for communicating their views topolicy makers and the public. On the other hand, the beneficiaries ofregulatory reform (especially the ultimate consumers of products of theregulated industries) are numerous, and the benefit per individual is usuallysmall. Beneficiaries of reform are less likely to understand their stake inregulatory reform, are not usually organized, and generally have littlesuccess in effectively communicating their views to decision makers andthe public.Those in a position to lose from regulatory reform are not always theones who have gained from prior restrictive economic regulations. In a wellfunctioningmarket, the sales price of capital assets reflects the future earningsstream they are expected to generate, appropriately discounted toaccount for delay in the receipt of those earnings. The value of regulated industries'assets are likely to be elevated sufficiently to reflect the expectationthat regulation, and its associated benefits to existing firms, will continue156

in the future. Consequently current stockholders ot such industries whopurchased shares after regulation was introduced are unlikely to earn morethan a normal return on their investment. When regulatory reform threatensto alter the economic environment on which they based their future profitexpectations, they will naturally resist.In many instances income distribution considerations are cited in supportof holding regulated prices below free-market levels. Allowing prices to rise,however, may not affect low-income consumers more adversely than higherincomeconsumers. There are substantial differences in consumption patternsamong households at the same income levels, and the effects of deregulationon family well-being are likely to differ greatly. For these reasons it ispreferable to use the regular tax and income transfer systems, rather thanprice regulations, to achieve society's income distribution objectives.Another problem facing regulatory reform is the difficulty often encounteredin bringing regulatory reform initiatives before the full Congress. Individualcongressional committees, responding to the pressures described above,are sometimes reluctant to consider significant reform bills. Thus, althoughthere is a growing consensus that regulatory reform is needed, the processof achieving it may be hampered by fragmentation of individual proposals.It may therefore be desirable for policy makers to address a number of regulatoryreform issues simultaneously. Such an approach was contained in theproposed Agenda for Regulatory Reform submitted by the President to the94th Congress. This proposal would have required the Administration tointroduce legislation to effect major regulatory reforms over a 4-yearperiod. Another provision would have ensured congressional action by placingthe Administration's proposals before the full Congress after a specifiedtime if similar proposals were not reported out of committee.SUMMARYMajor policy initiatives are required to address the kinds of regulatoryproblems described above. Two types of efforts are needed. First, the statutesunder which some agencies operate need to be modified. This approach isparticularly applicable to the independent regulatory agencies which havejurisdiction over specific industries. The principal goal should be to eliminateregulations that inhibit competition, prevent innovation, and otherwisedistort the allocation of resources. Second, the quality of agencydecisions under the existing regulatory statutes needs to be improved. Thisapproach appears particularly suited to those regulatory agencies which dealwith matters of health, safety, and the environment.Several specific reforms deserve consideration in 1977. First, reform thatincreases rate flexibility and eases entry restrictions in the airline and truckingindustries would reduce the costs imposed by prices set in excess of competitivelydetermined free-market levels. The reduction in the quantity ofresources absorbed unproductively would increase the ability of the economyto produce more goods and services of all types, including those of the regulatedsector.157224-250 O - 77 - 11

Second, the economic costs generated by price ceilings could be reducedby the elimination of many price restrictions. Decontrol of natural gasprices is the most urgent need. This would increase economic efficiency and,by increasing supply, move us toward greater energy self-sufficiency.Third, regulations related to health, safety, and the environment needto be carefully evaluated. These regulations are aimed at some importantthough elusive social goals. But some generate hidden economic costs thatare being ignored, and some may not be effective in achieving the goals oftheir enabling legislation. A sound comparison of the realized benefits againstthe total costs generated by each of these regulations is necessary to ensurethat the regulatory goals chosen by society are desirable and are achievedat the least possible cost.AGRICULTURAL POLICYFarm programs over the years have reduced real GNP by imposing avariety of restrictions on pricing, production, land use, and trade in farmcommodities. Some of the most important of these restrictions have beeneliminated in recent years, but others remain. In 1977 major pieces offarm legislation will expire, and there will be pressures to return to pastapproaches which have caused an inefficient allocation of the Nation'sagricultural resources. This section reviews the progress made in farm policy,the threat to that progress, and the direction we believe that future farmpolicy should take.THE MOVEMENT TO MARKET-ORIENTED FARM PROGRAMSBeginning in the 1930s the pursuit of income protection for farmers ledto programs which have raised average farm prices above competitivemarket-clearing levels. These programs have produced the general consequencesof price-increasing regulation discussed in the preceding section:the regulated price induces more output and less consumption than wouldotherwise have occurred, and the excess production and capacity generatepressures to restrict output.For grains and some other commodities the regulated price has beensupported by Government acquisition of commodities. The existence of excesscapacity is then revealed in the accumulation of stocks of commoditiesheld by the Government. To prevent stock accumulation, schemes have beentried under which a relatively high price was paid for commodities useddomestically, while exports were made at a lower world price. If sufficientquantities could not be exported at world market prices, export subsidieshave been paid—notoriously in the case of wheat, when subsidies were paidduring the period of the Soviet purchases of 1972. In addition, subsidizedexports have been made through the Food for Peace program and throughsubsidized credit to foreign purchasers. Domestic food consumption has beensubsidized through the school lunch, food stamp, and other special programs.Because no demand-increasing approach has been able for long to equate158

demand and supply at support prices, there was continued resort to productioncontrol schemes. Measures taken to restrict production have included:acreage allotments and marketing quotas for the major crops; Governmentpurchase and slaughter of sows and baby pigs in the 1930s; paymentsto farmers to turn cropland to less productive use under croplandadjustment, conservation reserve and cropland conversion programs; and,more recently, requirements to "set aside" cropland acres as a prerequisiteto participation in price support programs, supplemented by diversion paymentsto induce further reduction in crop acreage.The typical result of these programs was a reduction in food output, orat least in domestic consumption, and inefficiency in the allocation ofresources. Establishment of domestic prices above world market levels requiredmeasures inconsistent with our overall trade liberalization objectives.Food prices were more stable, but at the cost of higher average pricesthan if prices had been unregulated. Apart from efficiency losses, costs tothe nonfarm public included many billions of dollars in direct paymentsto farmers. In 1968-70, annual budget outlays for farm programs averaged$5 billion, and Government payments amounted to over one-fourth of totalnet farm income. Over the years the program benefits were largelycapitalized into land values, so that they accrued primarily to owners offarm real estate.Reductions in some crop support prices in the mid-1960s began a reorientationof farm policy toward unregulated market prices, and since 1972increases in world market demand have permitted an almost complete abandonmentof restrictive features in U.S. farm programs for major crops. Reformswhich only a few years ago were considered a practical impossibilityhave now been put into effect. At the same time, extreme price increasesfollowing the sharp reduction in U.S. and world carryover stocks of grainsin 1972—73 have renewed interest in measures to stabilize prices. This concernfor stability, together with a desire for farm income protection, couldopen the door to a return to past restrictive approaches.THE THREAT TO MARKET-ORIENTED POLICIESFarm programs differ from other regulatory activities in that regulatedprices and means of controlling production are more often specified inlegislation. Consequently the features of farm programs tend to be a moredirect political issue, and more subject to sudden change in approach, than isthe case in the regulation of most other industries. Farm policy will be consideredby the Congress in 1977 because much of the legislation authorizingcurrent programs will expire, including the Agriculture and ConsumerProtection Act of 1973, which covers the major crops. The machinery setup under the 1973 act allows the separation of farm income supportfrom price stabilization measures to a greater degree than waspossible under preceding programs. Farm income support can be providedby means of deficiency payments, which are based on the difference between159

a legislated target price and the market price or support price received.Farmers in the aggregate cannot increase their payments by expanding output,since payments are limited to a given base production. Thus althoughthis approach could be very costly to taxpayers if the target prices were highenough, it can provide farm income support without Government stockbuildup and without restricting food supplies. To date, the strength of worldmarkets has kept market prices above target prices, and therefore no deficiencypayments have been made, although payments for rice are a certaintyin fiscal 1977.Recent weakness in the price of grains, especially wheat and rice, has rekindledfarmers' interest in price support programs. The threat of decliningfarm incomes, coupled with appeals for policies to promote foodprice stability by means of grain reserves, could lead to higher support pricesand hence a turn away from full-production, market-oriented policies.The United States has proposed an international system of food grainreserves of limited size which would not be used to defend any particularprice band. An alternative, but one which would also involve importantissues in international policy coordination, could be a unilateral domesticbuffer stock of grain, which would be built up when prices are low and soldwhen prices are high. This idea fits in naturally with Government storageof grain acquired to support prices. The main new elements would haveto do with whether the stocks would be open-ended in size or would specifymaximum quantities to be acquired, and the rules for placing stocks on themarket to moderate price increases.While a publicly owned buffer stock can reduce price fluctuations, itinvolves substantial costs and risks. The principal risk is that supportprices and resale prices as well as quantities to be acquired and releasedwill tend to be determined by political criteria. The result, if past historyis a guide, will be to stabilize prices in a range which on the average is abovecompetitive market-clearing levels. Such regulated prices would probablyreturn us finally to the acreage restrictions, production controls, and exportsubsidies which have characterized past farm programs.THE FUTURE OF MARKET-ORIENTED POLICIESFarm policy should not only resist bringing back the restrictive grain andcotton programs of the past, but should also move toward market orientationfor the commodities where price-increasing measures remain effective. Commoditiescovered by effective price supports include milk, tobacco, andpeanuts. Price supports for milk used to manufacture other dairy productsare currently resulting in substantial Government purchases of powderedmilk, cheese, and butter, and they require import controls to keep out foreigndairy products attracted by the high prices. The existing programs for tobaccoand peanuts rely on economically objectionable production controls.Rights to grow and market these crops have become valuable assets. Even160

with stringent controls on peanut acreage and tobacco production, the supportprices are high enough to result in Government stock accumulation.Milk and some fruits, vegetables, and nuts are marketed by large cooperativesunder the auspices of Federal marketing agreements and orders. Apartfrom those for milk, there were 47 orders and agreements in fiscal 1976 coveringfarm products valued at $3.7 billion. Regulation in these cases doesnot establish prices by legislative or executive action but grants powers toproducer groups sufficient to influence prices paid to them. To attain "orderlymarketing," flows of products to market during peak production periodsare cut back or diverted from fresh to processing uses or to export markets.The result is a higher price for fresh products for domestic uses. The quantitativelymost important case is the higher price established for milk sold influid form compared to milk for other dairy products. Size and grade standardshave in some instances been used to reduce flows of imports, notably ofwinter tomatoes from Mexico. While most producers' associations have foundit difficult to control total supplies, they have in some cases—notably for hopsand celery—been able to do so and thereby to raise prices.Farm policy, besides avoiding production controls under commodity programs,should actively promote efficient food production in other ways.Perhaps the most important means is basic agricultural research, the benefitsof which are difficult for private business to capture. Another is to make surethat efficient food production gets appropriately weighted against other socialgoals, for example by insisting that more stringent environmental or safetyregulations do not impose greater additional costs than their expected additionalbenefits.The goal of eliminating excessive price instability can be served by morepromising means than direct market intervention. Provision of timely andaccurate production and market information is a valuable service whichmay be inadequately supplied by the private sector because of the difficultyof capturing the benefits. By fostering efficient futures markets, which assistcommodity producers and users in risk management and which translatethe market information that exists into price signals easily interpreted by andreadily available to market participants, Government may play a useful role.Domestic price stability would be furthered by reducing protectionism andincreasing market orientation abroad. Adjustment to world supply and demandfluctuations would then not occur as disproportionately as it doesnow in the United States. Freer trade in agricultural products is a chiefU.S. goal in the Multilateral Trade Negotiations currently under way, whichsuggests that the United States should resist undermining its position byprotectionist measures to favor our own domestic producers. Bilateral negotiationsmay also prove useful. The 5-year grain sales agreement with the SovietUnion, which covers shipments of wheat and corn after October 1, 1976,may reduce the year-to-year fluctuations in Soviet grain imports and is astep toward making the grain export policy of the United States steadierand more predictable. In all of these respects agricultural policy can promote161

price stability without the risks inherent in direct intervention in commoditymarkets.Farm programs also influence the efficiency of resource utilization in agricultureby helping farmers bear the risks of crop failure caused by badweather, pests, or disease. For most commodities, production risk is paid forby consumers in the higher prices needed to induce people to undertake riskyactivities. For grains and cotton, current legislation provides free insurancethrough disaster payments when bad weather prevents planting or when aharvest of two-thirds or less of normal production on allotment acreage isrealized. These payments totaled about $840 million in 1974 and 1975 together.The economic arguments favor replacement of the disaster paymentscheme by an expanded system of nonsubsidized general crop insurance.Subsidized crop failure encourages farmers to use marginal land too intensively,contrary to the conservation goals of agricultural policy, and couldreduce the output of our agricultural resources in the future.Farm programs offer both opportunities and pitfalls in the effort to makethe most of our agricultural resources and thus increase real GNP. Opportunitiesoffered by the commodity price boom of recent years were used toestablish a potentially valuable legacy of a full-production policy for agriculture.The challenge is to use whatever new opportunities present themselvesto eliminate remaining restrictive measures. Most important for theimmediate future is not to let the pursuit of farm income support or pricestabilization lead us back into past restrictive approaches.TAX POLICIES FOR CAPITAL FORMATIONIn Chapter 1 it was noted that a higher rate of investment is desirable fortwo reasons: to help sustain the expansion in the short run and to providethe new capacity required in the longer run to ensure rising real incomes,productive employment opportunities for a growing labor force, greaterself-sufficiency in energy, and a cleaner environment. Chapter 1 also notedthat one of the important causes of the recent productivity slowdown hasbeen the slower growth in the stock of capital per worker over the lastdecade. The conclusion was therefore reached that an important objectiveof economic policy in the years ahead should be to ensure adequatelevels of new investment. In the near term, stable economic growth is essentialfor a higher rate of capital formation. But policies may also have tobe devised to counteract the forces, identified in Chapter 1, which mayhave lowered the effective rates of return to saving and investment andinterfered with an efficient allocation of capital resources. For example, thePresident's proposed reductions in personal and corporate income taxes canbe justified in part as an offset to the bias against private investment createdby our tax structure, under which the real tax burdens for business as well asindividuals rise in periods of high inflation. There are a number of other162

aspects of the tax system which impinge on investment and saving. This sectiondiscusses some of these features and suggests some possible changes thatmay be useful to stimulate additional capital formation and promote amore efficient use of available capital resources.INVESTMENT TAX CREDITThe investment tax credit (ITC) was first enacted in 1962 as part of theKennedy Administration's program to stimulate investment by increasingthe profitability of new equipment. Since then, the ITC has been revisedby a series of legislative actions and successively suspended, repealed, andreenacted. The ITC was permanently reinstated at a maximum 7 percentrate (4 percent for utilities) by the Revenue Act of 1971. The Tax ReductionAct of 1975 temporarily increased the maximum rate to 10 percent forall businesses, including utilities, during 1975 and 1976. The Tax ReformAct of 1976 subsequently extended the 10 percent rate through 1980, andthe President has proposed that it be made permanent.At present the law provides for a credit against current tax liabilities ofcorporate and noncorporate businesses, equal to 10 percent of the value ofqualified investments. Qualified investments are generally new depreciableassets used in production, excluding structures, with service lives of 3 years ormore. The credit is applied on a sliding scale in such a way that one-third ofthe full credit is allowed for assets with service lives of 3 or 4 years, twothirdsfor assets with service lives of 5 or 6 years, and the full credit forthose assets with service lives of 7 years or more. The ITC rates thus rangefrom 3/3 to 10 percent, depending on the life of the asset. The creditclaimed in any year cannot exceed a company's total tax liability for theyear, and the maximum credit that generally may be taken is $25,000, plus50 percent of the tax liability in excess of $25,000. Credits not usable in thecurrent year because of this limitation may be deducted against tax liabilities3 years back and 7 years forward on a first-in, first-out basis, that is,the oldest credits are used first. Under current law, the basis for calculatingdepreciation allowances on new equipment is not reduced by the amount ofthe credit. A provision requiring a basis adjustment was contained in theoriginal 1962 legislation, but it was subsequently repealed by the RevenueAct of 1964.The credit was restricted to equipment purchases because of the favorabletax treatment already accorded to structures under the rulesfor accelerated depreciation and for expensing of interest and taxes incurredduring the construction period. It was also felt that the most rapid gains inproductivity could be achieved by encouraging investment in new equipment.In addition, there was a fear that a credit on structures might becomea tax loophole for real estate speculation and the purchase of privateresidences.There is no general consensus about the precise impact of the ITC oninvestment spending. Nevertheless it does appear that past increases in163

the credit have led to significantly higher expenditures for new equipment.Moreover, compared with the other major investment incentives—changes in accelerated depreciation and reductions in the corporate incometax rate—the ITC apparently yields larger and more rapid increasesin investment per dollar of reduced tax liability. Consequently the issue withrespect to the ITC concerns not so much its overall effectiveness as thedistortions it may create in choices among different types of capital assets.These distortions derive from three specific aspects of the ITG as it nowoperates.First, because the amount of credit that may be taken is generally limitedby the investor's total tax liability, firms with highly variable profit rates mayhave difficulty making full use of the ITG in any given year. It is estimatedthat about $1^2 billion in additional tax credits would have been claimedin 1975 if this limitation had not existed, and this represents nearly 20 percentof the total amount of investment tax credit claimed in that year.The present carry-back and carry-forward provisions do permit eventualrecovery of most credits. However, since profits and business tax liabilitiesgenerally fall during recessions, the credits may not be available to firms incyclically sensitive industries at the very time when the need for additionalcash flow is greatest. The same problem may affect rapidly growing firms,which have large investment needs relative to their profits and tax liabilities.Making the ITC fully refundable in the year in which assets are purchasedwould eliminate that constraint. This change would tend to minimizethe adverse effects of the business cycle on investment and provide anadditional incentive to the most dynamic sectors of the economy.Second, the ITG discriminates against very short-lived assets as wellas assets with service lives of more than 7 years. There may be some justificationfor denying the ITG to inventory assets because they are not used inproduction. Moreover, administration of the ITG for inventories tends tobe complicated by the fact that they are often sold before the end of theirservice lives, thus necessitating recapture of credits received. There arenevertheless many other types of productive short-lived capital assets whichon the grounds of efficiency should benefit from the credit. In addition,the flat 10 percent rate applied to all assets with useful lives of 7 years ormore results in a progressively smaller increase in the rate of return onlonger-lived capital assets (Table 35). If the credit is not to impart such abias against long-term investments, the implied rate of return must be increasedproportionately for all assets. To achieve this result, a variable rateITC is required, with a larger credit applied to longer-lived assets. A restructuringand extension of the present sliding scale would therefore neutralizethe effect of the ITC on the choice among assets with different service lives.Such a change would particularly benefit many primary processing industrieswhich are critical to the economy's long-term growth potential andwhose capital structure is heavily weighted toward long-lived assets.164

TABLE 35—Change in aUer-tax internal rate of return under present 10 percentinvestment tax credit, all businessesLife of asset(years)1 . _.. .23__ . _4 _ _5689101520.25. . .30Investmenttaxcredit(percent)0.0.03.33.36.76.710.010.010.010.010.010.010.010.0Change inafter-taxinternalrate ofreturn(percentagepoints) i0.00.001.921.572.772.423.302.992.732.521.911.601.421.311 Assumes that the net income stream from the investment is constant, that the after-tax internal rate ofreturn before the investment tax credit equals 10 percent, and that the credit does not affect future costs orrevenues.Source: Council of Economic Advisers.Finally, the current failure to exclude the amount of the tax credit fromthe depreciable base of an asset means that a write-off is allowed for an expensenot incurred. This raises the effective rate of the ITC above the statutorylevel, the increase being larger for shorter-lived assets, thus accentuatingthe bias against longer-term investments. It would be preferable to makethe appropriate adjustment to the depreciable tax base and change the sizeof the credit itself to achieve the desired rate of profitability on assets withdifferent useful lives.A redesign of the ITC to eliminate the distortions noted above would makeit a more neutral and effective incentive for new investment and should beconsidered if the need arises in the future for additional fiscal stimulus forinvestment. Making the ITC permanent would also be desirable to removethe uncertainty about its future level and create a more stable basis for businessinvestment planning. Frequent changes in the ITC should be avoidedbecause they may actually have a destabilizing effect on aggregate demand.The primary effect of temporary revisions in the credit may simply be tochange the timing of investment spending. For example, a 1-year increasein the credit may boost the level of investment in the short run, but thenlead to a correspondingly lower level in the following year. Furthermorethe ITC may have perverse effects on investment if firms begin to anticipatechanges in the rate. If increases in the credit are regularly expected as theeconomy is headed out of recessions, the downturn may be prolonged iffirms hold back on new investment until the credit is raised. For thesereasons, then, the use of the ITC to stabilize aggregate demand in the shortrun should be kept to a minimum.165

TAX INTEGRATIONIntegration of the corporate and personal income taxes to eliminate thedouble tax on corporate income is another proposal that has been recommendedas a means of improving the allocation of capital resources andraising the aggregate rate of investment. Under current law the first $25,000of corporate income is taxed at a rate of 20 percent, the second $25,000 at22 percent, and all income above $50,000 at 48 percent (22 percent plus asurtax of 26 percent) .* In addition shareholders must pay individual incometaxes on distributed profits (dividends) ; and retained earnings are taxedagain, though at lower effective rates, when capital gains are realized fromthe sale of stock. Thus, while income from noncorporate businesses andwages and salaries is taxed only once, corporate income is subject to a doubletax. This extra tax creates a number of distortions affecting the financialstructure of corporations and the overall allocation of capital resources,which impair economic stability and reduce total output.First, because after-tax rates of return on capital tend to be equalized bymarket forces, the higher rate of tax on corporate income implies that anextra dollar invested in the corporate sector must yield a higher before-taxrate of return than an extra dollar invested in the noncorporate sector. Thedouble tax therefore discourages capital resources from flowing into higheryieldingprojects in the corporate sector, the result being a net loss in output.Second, since retained earnings are generally translated into capital gainsin the form of higher stock prices, and these gains are taxed at preferentialrates, the tax burden on distributed profits is relatively larger than thaton undistributed profits. Corporations thus have an incentive to reducedividends and increase retained earnings. This phenomenon may producea misallocation of capital within the corporate sector as investment is encouragedin older established firms with a high level of retained earningsand discouraged in newer firms, which usually rely more heavily on capitalmarkets to raise funds. Moreover certain investment projects may be undertakenwith internally generated funds, despite the fact that they might notbe worthwhile if financed with capital from external sources. Third, thecombination of high inflation and the tax-deductibility of interest paymentshas encouraged many corporations to raise debt-equity ratios tolevels where the risk of bankruptcy may have risen substantially. Such firmsare thereby made more vulnerable to business cycle developments and mayexperience increasing difficulty in raising funds in capital markets. Finally,the increase in the tax burden resulting from the double tax is relativelygreater for lower-income stockholders.It is also sometimes claimed that the double taxation of corporate incomereduces the national rate of saving and that integration would be desirableto increase capital formation. Taken by itself, integration would lower taxes*The Tax Reform Act of 1976 extended these brackets and rates only through theend of 1977. The President has proposed that the first two brackets and rates bemade permanent, and that the surtax be permanently lowered to 24 percent.The latter change would yield a combined rate of 46 percent on corporate incomeover $50,000.166

and raise the return to capital income, which could be expected to resultin higher saving as well as consumption. However, if integration were accompaniedby an increase in other taxes, leaving total revenue unchanged,the effect on saving would be ambiguous. Saving would rise only to theextent that a net increase in the rate of return remained after the offsettingtax changes (and saving responded positively to such an increase) or incomewas redistributed to individuals with above-average propensities to save.Since the response of saving to changes in the rate of return is uncertainin any case, and it is unlikely that the offsetting tax increases wouldproduce a significant change in the after-tax distribution of income, itis probable that the effect of revenue-neutral integration on aggregate savingwould be minimal. The major benefits of integration thus stem from theimproved allocation of capital resources and the more equitable distributionof tax burdens that it would bring about—not from its presumed effectson total saving.Full integration in its purest form would eliminate the corporate incometax entirely and allocate income to stockholders as if they were generalpartners in a small business. There may be certain administrative problems,however, which would make this partnership approach difficult to implementin the case of widely held corporations. Moreover, severe cash flowproblems could be created for shareholders with high marginal tax rates iftheir tax liabilities significantly exceeded the dividends paid out.A more modest scheme of partially integrating the personal and corporateincome taxes would remove only the double tax on dividends, either byallowing corporations to deduct their dividend payments in calculatingincome for tax purposes, or by treating the corporate tax on dividends aswithholding for the shareholders. Under either of these methods of partialintegration, the bias toward reliance on retained earnings in corporate financingdecsions would be reduced. The Administraton's integration proposalcombines both approaches. A portion of dividends paid would be treated asa cost of doing business and therefore would be deductible from a corporation'sgross income. The remaining amount of dividends would be subjectto the ordinary corporate income tax, but the tax paid would be imputed toshareholders and treated as withholding in the calculation of their individualincome taxes. The shareholders would then be required to raise theirdividend income by the amount of tax imputed to them and withheld by thecorporation, calculate their individual income tax on this adjusted basis,and credit the amount withheld against their tax liability. If there were nooffsetting increase in taxes, this integration procedure could be expected toraise the after-tax incomes of both corporations and their shareholders,assuming no change in dividend payout rates.Full integration of corporate and personal income taxes would completelyeliminate the distortions in resource allocation mentioned earlier. Partialintegration, affecting dividends only, would not be completely neutral becauseit would not change the present tax treatment of retained corporate income.167

Nevertheless, if the difficulties in implementing full integration should proveinsurmountable, partial integration may be a possible second-best solution.Neither plan by itself, however, should be expected to result in a noticeablechange in the saving rate.POLICIES TO STIMULATE SAVINGTo help meet the economy's need for more capital, the most pressinggoal of policy should be to strengthen the long-term incentives for investment.However, if the share of GNP devoted to investment is to rise over thenext several years, a comparable flow of savings must also be forthcoming.Otherwise there may be a significant rise in the rate of interest, which couldlimit the amount of new capital formation. Although the present supply ofsavings is sufficient in view of the current level of economic activity, it maybe necessary to stimulate more saving as we approach full employmenttoward the end of the decade. If this need does arise, the additional savingcould come either from the public sector in the form of larger budget surpluses(or lower deficits), or from higher personal and business saving. InChapter 1 it was noted that in order to release the resources necessary forinvestment it would be desirable in the longer run to move toward a macroeconomicpolicy mix which generates a higher level of public saving. In theprivate sector, consideration should be given to changing those features ofour present tax system that may discourage saving. Recent discussions havesuggested that the personal saving rate might be raised by restructuring thesocial security system or by substituting a consumption tax for the personalincome tax. There may of course be other reasons for reforming both taxes,but the discussion here will focus only on the impact they may have on personalsaving.Most individuals finance their retirement with the returns from savingsaccumulated during their working years, intrafamily transfers, and socialsecurity benefits. Social security has become increasingly important in people'sretirement planning because of liberal increases in benefits and widercoverage. The question therefore arises whether this development mayhave led to a decline in private saving. If it has, the national rate of savingwould be correspondingly lower, since the social security system is financedon a pay-as-you-go basis; that is, benefit payments are financed by contributionsfrom the current work force rather than through a trust fund reserveaccumulated over time.The social security system may affect personal saving in several ways,some of which tend to raise the level, while others tend to lower it. The prospectof retirement benefits financed by younger generations in effect raises thecurrent working population's future endowment of wealth and encourages areduction in their saving. To the extent that social security benefits are expectedto yield significantly higher returns to individuals than are availablein private capital markets, the incentive to save is further reduced duringthe working years. On the other hand, by providing retirement in-168

come, social security encourages people to shorten their working lives. Sincesocial security retirement benefits generally become available only at the ageof 62, individuals will therefore tend to save more over a shorter working lifein order to lengthen the period of retirement. Furthermore, because incomefrom assets, unlike labor income, does not reduce social security benefits, thedesire to maintain a high rate of consumption after retirement may encouragemore saving. Finally, to some extent social security may simply replaceintergenerational transfers within familes, and hence have no net impact onnational saving.Whether the net effect of these factors influencing personal saving is positiveor negative is an empirical question. Some recent econometric studieshave suggested that the social security system on balance may have reducedpersonal saving. The evidence is inconclusive, however, about the exact magnitudeof this effect, and further research is clearly necessary before a definitiveanswer can be reached. Nevertheless it would be useful to begin consideringpossible ways of altering the social security system to mitigate any adverseeffects it may have on saving. Insofar as such a reform would involvemore complete funding of current and future social security benefits, a largeFederal budget surplus might result. Of course it would be necessary to ensurethat the implicitly more restrictive fiscal policy would be consistent withthe overall objectives of demand management.An alternative proposal designed in part to encourage saving would beto replace the personal income tax with a tax on consumption. It iswell known that both taxes cause a loss in efficiency by distorting individualchoices between market and nonmarket activities. An income tax,however, generates an additional distortion between consumption and savingby first reducing after-tax income available for all purposes, and then loweringthe interest earned on savings. An income tax therefore interferes withthe choice between present and future consumption by causing a divergencebetween the before- and after-tax rates of return on capital investments.This distortion could be removed either by making capital income deductibleunder the income tax, or by replacing the latter with a tax on consumption.A consumption tax, by deferring the tax payment until consumptionoccurs, is neutral with respect to the choice regarding consumption indifferent periods. Such a tax would therefore raise the yield from postponingconsumption and remove the existing disincentive to saving. As in thecase of tax integration, whether a consumption tax would in fact lead to anet increase in aggregate saving depends on the relative magnitudes of its income,substitution, and asset value effects. The available empirical evidencesuggests that there is considerable uncertainty regarding both the magnitudeand the direction of the effect of interest rate changes on saving. Therefore,if one purpose of a consumption tax is to stimulate saving, further examinationof how changes in the rate of return affect saving-consumption decisionsis clearly necessary. Nevertheless a consumption tax merits study not only asa possible mechanism to raise personal saving, but also in connection withbasic tax reform as an alternative to a broader-based and simplified incometax.169

Appendix AREPORT TO THE PRESIDENT ON THE ACTIVITIESOF THECOUNCIL OF ECONOMIC ADVISERS DURING 1976171

LETTER OF TRANSMITTALCOUNCIL OF ECONOMIC ADVISERS,Washington, D.C., December 30,1976.The PRESIDENT:SIR : The Council of Economic Advisers submits this report on its activitiesduring the calendar year 1976 in accordance with the requirements of theCongress, as set forth in section 4(d) of the Employment Act of 1946.Respectfully,ALAN GREEN SPAN. Chairman.BURTON G.MALKIEL.173224-250 O - 77 - 12

Report to the President on the Activities of theCouncil of Economic Advisers During 1976The Council of Economic Advisers was created by the Employment Actof 1946 to provide economic analysis and advice to the President and thusassist him in establishing and maintaining conditions under which theobjectives of the act can be secured.Alan Greenspan served as Council Chairman during 1976, his second yearin that capacity. Burton G. Malkiel was a Council Member throughout 1976,on leave of absence from Princeton University, where he is Gordon S.Rentschler Memorial Professor of Economics. On November 15, 1976, PaulW. MacAvoy, Council Member, resigned to become Professor of Economicswith the School of Organization and Management at Yale University.Past Council Members and their dates of service are listed belowNamePositionOath of office dateSeparation dateEdwin G. Nourse....Leon H. KeyserlingJohn D.ClarkRoy BloughRobert C. TurnerArthur F. Burns ..Neil H.Jacoby...Walter W. Stewart-Raymond J. SaulnierJoseph S. DavisPaul W. McCracken .Karl BrandtHenry C. WallichWalter W. HellerJames Tobin. . . .Kermit GordonGardner AckleyJohn P. LewisOtto EcksteinArthur M. OkunJames S. DuesenberryMerton J. PeckWarren L. SmithPaul W. McCrackenHendrik S. HouthakkerHerbert SteinEzra Solomon..Marina v.N. WhitmanGary L. SeeversWilliam J. FellnerPaul W. MacAvoy_.ChairmanVice ChairmanActing ChairmanChairman..MemberVice ChairmanMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberMemberChairmanMemberMemberMember...ChairmanMemberMemberMemberChairmanMemberMemberMemberChairmanMemberMemberChairmanMemberMemberMemberMemberMember_August 9,1946August 9,1946.November 2,1949May 10,1950August 9,1946..May 10,1950June 29,1950September 8,1952March 19, 1953September 15,1953December 2,1953April 4,1955December 3,1956May 2, 1955December 3,1956November 1,1958May 7,1959January 29,1961January 29,1961January 29,1961August 3,1962November 16,1964....May 17,1963September 2,1964November 16,1964February 15,1968February 2,1966February 15,1968July 1,1968February 4,1969February 4,1969February 4,1969January 1,1972September 9,1971March 13,1972July 23,1973October 31,1973June 13,1975November 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 20,1969.June 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.November 15,1976.175

RESPONSIBILITIES OF THE COUNCILThe principal directive of the Employment Act is that the Federal Government"use all practicable means consistent with its needs and obligations . . .for the purpose of creating and maintaining . . . conditions ... to promotemaximum employment, production, and purchasing power."To this end, the basic responsibility of the Council of Economic Advisersis to analyze economic problems and interpret trends and changes in theeconomy so as to assist the President in the development and evaluation ofnational economic policies. The Council prepares regular reports on currenteconomic conditions and forecasts of future economic developments as wellas submitting recommendations which are considered in the formulation ofeconomic policy. The Council also performs a direct advisory role both withinthe Executive Office of the President and through participation in interagencygroups in which representatives of various departments, agencies, andoffices in the executive branch evaluate economic problems and developalternative solutions.During 1976 the Council and its staff contributed to the study of manydifferent economic issues. Analyzing current developments in business activity,evaluating alternative macroeconomic policies, as well as investigatingproductivity and the growth of potential output in the United Stateswere an important part of the Council's work last year. The Council also participatedin studies of other topics of current importance in policy decisions:foreign economic conditions and international financial developments; issuesand proposals regarding agriculture and food, agricultural exports, andcommodity trade; ways of improving the functioning of the labor markets;measures and programs to support housing construction and stimulateinvestment; proposals for dealing with a wide range of energy issues andproblems; transportation problems; various proposals related to regulatoryreform and product liability insurance; proposals for improving the effectivenessof unemployment compensation, health insurance, social security andincome maintenance; and procedures that might improve the Government'seconomic statistics.Early each year the President submits the Economic Report of the Presidentto the Congress as required by the Employment Act. The Council assumesmajor responsibility for the preparation of the Report, which togetherwith the accompanying Annual Report of the Council of Economic Advisersreviews the progress of the economy during the preceding year and outlinesthe Administration's policies and programs.The Chairman is a member of the Economic Policy Board and of itsExecutive Committee. This board was formed in October 1974 to directthe formulation, coordination, and implementation of economic policy. TheExecutive Committee, which serves as the focal point for economic policymaking, meets daily to address current issues of economic policy. It ischaired by the Secretary of the Treasury and consists of the Chairman of176

the Council of Economic Advisers, the Director of the Office of Managementand Budget, the Secretary of State, the Secretary of Commerce, theSecretary of Labor, the Executive Director of the Council on InternationalEconomic Policy, and the Assistant to the President for Economic Affairs,who is the Executive Director of both the Economic Policy Board and itsExecutive Committee. The Executive Committee, often augmented by theChairman of the Board of Governors of the Federal Reserve System, meetsregularly with the President to review economic conditions and to discussand recommend possible changes in economic policy.The Chairman of the Council is also a member of the Executive Committeeof the President's Energy Resources Council, which was institutedin October 1974 to formulate and coordinate energy policy. The Chairmanheads the U.S. delegation to the Economic Policy Committee of the Organizationfor Economic Cooperation and Development (OECD) and servesas vice chairman of that committee. Council Members and staff economistsmeet with various working parties of the committee and attend other meetingsof the OECD during the year.The review and analysis of the overall performance of the economy isconducted and coordinated through a series of "Troika" working groups,comprising representatives of the Council, the Treasury, and the Office ofManagement and Budget. At regular intervals economists from these agenciesevaluate recent economic performance and formulate economic forecastswhich are then reviewed by a second group, chaired by a Council Memberand including a representative of the Treasury and the Office of Managementand Budget. The analysis and projections thus developed are finallyreviewed and cleared through the Chairman of the Council for presentationand consideration by the Executive Committee of the Economic PolicyBoard.The Council has initiated a series of periodic meetings at which leadingeconomists are invited to present their views on the economy and economicpolicy to the Executive Committee of the Economic Policy Board.The Joint Economic Committee (JEC), like the Council, was created bythe Employment Act of 1946 to make a continuing study of matters relatingto the economy and to submit its own report and recommendations to theCongress. During 1976 the Chairman and Members of the Council appearedthree times before the JEC. The Chairman and Council Members also presentedtestimony before the following: the Senate Committee on Banking,Housing, and Urban Affairs; the Subcommittee on Manpower, Compensation,and Health and Safety of the Committee on Education and Labor; andthe Subcommittee on Financial Markets of the Senate Finance Committee.The Annual Report of the Council of Economic Advisers, contained inthe Economic Report of the President, is the main vehicle through which theCouncil informs the public of its work and its views. This publication presentsa comprehensive review and analysis of economic conditions, withforecasts and projections for the coming year, as well as an explanation of177

the Administration's economic policy. In recent years about 50,000 copiesof the Economic Report have been distributed. The Council also conveys itsviews on current economic problems and developments through occasionalpress briefings, testimony before various congressional committees, andspeeches and papers by the Chairman and the Members of the Council. TheCouncil assumes primary responsibility for the monthly publicationEconomic Indicators. This compilation of current data, prepared by theCouncil's Statistical Office under the direction of Frances M. James andCatherine H. Furlong, and issued by the Joint Economic Committee, has adistribution of about 10,000 copies.ORGANIZATION AND STAFF OF THE COUNCILOFFICE OF THE CHAIRMANThe Chairman is responsible for communicating the Council's views tothe President. This duty is performed through discussions with the Presidentand through regular reports on economic developments. The Chairman alsorepresents the Council at Cabinet meetings and at many other formal andinformal meetings of Government officials. He exercises ultimate respon- *sibility for directing the work of the professional staff.COUNCIL MEMBERSThe Council Members directly supervise the work of the staff and areresponsible for all subject matter covered by the Council. They generallymeet with the Economic Policy Board and prepare analyses for its use, andthey represent the Council at numerous other meetings, where they assumemajor responsibility for the Council's involvement. Whenever the Chairmanis absent from Washington, one of the Council Members becomes ActingChairman.In practice the Chairman and the Council Members work as a team.For operational reasons, however, subject matter is divided informally betweenthe Council Members. In 1976 Mr. Malkiel's responsibility coveredthese areas: analysis of business conditions; short-term forecasting, andmatters that relate to monetary and fiscal policy; international trade andfinance; manpower employment and developments in the labor market;financial markets; housing; taxation; and social security. Mr. Malkiel wasChairman of the second-level Troika group and also of the EconomicPolicy Board's subcommittee on improving economic statistics. Mr. Mac-Avoy's responsibility encompassed these fields: energy; natural resources andcommodity trade issues; food and agriculture; health, education, and welfare;environmental problems; transportation; regulated industries; andantitrust questions. He was Chairman of the Economic Policy Board's FoodDeputies Group and co-Chairman of the Domestic Council Group on RegulatoryReform. The Council Members were involved in a large numberof the committees and subcommittees of the Economic Policy Board.178

PROFESSIONAL STAFFAt the end of 1976 the professional staff was made up of the followingpersons with their special fields of economic analysis:Senior Staff EconomistsBarry R. Chiswick Labor, Human Resources, and IncomeDistributionPeter K. ClarkProductivity, Aggregate Supply, and EconomicAnalysisJohn M. DavisSpecial Assistant to the ChairmanBruce L. GardnerAgriculture and FoodHelen B. JunzInternational Finance and TradeMichael D. McCarthyBusiness Conditions, Econometrics, and ForecastingDavid C. MunroBusiness Conditions, Econometrics, and ForecastingJohn J. Siegfried Regulated Industries, Transportation, andEnvironmentWilliam L. SpringerFiscal Policy and Public FinanceJohn B. TaylorMonetary Policy, Capital Markets, InterestRates, and HousingPhilip K. Verleger, JrEnergy Analysis and Policy, MicroeconomicAnalysisDoral S. CooperFrances M. JamesCatherine H. FurlongStaff EconomistInternational Finance and TradeStatisticiansSenior Staff StatisticianStatisticianArthur E. BlakemoreRichard E. BrowningRichard A. KossTimothy H. QuinnBarbara A. SmithPaul C. WestcottBenjamin ZycherJunior Staff EconomistsLabor, Human Resources, and Fiscal PolicyBusiness Conditions, Labor, and InternationalFinanceEconometrics and ForecastingRegulated IndustriesBusiness Conditions and International FinanceAgriculture and PricesRegulated Industries, Monetary Policy, andEnergyFrances M. James, Senior Staff Statistician, is in charge of the StatisticalOffice and manages the Council's economic and statistical information system.In addition to supervising the publication of Economic Indicators shedirects the fact checking of memoranda, testimony, and speeches presentedby Council Members and staff. Catherine H. Furlong, Dorothy Bagovich,and Natalie Rentfro assist Miss James in carrying out these tasks and in thepreparation of the tables and charts accompanying the Economic Report.During the summer James R. Golden (U.S. Military Academy) was a179

member of the senior staff, and Robert S. Stillman (University of California,Los Angeles) served on the junior staff. Rudiger Dornbusch (MassachusettsInstitute of Technology), George M. von Furstenberg (Indiana University),Stephen M. Goldfeld (Princeton University), R. Jeffery Green(Indiana University), Allan G. Pulsipher (Southern Illinois University),and Milton Russell (Resources for the Future, Washington)., served asconsultants to the Council. Students providing assistance were SusanBenedict (Allegheny College) and Teri F. Liebowitz (Boston University).In preparing the Economic Report the Council relied upon the editorialassistance of Rosannah C. SteinhofT..Also called on for special assistance inconnection with the Report were Dorothy L. Reid, a former member of theCouncil staff, Elizabeth A. Kaminski of the Administrative Office, andEarnestine Reid of the Statistical Office.SUPPORTING STAFFThe Administrative Office provides administrative support for the entireCouncil staff. Its work includes preparing and analyzing the Council'sbudget, procuring equipment and supplies, responding to letters and inquiriesfrom the general public, and distributing the Council's speeches, reports,and congressional testimony. In 1976 the Administrative Office consistedof Nancy F. Skidmore, Administrative Officer, and Elizabeth A.Kaminski. The duplicating, mail, and messenger department was operatedby James W. Gatling and Frank C. Norman.Serving on the secretarial staff for the Chairman and Council Membersduring 1976 were Margaret A. Bocek, Patricia A. Lee, and Alice H. Williams.Secretaries for the professional staff were M. Catherine Fibich,Dorothy L. Green, Bessie M. Lafakis, Joyce A. Pilkerton, Earnestine Reid,Linda A. Reilly, Margaret L. Snyder, and Lillie M. Sturniolo.DEPARTURESThe Council's professional staff members are drawn primarily from universitiesand research institutions. Senior staff economists who resigned duringthe year, and their new institutions and affiliations, were John D. Darroch(Department of Commerce), George M. von Furstenberg (IndianaUniversity), R. Jeffery Green (Indiana University), David L. McNicol(California Institute of Technology), June A. O'Neill (CongressionalBudget Office), Frederick M. Peterson (Rinfret Associates, New York), MiltonRussell (Resources for the Future, Washington), and John L. Scadding(University of Toronto). Rosemary Quintano, staff economist, resigned toaccept a position with the Brookings Institution, Washington.Junior economists who resigned in 1976 were David W. Brazell (Universityof Wisconsin), David B. Crary (National Bureau of Economic Research,Washington), James W. Moser (University of California, Los Angeles),Joan M. Porter (Rice University), Valerie Sarris (Yale University), and J.W. Henry Watson (University of California, Los Angeles). Others who resignedduring the year were Jerry W. Gatling, messenger, and Anne V.Jackson, secretary.180

Appendix BSTATISTICAL TABLES RELATING TO INCOME,EMPLOYMENT. AND PRODUCTION181

CONTENTSNATIONAL INCOME OR EXPENDITURE:PageB-l. Gross national product, 1929-76 187B-2. Gross national product in 1972 dollars, 1929-76 188B-3. Implicit price deflators for gross national product, 1929-76 190B-4. Implicit price deflators and alternative price measures of grossnational product and gross domestic product, 1929-76 192B-5. Gross national product by industry in 1972 dollars, 1947-75 193B-6. Gross national product by major type of product, 1929-76 194B-7. Gross national product by major type of product in 1972 dollars,1929-76 195B-8. Gross national product: Receipts and expenditures by major economicgroups, 1929-76 196B-9. Gross national product by sector, 1929-76 198B-10. Gross national product by sector in 1972 dollars, 1929-76 199B-ll. Gross domestic product of nonfinancial corporate business, 1929-76. . 200B-l2. Output, costs, and profits of nonfinancial corporate business, 1948-76. 201B-l3. Personal consumption expenditures, 1929-76 202B-14. Gross private domestic investment, 1929-76 203B-l5. Inventories and final sales of business, 1946-76 204B-l6. Inventories and final sales of business in 1972 dollars, 1947-76 205B-l 7. Relation of gross national product and national income, 1929-76.... 206B-l8. Relation of national income and personal income, 1929-76 207B-l9. National income by type of income, 1929-76 208B-20. Sources of personal income, 1929-76 210B-21. Disposition of personal income, 1929-76 212B-22. Total and per capita disposable personal income and personal consumptionexpenditures in current and 1972 dollars, 1929-76 213B-23. Gross saving and investment, 1929-76 214B-24. Saving by individuals, 1946-76 215B-25. Number and money income (in 1975 dollars) of families and unrelatedindividuals, by race of head, 1947-75 216POPULATION, EMPLOYMENT, WAGES, AND PRODUCTIVITY:B-26. Population by age groups, 1929-76 217B-27. Noninstitutional population and the labor force, 1929-76 218B-28. Civilian employment and unemployment by sex and age, 1947-76. . 220B-29. Selected unemployment rates, 1948-76 221B-30. Unemployment by duration, 1947-76 222B-31. Unemployment insurance programs, selected data, 1946-76 223B-32. Wage and salary workers in nonagricultural establishments, 1929-76. 224B-33. Average weekly hours and hourly earnings in selected private nonagriculturalindustries, 1947-76 226B-34. Average weekly earnings in selected private nonagricultural industries,1947-76 227B-35. Productivity and related data, private business economy, 1947-76. . . 228B-36. Changes in productivity and related data, private business economy,1948-76 229183

PRODUCTION AND BUSINESS ACTIVITY:PageB-37. Industrial production indexes, major industry divisions, 1929-76. .. . 230B-38. Industrial production indexes, market groupings, 1947-76 231B-39. Industrial production indexes, selected manufactures, 1947-76 232B-40. Capacity utilization rate in manufacturing, 1948-76 233B-41. New construction activity, 1929-76 234B-42. New housing units started and authorized, 1959-76 236B-43. Business expenditures for new plant and equipment, 1947-77 237B-44. Sales and inventories in manufacturing and trade, 1947-76 238B-45. Manufacturers' shipments and inventories, 1947-76 239B-46. Manufacturers' new and unfilled orders, 1947-76 240PRICES:B-47. Consumer price indexes by expenditure classes, 1929-76 241B-48. Consumer price indexes by commodity and service groups, 1939-76. 242B-49. Consumer price indexes, selected commodities and services, 1939-76. 243B-50. Consumer price indexes, for commodity groups, seasonally adjusted,1973-76 244B-51. Consumer price indexes for service groups and selected expenditureclasses, seasonally adjusted, 1973-76 245B-52. Percent changes in consumer price indexes, major groups, 1948-76. . 246B-53. Wholesale price indexes by major commodity groups, 1929-76 247B-54. Wholesale price indexes by stage of processing and by special groupings,1947-76 249B-55. Wholesale price indexes for selected groupings, seasonally adjusted,1973-76 251B-56. Percent changes in wholesale price indexes, major groups, 1948-76. . 252MONEY STOCK, CREDIT, AND FINANCE:B-57. Money stock measures, 1947-76 253B-58. Commercial bank loans and investments, 1930-76 254B-59. Private liquid asset holdings, nonfinancial investors, 1959-76 255B-60. Total funds raised in credit markets by nonfinancial sectors, 1968-76. 256B-61. Federal Reserve Bank credit and member bank reserves, 1929-76. . . 258B-62. Aggregate reserves and member bank deposits, 1959-76 259B-63. Bond yields and interest rates, 1929-76 260B-64. Instalment credit extensions and liquidations, 1971-76 262B-65. Mortgage debt outstanding by type of property and of financing,1939-76 263B-66. Mortgage debt outstanding by holder, 1939-76 264B-67. Net public and private debt, 1929-75 265GOVERNMENT FINANCE:B-68. Federal budget receipts, outlays, and debt, fiscal years 1968-78 266B-69. Federal budget receipts and outlays, fiscal years 1929-78 268B-70. Relation of the Federal budget to the Federal sector of the nationalincome and product accounts, fiscal years 1976-78 269B-71. Receipts and expenditures of the government sector of the nationalincome and product accounts, 1929-76 270B-72. Receipts and expenditures of the Federal Government sector of thenational income and product accounts, 1949-78 271B-73. Receipts and expenditures of the State and local government sector ofthe national income and product accounts, 1946-76 272B-74. State and local government revenues and expenditures, selected fiscalyears, 1927-75 273B-75. Interest-bearing public debt by kind of obligation, 1967-76 274184

PageB-76. Estimated ownership of public debt securities, 1967-76 275B-77. Average length and maturity distribution of marketable interestbearingpublic debt held by private investors, 1967-76 276CORPORATE PROFITS AND FINANCE:B-78. Corporate profits with inventory valuation and capital consumptionadjustments, 1946-76 277B-79. Corporate profits by industry, 1929-76 278B-80. Corporate profits of manufacturing industries, 1929-76 280B-81. Sales, profits, and stockholders 5 equity, all manufacturing corporations,1947-76 282B-82. Relation of profits after taxes to stockholders' equity and to sales, allmanufacturing corporations, 1947-76 283B-83. Relation of profits after taxes to stockholders' equity and to sales, allmanufacturing corporations, by industry group, 1975-76 284B-84. Sources and uses of funds, nonfarm nonfinancial corporate business,1946-76 285B-85. Current assets and liabilities of U.S. corporations, 1939-76 286B-86. State and municipal and corporate securities offered, 1934-76 287B-87. Common stock prices and yields, 1949-76 288B-88. Business formation and business failures, 1929-76 289AGRICULTURE:B-89. Income of farm people and farmers, 1929-76 290B-90. Farm production indexes, 1929-76 291B-91. Farm population, employment, and productivity, 1929-76 292B-92. Indexes of prices received and prices paid by farmers and selected farmresource prices, 1929-76 293B-93. Selected measures of farm resources and inputs, 1929-76 294B-94. Comparative balance sheet of the farming sector, 1929-77 295INTERNATIONAL STATISTICS:B-95. U.S. international transactions, 1946-76 296B-96. U.S. merchandise exports and imports by commodity groups,1958-76 298B-97. U.S. merchandise exports and imports by area, 1970-76 299B-98. U.S. overseas loans and grants, by type and area, fiscalyears, 1962-75. 300B-99. International reserves, 195?, 1962, and 1972-76 301B-100. U.S. reserve assets, 1946-76 302B-101. International investment position of the United States at year-end,1971-75 303B-102. Price changes in international trade, 1968-76 304B-103. Consumer price indexes in the United States and other major industrialcountries, 1955-76 305General NotesDetail 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).185

NATIONAL INCOME OR EXPENDITURETABLE B-l.—Gross national product, 1929-76[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]Year or quarterGrossnationalproductPersonalconsumptionexpendituresNet exports of goodsand servicesNetexportsGovernment purchases of goods andservicesTotalTotalFederalGross)rivatedomesticn vestmentExportsImportsNationaldefenseiNoneten seStateandlocalPercenthangefrompreceding>eriod,grossnationalproduct21929..103.477.316.21.17.05.98.81.47.4193355.845.81.4.42.42.08.22.16.1-4.21939...90.867.09.31.14.43.413.55.21.23.98.36.91940..194119421943 .19441945194619471948.1949100.0124.9158.3192.0210.5212.3209 6232.8259.1258.071.080.888.699.4108.2119 5143.8161.7174.7178.113 117.99.95.87.210 630 734.045.935 31.71.3.0-2.0-1.8-.67.611.66.56.25.45.94.84.45.37.214 819.816.915.93.64.64.86.57.17.87.28.210.49.614.224.959.888.997.082.827.525.532.038.46.116.952.081.389.474.617.612.716.720.42.213.749.479.787.473 514.89.010.713.23.93.22.61.62.01.12.83.76.07.28.18.07.87.57.68.29.912.815.318.010.124.926.821.39.69-1 311.111.3- 4195019511952.1953195419551956195719581959286 2330.2347.2366 1366.3399.3420.7442 8448.9486.5192 0207.1217.1229 7235.8253.7266.0280 4289.5310.853 859 252.153 352.768.471.069 261.977.61 93.82.462.02.24.36 12.5.613 918.918.217 118.020.023.926 723.323.712.015.115.816.616.017.819.620.720.823.238.560.175.682.575.875.079.487.195.097.618.738.352.457.547.944.545.950.053.953.914 033.545.848 641.138.440.244 045.645.64.74.86.58.96.86.05.75.98.38.319.821.823.225.027.830.633.537.141.143.710 915 45.15 5.09.05.45 21.48.41960196119621963196419651966196719681969506.0523 3563.8594.7635.7688.1753.0796.3868.5935.5324.9335 0355.2374.6400 4430.2464.490.4535.9579.76.474 385 290.296 6112.0124.5120.8131 5146.24.45 85.46.38 97.65.14.92.31.827.628.930.632.737.439.542.845.649.954.723.223.125.226.428.432.037.740.647.752.9100.3108.2118.0123.7129.8138.4158.7180.2198.7207.953.757.463.764.665.267.378.890.998.097.544.547 051.150.349.049.460.371.576.976.39.310.412.714.316.217.818.519.521.221.246.550.854.359.064.671.179.889.3100.7110.44.03 47.75.56 98.29.45.89.17.719701971197219731974982.41,063.41,171.11 306.61,413.2618668.733.809.887.140 8160.0188.3220.0215.03.91.6-3.37.17.562.565.672.7101.6144.458.564.075.994.4136.9218.9233.7253.1269.5303.395.696.2102.1102.2111.673.570.273.573.577. 322.126.028.628.734.3123.2137.5151.0167.3191.65.08.210.111.68.219751976 v1,516.31, 692.4973.1,078.183.7241.220.56.9148.1161.9127.6155.1339.0365.8124.4133.484.388.240.145.2214.5232.37.311.61974: 1 -IIIIIIV1,372.71,399.41,431.61,449.2853.878.906.911.216.4218.8213.3211.515.03.92.98.1133.2142.2148.4153.8118.2138.3145.5145.7288.0298.0308.6318.5106.1108.9113.5118.174.975.978.280.231.233.035.337.9181.9189.1195.1200.45.38.09.55.01975: 1IIIIIIV1, 446.21, 482.31,548.71,588.2933.960.987.1,012.172.4164.4196.7201.415.024.421.421.0147.5142.9148.2153.7132.5118.5126.8132.7325.6333.2343.2353.8120.3122.4124.6130.482.083.484.687.138.339.040.043.2205.3210.9218.6223.4-.810.419.110.61976: 1IIIll1,636.2 1, 043.1,675.2 1,064.1,709.8 1,088.1,748. 5 1,117.229.6239.2247.0249.08.49.34.75.2154.1160.3167.7165.6145.7151.0163.0160.4354.7362.0369.6376.8129.2131.2134.5138.986.286.988.591.342.944.246.047.6225.5230.9235.0238.012.69.98.59.41 This category corresponds closely to the national defense classification in "The Budget of the United States Government,Fiscal Year 1978."2 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.187

TABLE B-2.—Gross national product in 1972 dollars, 1929-76[Billions of 1972 dollars; quarterly data at seasonally adjusted annual rates]Year or quarter1929193319391940194119421943..194419451946194719481949195019511952195319541955195619571958195919601961196219631964196519661967196819691970 .197119721973197419751976 v1974: 1 IIIllIV1975- 1 IIIIIIV1976: 1 IIIllIV* ..Grossnationalproduct314.7222.1319.7343.6396.6454.6527.3567.0559.0477.0468.3487.7490.7533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4736.8755.3799.1830.7874.4925.9981.01,007.71,051.81,078.81,075. 31,107 51,171.11,235 01,214.01,191.71,265.01,230.41, 220.81,212.91,191.71,161.11,177.11,209.31, 219.21, 246. 31, 260. 01, 272.21,281.5Personal consumption expendituresTotal215.6170.7220.3230.4244.1241.7248.7255.7271.4301.4306.2312.8320.0338.1342.3350.9364.2370.9395.1406.3414.7419.0441.5453.0462.2482.9501.4528.7558.1586.1603.2633.4655.4668.9691 9733.0767 7759.1770.3812.9761.8761.9764 7748.1754.6767.5775.3783,9800.7808.6815.7826.6Durablegoods21.510.919.121.824.716.314.513.514.825.830.633.136.343.439.938.943.143.552.249.849.746.451.852.550.355.760.765.773.479.079 788.291 988.998 1111.2121 8112.3111.9125.7114.9115.0116 1103.1106 0108.4115.1118.0124.3125.2126 2127.0Nondurablegoods98.182.9115.1119.9127.6129.9134.0139.4150.3158.9154.8155.0157.4161.8165.3171.2175.7177.0185.4191.6194.9196.8205.0208.2211.9218.5223.0233.3244.0255.5259.5270.2276.4282.7287.5299.3309.3303.5306.1319.1305.1304.0304.9299.8300.6307.2306.8309.5314.6317.6318.9325.5Services96.176.886.188.791.895.5100.1102.7106.3116.7120.8124.6126.4132.8137.1140.8145.5150.4157.5164.9170.2175.8184.7192.3200.0208.7217.6229.7240.7251.6264.0275.0287.2297.3306.3322.4336.5343.4352.4368.1341.8342.9343.7345.1348.0351.8353.4356.4361.8365.8370.6374.2Gross private domestic investmentTotal55.98.433.644.655.829.618.119.827.871.070.182.365.693.794.183.285.683.4104.1102.997.287.7107.4105.4103.6117.4124.5132.1150.1161.3152.7159.5168.0154.7166.8188.3207.2182.0137.8171.9194.8187.9176.2169.1129.3126.2148.7147.0167.1171.7175.2173.7Fixed investmentTotal51.313=332.038.443.824.418.022.131.458.870.476.870.083.280.478.984.185,696.397.195.789.6101.0101.0100.7109.3116.8124.8138.8144.6140.7150.8157.5150.4160.2178.8190.7173.5149.8162.8183.4178.5171.1161.1149.8147.4149.7152.5156.7160.6165.0169.1NonresidentialTotal37.010.420.725.730.317.614.018.727.642.048.951.046.050.052.952.156.355.461.265.266.058.962.966.065.670.973.581.095.6106.1103.5108.0114.3110.0108.0116.8131.0128.5111.4115.7133.5131.6127.3121.8114.4110.6110.1110.5112.6114.9117.5117.8Structures20.64.98.69.911.96.74.25.58.318.817.318.417.819.120.620.622.523.525.328.128.126.426.828.829.330.830.833.339.642.541.142.044.042.841.742.545.542.136.738.144.643.540.339.837.536.136.636.737.137.938.439.0Producers*durableequipment16.45.512.115.818.510.99.813.219.223.231.632.728.230.932.331.533.831.835.937.137.932.536.137.236.340.142.747.756.063.662.466.170.367.266.374.385.586.574.777.688.988.186.982.076.974.573.573.875.577.079.278.8See footnotes at end of table.188

TABLE B-2.—Gross national product in 1972 dollars,1929-76—Continued[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]Year orquarterGross private domesticinvestment—continuedFixed investment—continuedResidentialTotal14.32.911.312.813.56.84.03.43.816.821.525.824.033.227.526.827.830.235.131.929.730.638.135.035.138.443.243.843.238.537.242.843.240.452.262.059.745.038.447.149.947.043.939.335.436.839.641.944.145.747.451.3Nonfarmstructures13.62.610.611.812.56.13.53.03.515.519.823.922.331.525.925.326.328.833.830.428.329.236.533.733.636.941.742.241.636.935.541.141.538.950.560.357.942.936.645.147.844.941.937.134.035.237.639.742.043.945.549.2Farmstructures0.6.2.6.8.9.6.4.4.31.11.31.51.41.31.31.21.21.1.91.01.0.91.0.81.0.9.9.9.8.9.9.8.9.6.7.7.5.8.6.7.9.7.71.0.4.4.71.0.9.6.7.8Producers'durableequipmentChangeinbusinessinventoriesNet exports of goodsand servicesNetexportsExportsImportsGovernment purchasesof goods and servicesTotalFederalStateandlocalPercentchangefromprecedingperiod,grossnationalproduct *19291933193919401941194219431944.....19451946194719481949195019511952195319541955195619571958195919601961196219631964196519661967196819691970197119721973197419751976 P1974:1....II...III..IV...1975:1....II...III..IV..1976:1....II..III..IV v0.1.1.9.9.91.01.11.21.31.21.31.31.31.31.21.01.11.21.21.31.21.31.44.6-4.91.66.212.05.2-2 # .3-3.612.2-.25.5-4.410.613.74.31.5-2.27.75.81.5-1.86.54.42.98.17.87.311.316.712.08.710.64.36.69.416.58.5-12.09.111.49.45.18.0-20.5-21.2-1.0-5.510.411.110.24.72.2.22.03.0.8-2.5-7.3-7.2-4.511.616.68.58.84.07.44.92.04.54.77.38.93.5.95.56.75.87.310.98.24.33.5-.4-1.31.4-.6-3.37.616.522.615.918.414.914.917.720.124.322.823.116.616.015.715.315.69.413.314.614.710.39.010.013.526.130.224.224.221.725.924.923.825.327.932.334.830.731.535.837.039.642.247.849.151.654.258.562.267.167.972.787.497.290.695.797.898.796.495.990.387.790.793.993.695.498.095.813.49.311.411.514.012.816.317.318.014.613.615.715.417.718.520.021.820.823.225.026.027.230.630.330.333.935.036.941.047.350.758.963.565.768.575.979.980.768.179.879.483.881.578.270.263.467.970.877.079.482.380.540.942.863.865.595.9185.8267.9298.8264.393.175.484.196.297.7132.7159.5170.0154.9150.9152.4160.1169.3170.7172.9182.8193.1197.6202.7209.6229.3248.3259.2256.7250.2249.4253.1252.5256.4261.0264.2255.4256.1257.1256.9257.1259.1262.4265.2261.9263.6265.5265.86.910.822.626.358.6151.5236.3268.2232.758.436.142.448.947.081.3107.0114.695.286.985.989.892.891.890.895.6103.1102.2100.6100.5112.5125.3128.3121.8110.7103.9102.196.695.395.796.795.394.795.895.494.895.395.697.295.496.097.398.133.932.041.239.237.334.331.630.631.634.839.341.847.450.751.352.555.459.764.066.570.376.478.982.087.190.095.4102.1109.1116.8123.1130.9134.9139.5145.5151.0155.9161.1165.2167.5160.1161.4161.3161.5162.2163.8166.9168.0166.6167.7168.2167.7-2.17.67.515.414.616.07.5-1.4-14.7-1.84.1.68.78.13.83.9-1.36.72.11.8-.26.02.32.55.84.05.35.95.92.74.42.6-.33.05.75.5-1.7-1.86.2-3.9-3.1-2.6-6.8-9.95.611.43.39.24.53.93.01 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.189224-250 O - 77 - 13

TABLE B-3.—Implicit price deflators for gross national product, 1929-76[Index numbers, 1972=100, except as noted; quarterly data seasonally adjusted]Year orquarter19291933..193919401941194219431944..1945.194619471948194919501951. .1952195319541955195619571958195919601961196219631964196519661967196819691970197119721973197419751976 v1974- 1 ||IIIIV..1975- 1 IIIllIV1976:1 IIIllIVP—_Grossnationalproduct132.8725.1328.4029 1031.4934.8236 4137.1337.9943.8849.7053.1352.5953.6457.2758.0058 8859.6960.9862.9065.0266 0667.5268.6769.2870.5571.5972.7174.3276.7679.0282.5786.7291.3696.02100.00105.80116.41127.25133.79111 56114.64118.03121.60124. 55125. 93128.07130.27131.29132.96134.40136.44Personal consumption expendituresTotal35.826.830.430.833.136.740.042.344.047.752.855.955.756.860.561.963.163.664.265.567.669.170.471.772.573.674.775.777.179.381.384.688.592.596.6100.0105.5116.9126.3132.7112 0115.3118.6121.8123.7125.1127.3129.1130.3131.7133.4135.2Durablegoods43.131.734.935.739.142.145.049.553.761.166.869.169.170.874.774.875.573.274.076.079.279.481.982.182.783.984.885.785.685.787.490.793.195.599.0100.0101.6108.3117.7124.4103 2106 5110.2113.8115.1117.1118.2120.2121.8123.8124.9127.0Nondurablegoods38.426.830.530.933.639.143.746.247.852.158.762.360.360.765.866.666.366.666.367.369.471.071.472.673.373.974.975.877.380.181.985.389.493.696.6100.0107.9124.0133.7138.0118.2122.3125.9129.6131.2132.1135.1136.2136.4136.9138.5139.9Services31.626.129.229.530.832.434.236.137.338.941.744.446.147.449.952.655.457.258.560.262.264.266.068.069.170.471.772.874.376.578.882.086.190.595.8100.0104.7113.5122.7130.9109.5112.1114.9117.4119.7121.5123.6125.9128.0129.8132.0133.8Gross private domestic investment lFixed investmentTotal28.222.427.628.530.633.435.636.937.141.348.953.654.856.560.862.162.963.464.868.370.970.871.671.971.672.072.172.873.876.278.782.186.991.195.9100.0106.0117.7132.4140.3111.1115.3120.3125.2129.9131.9132.7134.9137.0139.0140.6142.6NonresidentialTotal28.222.828.229.130.933.835.736.636.639.946.851.352.854.358.959.961.061.462.667.070.770.672.072.271.872.372.973.674.576.879.382.686.691.396.4100.0103.8116.1132.1138.3108.7113.2118.6124.7129.4131.8132.7134.5136.2137.5138.7140.5Structures24.119.122.823.124.728.132.033.433.636.343.748.448.048.854.755.856.855.957.061.864.463.363.663.162.763.063.564.465.968.871.875.381.188.094.4100.0107.8128.7141.6145.5117.5126.0134.1138.6141.6141.5141.4142.0143.3145.0146.1147.4Producers'durableequipment33.426.232.032.834.937.337.338.037.942.848.552.955.957.661.662.563.765.466.571.075.476.578.279.379.279.479.680.180.682.184.387.390.093.497.6100.0101.7110.0127.4134.7104.3106.9111.4118.0123.5127.1128.3130.8132.8133.8135.1137.1See footnotes at end of table.190

TABLE B-3.—Implicit price deflators for gross national product, 1929-76—Continued[Index numbers, 1972=100, except as noted; quarterly data seasonally adjusted]Year orquarterGross private domesticinvestment*—continuedFixed investment—continuedTotalResidentialNonfarmstructuresExports andimports ofgoods andservices iGovernment purchasesof goods and servicesTotalFarmstructuresProducers'durableequipmentExportsImportsFederalStateandlocalGrossdomesticproductPercent changefrom precedingperiod 2GrossnationalproductdeflatorGrossdomesticproductdeflator1929..28.227.828.677.245.043.821.620.721.832.8193320.719.819.558.825.522.119.319.619.125.2-2.2-2.1193926.626.323.461.133.329.621.222.920.228.4-.7-.7194019411942194319441945 .. .194619471948.194927.429.932.434.938.140.844.653.758.158.727 229.731.834 337.340.043.953.057.458.123.626.630.735.740.842.946.652.857.358.059 663.871.371 475 084.695.2105.6111.5107.936 840.246.549 252.653.656.765.869.865.531.533.237.439.641.143.649.760.766.162.721.626.032.233.232.531.329.433.838.039.923.128.934.334.433.332.129.935.139.441.820.621.422.823.824.925.928.632.536.638.029.131.534.836 437.138.043.949.753.152.62 58.210.64 62 02.315.713.16.9-1.02 58.210.64 52 02.315.613.16.9-1.0195019511952195319541955195619571958195960.064.466.466.967.168.770.971.371.271.059.563.865.866.366.668.270.570.870.770.659.463.865.766.266.568.370.670.970.870.8107.4114.9114.6114.2112.4109.1104.3103.4101.9101.864.073.173.071.971.271.873.976.475.775.467.881.879.175.876.976.878.379.576.575.739.445.347.448.548.949.752.154.456.157.239.947.148.950.250.451.153.455.758.158.739.042.444.245.146.647.850.452.853.855.453.657.257.958.859.660.962.865.066.067.52.06.81.31.51.42.23.23.41.62.22.06.71.31.51.42.23.23.41.62.2196019611962196319641965196619671968196971.471.371.570.971.272.374.677.080.787.770.970.971.170.570.872.074.276.780.487.571.270.771.370.771.072.374.376.780.587.5100.899.196.895.394.392.190 891.093.295.277.178.077.377.578 380.582 884.085.387.976.776.174.575.677.178.079.780.180.983.358.059.261.162.664.066.069.272.676.781.059.160.061.863.364.867.070.172.676.480.056.858.360.361.963.365.168.472.576.981.968.669.270.571.672.774.376.879.082.686.81.7.91.81.51.62.23.32.94.55.01.7.91.91.51.62.23.33.04.55.11970197119721973197419751976P.90.694.9100.0110.8122.3133.2143.890.494.8100.0111.0122.8133.7144.490.595.0100.0110.7122.8133.6143.997.599.3100.0100.1105 3116.3122.493.196.6100.0116.2148.6163.4169.289.193.5100.0118.2169.6187.4194.387.593.7100.0106.7118.3129.9138.486.492.6100.0105.8117.1130.0138.088.394.5100.0107.3119.0129.8138.791.496.0100.0105.7115.9126.9133.45.45.14.15.810.09.35.15.35.14.15.79.69.55.11974: 1IIIIIIV117.5121.0125.3126.7118.0121 6125.9127.2117.8121.2125.0126.6101.3103.3106.8110.6136.2144 1154.0160.4148.9164.9178.6186.3112.7116.4120.0124.0111.3114.9118.4123.8113.6117.2121.0124.1111.1114.1117.4121.09.511.512.412.78.511.312.112.81975: 1IIIIIIV131.5132.1132.8135.9132.1132.7133.3136.4130.9131.6132.6136.2113.6115.6117.0118.8163.4163.0163.4163.7188.9186.9186.6187.3126.7128.6130.8133.4126.8128.4130.4134.2126.5128.7131.0132.9124.2125.6127.7129.910.14.57.07.110.94.57.07.11976: 1IIIllI V P139 0142.9145.3147.3139 6143.4145.9148.0138 8143.8145.5147.8120 1122.4123.2124.0164 6168.1171.1172.9189 2190.4198.1199.4135 4137.3139.2141.8135.4136.7138.3141.5135.4137.7139.7141.9130.9132.6133.9136.03.25.24.46.23.05.34.26.31 Separate deflators are not available for gross private domestic investment, change in business inventories, and netexports of goods and services.2 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.191

TABLE B-4.—Implicit price deflators and alternative price measures of gross national productand gross domestic product, 1929-76Gross national product pricemeasures, 1972 = 100Percent change from preceding period lYear orquarterImplicitpricedeflatorTotalFixedweightedprice index(1972weights)Gross domesticproductImplicitpricedeflatorFixedweightedprice index(1972weights)ImplicitpricedeflatorTotalFixedweightedprice index(1972weights)ChainpriceindexGross domestic productImplicitpricedeflatorFixedweightedprice index(1972weights)Chainpriceindex192932.8732.8193325.1325.2-2.2-2.1193928.4028.4-.7-.719401941. . ..194219431944. . ..1945194619471948194929.1031.4934.8236.4137.1337.9943.8849.7053.1352.5929.131.534.836.437.138.043.949.753.152.62.58.210.64.62.02.315.713.16.9-1.02.58.210.64.52.02 315.613.16.9-1.0195019511952195319541955195619571958195953.6457.2758.0058.8859.6960.9862.9065.0266.0667.5268.169.153.657.257.958.859.660 962.865.066.067.568.069.12.06.81.31.51.42.23.23.41.62.21.6i.62.06.71.31.51.42 23.23.41.62.21.61.6196019611962196319641965196619671968196968.6769.2870.5571.5972.7174.3276.7679.0282.5786.7270.371.172.072.873.775.077.279.583.087.168.669.270.571.672.774.376.879.082.686.870.271.172.072.873.775.077.279.683.087.11.7.91.81.51.62.23.32.94.55.01.71.11.31.11.21.82.93.04.35:01.71.21.41.31.41.93.13.04.45.01.7.91.91.51.62.23.33.04.55.11.71.21.31.11.21.83.03.04.45.01.71.21.31.41.93.13.14.45.01970197119721973197419751976 v91.3696.02100. 00105. 80116.41127.25133.7991.696.1100.0106.0116.6127.3134.291.496.0100.0105.7115.9126.9133.491.796.2100.0105.9116.2126.8133.85.45.14.15.810.09.35.15.24.94.06.010.09.25.45.35.04.16.010.09.25.35.35.14.15.79.69.55.15.24.94.05.99.79.25.55.35.04.15.99.79.35.51974:1II....III..-.IV....1975:1IIIII....IV....111.56114.64118.03121.60124. 55125.93128. 07130. 27111.8114.8118.2121.8124.4126.0128.3130.4111.1114.1117.4121.0124.2125.6127.7129.9111.5114.4117.7121.3123.9125.6127.8129.99.511.512.412.710.14.57.07.110.511.012.512.68.95.47.36.610.711.212.812.79.25.47.36.48.511.312.112.810.94.57.07.110.010.512.312.69.05.57.46.710.210.512.512.79.45.57.46.41976:1IIIII....IVP..131.29132.96134. 40136.44131.7133.4134.9136.8130.9132.6133.9136.0131.3133.0134.4136.33.25.24.46.24.25.24.65.84.35.44.65.83.05.34.26.34.25.34.45.94.35.44.45.8i Changes are based on unrounded data and therefore may differ slightly from those obtained from published indexeshown here.Source: Department of Commerce, Bureau of Economic Analysis.192

TABLE B~5.—Gross national product by industry in 1972 dollars, 1947-75[Billions of 1972 dollars]YearGrossnationalproductAgriculture,forestsTotalManufacturingandfisheriesContractconstructionDurablegoodsindustriesNondurablegoodsindustriesTransportation,communication,andutilitiesWholesaleandretailtradeFinance,insurance,andrealestateServicesGovernmentand Allgovernmentother ienterprises194719481949468.3487.7490.726.128.027.822.726.226.2114.9121.5115.068.572.066.346.449.648.838.338.736.476.178.079.955.657.360.955.156.757.268.569 073.111.112 014.119501951195219531954533.5576.5598 5621.8613.729.128.229 030.331.128.932.233.534.535.6131.3146.0150.7161.2149.678.189.994.3102.691.753.256.156.458.657.939.644.244.345.945.687.688.391.194.094.664.767.071 574.478.159.460.661.663.063.175.489.896 696 494.917.520.220.222.321.119551956195719581959654 8668.8680.9679.5720.431 931.430.832.030.937.840.440.541.744.9165.8166.9167.8153.3170.7103.4102.5102.988.8100.762.464.464.964.570.049.452.353.452.255.7103.2106.2108.0107.9115.882.486.290.294.098.767.571.173.375.880.395 497.6100.1101.7103.621.416.616.821.020.019601961196219631964736.8755.3799.1830.7874.432.232.332.332.832.145.646.147.749,253.1172.0171.2186.2201.0215.7101.599.3110.1119.0129.370.572.076.282.186.458.059.162.165.668.9117.9119.2126.7131.7139.7102.3107.4115.9115.9119.882.285.488.692.296.9107.2111.1115.1118.3122.619.423.624.524.125.619651966196719681969925.9981.01,007.71,051.81,078.833.031.332.632.433.056.358.458.961.860.4235.1254.0254.1268.4276.2144.1157.0157.2165.5169.191.097.096.9102.9107.274.380.082.388.292.9148.6156.9160.7170.6174.5127.8132.0137.1143.7150.2101.2106.5112.7116.3121.4127.4136.4143.5148.1151.822.125.425.722.418.419701971197219731974_.1,075.31,107.51,171.11,235.01,214.034.336.135.435.935.656.256.156.657.251.6260.6264.1288.8313.0296.8154.4155.3171.9188.9176.2106.2108.7116.8124.1120.695.197.3103.6112.6112.4178.4186.8201.2212.0207.2153.7161.7168.6172.3173.9124.7126.6134.5143.1143.1152.0153.1154.9157.3159.820.425.727.731.633.619751,191.737.749.0270.0159.2110.9111.5211.1180.2144.4162.325.41 Mining, rest of world, and residual,.measured as the sum of gross product by industry).Source: Department of Commerce, Bureau of Economic Analysis.ucts less GNP in 1972 dollars193

TABLE B~6.—Gross national product by major type of product, 1929—76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Yearorquarter1929.1933.1939.1940.1941.1942.1943.1944.1945.1946.1947.1948.1949.1950.1951.1952.1953.1954.1955.1956.1957.1958.1959.1960.1961.1962.1963.1964.1965.19661967.1968.1969.1970.1971.1972.1973.1974.19751976?1974:1...II...III..IV..1975:1II ..ML.IV..1976:1...IIIIIIV*Grossnationalproduct103.455.890.8100.0124.9158.3192.0210.5212.3209.6232.8259.1258.0286.2330.2347.2i 66.1366.3399.3420.7442.8448.9486.5506.0523.3563.8594.7635.7688.1753 0796.3868.5935.5982.4, 063. 4,171.1, 306.6,413.2,516.3,692.4, 372. 7, 399. 4,431.6, 449.2,446.2, 482. 3, 548. 7, 588. 2,636.2, 675. 2, 703. 8, 748. 5Finalsales101.757.490.497.8120.4156.5192.5211.5213.4203.2233.2254.4261.1279.4319.9344.0365.7367.8393.3416.0441.4450.4481.2502.2521.1557.3588.8629.9678.6738 7786.2860.8926.2978.61,057.11,161.7, 288.6, 402.5,531 0, 679.0, 360.0, 386. 4, 424.2, 439.4, 468.4,512.3, 550. 6, 592.5,621.4, 659. 2, 694. 7,740.6Inventorychange1.7-1.6.42.24.51.8-.6-1.0-1.06.4-.54.7-3.16.810. 33.1.4-1.56.C4.71.35.23.82.26.56.C5.89.114 c10.17.79.43.86.49.417. S10.7-14 t13. *12. e13. G7.39.7-22.2-30. C-2.C-4.-14.816.015.17.SiGoodsTotalTotal56.127.049.056.072.593.7120.4132.3128.9125.3139.8154.4147.7162.4189.5194.6203.1196.1214.5223.3232.3228.2247.4254.3256.5278.0289.7309.0336.6373.9387.3418.9446.2456.2479.8526.0598.8639.7681.7761.5621.0634.8650.4652.5642.6661.0703.5719.7742.3758.4766.1779.2Finalsales54.428.648.653.868.091.9121.0133.3129.9118.9140.3149.7150.1155.6179.2191.5202.7197. (208.5218.6231.0229.7242.2250.6254.3271.5283.7303.2327.1359.6377.2411.2436.8452.4473.5516.6580.9629.0696.3748.0608.4621.9643.0642.8664.8691.0705.4724.0727.5742.4751.0771.2Inventorychange1.7-1.6.42.24.51.8-.6-1.0-1.06.4-.54.7-3.16.810.33.1.4-1.56.04.71.3-1.55.23.82.26.56.05.89.514 310.17.79.43.86.49.417.910.7-14.613.512.613.07.39.7-22.2-30.0-2.0-4.314.816.015.17.9Durable goodsTotal17.54.912.716.626.835.554.257.948.937.245.847.646.258.869.568.772.466.481.385.188.577.790.191.590.0102.0108.0118.9133.6149.1148.7162.4175.3170.8181.6208.4240.5247.2254.4301.0238.9242.8252.6254.7234.1248.5265.0270.0282.7301.2308.2311.8Finalsales16.15.412.415.423.834.554.258.550.131.844.146.948.354.762.567.671.569.078.282.387.380.587.489.190.298.4105.411!). 0127.0139.0143.5157.4169.2170.7179.8202.1229.6240.2266.5297.4232.3240.6247.6240.2249.5263.8272.0280.6286.3295.8301.4306.3Inventorychange1.4-.5.31.23.11.0.0-.6-1.35.31.7.7-2.14.16.91.1.9-2.53.C2.81.3-2.82.72.4-.13.62.73.96.610.05.35.06.1.01.86.310.97.1-12.13.56.62.25.114.5-15.4-15.3-7.0-10.6-3.65.46.85.5Nondurable goodsTotal38.622.136.339.445.658.166.274.480.088.194.0106.7101.5103.6120.0125.9130.8129.6133.2138.1143.7150.5157.4162.8166.5176.1181.6190.1203.1224.9238.5256.5270.9285.4298.3317.7358.3392.4427.3460.5382.1392.1397.7397.8408.5412.5438.4449.7459.6457.1457.9467.4Finalsales38.323.236.238.444.257.466.874.879.887.196.210^.8102.5100.9116.7123.9131.2128.7130.3136.3143.7149.2154.8161.4164.1173.2178.3188.2200.1220.6233.7253.8267.6281.7293.7314.5351.3388.9429.8450.6376.1381.3395.4402.6415.3427.2433.4443.3441.1446.6449.6464.9Inventorychange0.3-1.1.11.01.4.7-.6-.3.21.1-2.24.0-1.02.73.42.0 5i!o2.91.9.01.32.51.42.32.93.31.92.94.34.82.83.33.74.63.27.03.6-? 69.96.010.82.3-4.7-6.8-14.75.06.318.510.68.32.5Services35.925.934.335.740.650.662.972.276.968.671.376.781.988.2102.9113.1121.0125.7135.3145.2157.5166.9179.5193.2206.7221.5236.2254.4272.7297.7326.1356.6388.7424.6465.5510.8560.5626.6692.5771.3605.1614.6633.8652.8666.3684.2700.2719.5742.6759.6781.5801.4Structures11.42.97.58.311.814.08.76.16.515.721.728.028.435.637.*39.442.044.549.552.253.053.859.558.460.164.368.972.478.881 482.993.0100.7101.6118.1134.3147.2146.9142 1159.7146.5150.0147.4143.8137.2137.1145.0149.1151.3157.3162.2168.0Autooutput"~7~38.912.015.513.412.216.314.921.517.219.614.619.621.618.122.925.626.531.8^1 128.836.636.830.642.245.150.742.745 862.839.142.148.241.436.344.152.051.061.264.361.064.4Source: Department of Commerce, Bureau of Economic Analysis.194

TABLE B-7.—Gross national product by major type qj product in 1972 dollars, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Yearorquarter1929.1933.1939.1940.1941.1942.1943.1944.1945.1946.1947.1948.1949.1950.1951.1952.1953.1954.1955.1956.1957.1958.1959.1960.1961.1962.1963.1964.1965.1966.1967.1968.1969.1970.1971.1972.1973.1974.1975.1976 v1974:if"iii.IV.1975ii"III.IV.19761..II..III.IV*Grossnationalproduct314.7222.1319.7343.6396.6454.6527.3567.0559.0477.0468.3487.7490.7533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4736.8755.3799.1830.7874.4925.9981.0,007.7,051.8,078.8,075.3,107.5,171.1, 235.01,214.01,191.71,265.01, 230.41 220 81,212.91,191.71,161.11,177.11, 209. 31,219.21, 246.31,260.01,272.21,281.5Finalsales310.0227.0318.1337.4384.6449.4527.3569.3562.6464.9468.5482.2495.1522.9562.8594.2620.3615.8647.1663.0679.4681.3714.0732.4752.4791.0823.0867.1914=6964.3995.7,043.1,068.2,071.0,100.9,161.7,218.51, 205. 51,203.71, 255.91,219.11 211 41, 207.81,183.71,181.61,198.21,210.21, 224. 71,235.91, 248.81,262.01,276.8nventoryhange4.6-4.91.66.212.05.2.1-2.3-3.612.2-.25.5-4.410.613.74.31.5-2.27.75.81.5-1.86.54.42.98.17.87.311.316.712.08.710.64.36.69.416.58.5-12.09.111.49 45.18.0-20.5-21.2-1.-5.10.11.10.4.GoodsTotalTotal43.997.253.971.297.421.163.586.879.238.036.844.239.961.583.192.306.992.216.320.921.812.032.537.138.162.073.094.021.5455.6461.9481.1492.3483.4491.6526.0569.0552.9532.6576.3560.6558 1555.6537.4512.2522.5546.0549.9569.5576.0579.1580.8Finalsales39.302.152.365.085.415.963.489.182.825.837.038.744.350.969.488.005.494.408.615.120.313.826.132.835.253.865.286.710.238.949.972.481.7479.1484.9516.6552.5544.4544.7567.2549.2548 7550.5529.3532.7543.7547.0555.4559.1564.8568.9576.2nventorylange4.6-4.91.66.212.05.2.1-2.3-3.612.2-.25.5-4.410.613.74.31.5-2.27.75.81.5-1.86.54.42.98.17.87.311.316.712.08.710.64.36.69.416.58.5-12,09.111.49 45.18.0-20.5-21.2-1.-5.10.11.10.4.Durable goodsTotal44.215.536.446.565.779.5119.9134.1118.271.376.777.172.490.7102.4102.3107.398.1117.1117.2116.1101.4113.8114.4112.5125.5131.8144.2160.6177.1173.0181.3190.1179.2183.4208.4236.5224.1204.7230.2228.4224 3226.3217.4193.3200.212.213.221.230.234.233.Finalsales40.717.635.643.157.576.019.335.921.960.574.975.676.184.492.600.605.901.712.913.514.604.810.611.612.621.128.439.252.665.266.675.783.379.181.5202.1225.9218.6214.1227.9222.4222.8222.7206.8206.8211.9216.8220.7224.3226.7230.0230.5nventoryhange3.5-2.1.73.48.23.5.7-1.8-3.710.81.81.5-3.76.39.81.81.4-3.64.23.71.5-3.43.32.9 j4*. 43.45.08.011.96.45.66.8.11.86.210.65.5-9.42.36.11 53.710.7-13.-11.9-4.-7.-2.3.4.3.Nondurable goodsTotal99.781.717.524.731.741.743.552.761.066.760.167.167.570.780.789.999.694.199.203.705.710.618.722.725.636.541.149.961.078.588.999.802.2304.2308.2317.7332.5328.8327.9346.1332.2333.7329.3319.9318.9322.4333.9336.6347.6345.5344.5347.0Finalsales98.684.516.721.827.940.044.153.261.065.362.163.168.266.576.887.499.592.795.701.605.609.015.521.222.732.736.847.557.773.7283.3296.7298.4300.0303.4314.5326.6325.8330.6339.4326.8325.9327.9322.6325.9331.7330.2334.7334.8338.2338.9345.7nventoryhange1.1-2.8.92.83.81.7-.6-.5 .11.3-2.04.0-.84.23.92.5.11.43.52.1.01.63.21.53.03.74.32.33.34.85.63.23.74.24.83.25.93.0-2.76.85.37.81.4-2.6-7.0-9.33.71.912.87.35.61.3Services26.810.934.639.557.692.740.963.661.999.786.990.997.006.029.040.645.547.057.6.67.2279.3285.6298.0310.7325.5339.9354.0372.2389.1410.2432.7449.9465.4477.2491.1510.8531.1545.0556.6578.6545.754? 1544.6547.5549.6555.4558.7562.8570.3575.3582.1586.9Structures44.014.031.232.941.540.723.016.617.939.444.752.553.766.064.465.669.474.580.980.779.981.989.989.091.797.203.808.115.3115.2113.1120.9121.1114.6124.9134.3134.8116.1102.4110.0124.2120.6112.7106.999.399.2104.6106.4106.6108.7111.0113.8AutooutputI2.~914.718.924.020.418.423.922.931.324.425.820.024.726.822.627.530.331.137.436.733.540.640.032.542.145.150.640.039.750.239.040.244.136.832.738.645.042.650.451.848.750.1Source: Department of Commerce, Bureau of Economic Analysis.195

TABLE B-8.—Gross national product: Receipts and expenditures by majoreconomic groups, 1929-76[Billions of dollars]Year orquarter1929. .19331939194019411942... .1943194419451946 ..1947194819491950195119521953 .195419551956...19571958..1959 .. ..196019611962196319641965... .19661967 .19681969 .1970197119721973197419751976 vPersonsDisposable personalincomeTotal i82.345.569.975.292.0116.5132.9145.5149.0158.6168.4187.4187.1205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4685.9742.8801.3901.7982.91, 080.91,181.8Less:Interestpaidandtransfers21.9.7.91.01.1.8.7.8.91.41.72.12.32.72.93.34.04.34.85.65.96.06.57.47.78.39.410.511.712.613.314.115.616.617.318.921.523.223.725.4Equals:Totalexcludinginterestpaidandtransfers80.444.869.174.391.0115.6132.1144.6148.0157.3166.7185.3184.9202.8221.9233.1246.6251.4268.6285.7301.0311.1329.6342.0355.2375.6393.4426.5460.4497.8531.2574.0614.8669.4725.5782.4880.2959.71,057.21,156.3Personalconsumptionexpenditures77.345.867.071.080.888.699.4108.2119.5143.8161.7174.7178.1192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7618.8668.2733.0809.9887.5973.21, 078.6Personalsavingordissaving(-)3.1-1.02.13 310.227.032.736 528.513.44.910.66.710.814.816.017.015.614.919.720.621.718.817.120.220.418.826.130.333.040.938.135.150.657.349.470.372.284.077.8GovernmentNet receiptsTaxandnontaxreceiptsor accruals11.39.315.417.725.032.649.251.253.251.056.958.955.969.085.290.194.689.9101.1109.7116.2115.0129.4139.5144.8156.7168.5174.0188.3212.3228.2263.4296.3302.6322.2367.4411.2454.6466.4530.8Less:Transfers,interest,andsubsidies31.52.54.14.33.84.24.46.09.918.017.118.520.922.519.118.319.021.323.025.128.232.633.436.140.942.444.146.549.554.962.270.277.893.1106.8117.8135.4155.6191.8209.5Equals:Netreceipts9.86.911.313.521.228.444.745.243.333.039.940.435.046.566.271.875.668.678.184.688.082.496.0103.4103.9114.3124.4127.5138.9157.4166.0193.2218.5209.5215.5249.6275.8299.0274.6321.3ExpendituresTotalexpenditures10.310.717.618.428.864.093.3103.092.745.642.550.559.361.079.293.9101.697.098.0104.5115.3127.6131.0136.4149.1160.5167.8176.3187.8213.6242.4268.9285.6311.9340.5370.9404.9458.8530.8575.3Less:Transfers,interest,andsubsidies31.52.54.14.33.84.24.46.09.918.017.118.520.922.519.118.319.021.323.025.128.232.633.436.140.942.444.146.549.554.962.270.277.893.1106.8117.8135.4155.6191.8209.5Equals:Purchasesofgoodsandservices8.88.213.514.224.959.888.997.082.827.525.532.038.438.560.175.682.575.875.079.487.195.097.6100.3108.2118.0123.7129.8138.4158.7180.2198.7207.9218.9233.7253.1269.5303.3339.0365.8Surplusordeficit(-),nationalincomeandproductaccounts1.0-1.4-2.21-3.8-31.4-44.1-51.8-39.55.414.48.4-3.48.06.1-3.8-6.9-7.13.15.2.9-12.6-1.63.1-4.3-3.8.7-2.3.5-1.3-14.2-5.510.7-9.4-18.3-3.56.3-4.2-64.4-44.5See footnotes at end of table.196

TABLE B-8.—Gross national product: Receipts and expenditures by majoreconomic groups, 1929-76—Continued[Billions of dollars]BusinessInternationalYearorquarterGrossretainedearnings*Grossprivatedomesticinvestment8Excessof earningsorof investmentNet exports of goodsand servicesNettransfersandinterestpaid toforeignersExportsLess:ImportsEquals:NetexportsExcessofnettransfersandinterestor ofnet exportsl-VTotalincomeor receiptsStatisticaldiscrepancyGrossnationalproductor expenditure192911.716.2-4.40.47.05.91.1-0.7102.31.1103.41933 . .3.21.41.8.22.42.0.4-.255.1.755.819398.89.3-.5.24.43.41.1-.989.41.490.8194019411942 ...1943194419451946. ...194719481949 ....10.912.014.816.717.716.015.821.830.031.413.117.99.95.87.210.630.734.045.935.3-2.2-5.84.910.910.55.4-14 9-12.1-15.8-3.8.2.2\l.3.82 92.64.55.65.45.94.84.45.37.214.819.816.915.93.64.64.86.57.17.87.28.210.49.61.71.3.0-2.0-1.8-.67 611.66.56.2-1.5-1.12.22.11.4-4 6-9.0-2.0-.698.9124.3159.1193.8207.8208.2208 9231.0260.3257.01.1-is-1.82.74.171.8-1.21.0100.0124.9158.3192.0210.5212.3209.6232.8259.1258.019501951195219531954 . .1955195619571958195930.834.637.138.041.047.548.751.151.358.553.859.252.153.352.768.471.069.261.977.6-23.0-24 6-15.1-15.3-11.7-20.8-22.3-18 1-10.6-19.04.03.52.62.52.32.52.52.52.42.613.918.918.217.118.020.023.926.723.323.712.015.115.816.616.017.819.620.720.823.21.93.82.4.62.02.24.36 12.5.62.1-.3l'.9.3.3-1.8-3.6-.12.0284.1326 2344.5362.8363.3396.8421.5442 6447.2486.72.04 02.73.33.02.5-.8.21.7286.2330.2347.2366.1366.3399.3420.7442.8448.9486.5196019611962196319641965196619671968196958.759.867.070.176.284.691.293.798.2101.776.474.385.290.296.6112.0124.5120.8131.5146.2-17.7-14.5-18 2-20.1-20.4-27.4—33 3-27.1-33.3-44.52.62.83.03.13.23.33.53.73.63.827.628.930.632.737.439.542.845.649.954.723.223.125.226.428.432.037.740.647.752.94.45.85.46.38.97.65.14.92.31.8-1.7-3.0-2.4-3.2-5.7-4.3—1.6-1.21.42.0506.7521.7559 8591.0633.5687.2749 8794.6869.1938.8-.71.64.03.72.2.93 21.7-.6-3.3506.0523.3563.8594.7635.7688.1753.0796.3868.5935.51970197119721973197419751976 P. .101.4115.7131.0140.2139.4171.6198.6140.8160.0188.3220.0215.0183.7241.2-39.5-44.3-57.3-79.8-75.6-12.1-42.64.35.56.57.78.58.58.662.565.672.7101.6144.4148.1161.958.564.075.994.4136.9127.6155.13.91.6-3.37.17.520.56.9.33.99.8.61.0-11.91.7984.51,062.11,169.41,303.91,406.61,511.91, 684. 8-2.11.31.72.66.64.47.6982.41,063.41,171.11,306.61,413.21,516.31, 692.41 Personal income less personal tax and nontax payments (fines, penalties, etc.).2 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 currentsurplus of government enterprises, and disbursements less wage accruals.4 Capital consumption allowances with capital consumption adjustment, corporate inventory valuation adjustment,undistributed corporate profits with capital consumption adjustment, and private wage accruals less disbursements.s Private business investment, purchases of capital goods by private nonprofit institutions, and residential housingand equipment. See Table B-14.« Net transfers to foreigners by persons and government and interest paid by government to foreigners.* Capital grants received by the United States (net) less net foreign investment.Source: Department of Commerce, Bureau of Economic Analysis.197

TABLE B-9.—Gross national product by sector, 1929-76[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]Year or quarterGrossnationalproductTotalTotalGross domestic productBusinessNonfarmxFarmTotalGovernment 2StatisticaldiscrepancyHouseholdsandinstitutionsFederalStateandlocalRestof theworldPercentchangefromprecedingperiod,grossdomesticproducts192919331939. .19401941194219431944.194519461947194819491950..1951....1952195319541955195619571958 . ...1959I96019611962 . .196319641965 . .196619671968196919701971 . .19721973197419751976 v1974: 1IIIIIIV1975: 1IIIIIIV1976: 1IIIIIIV V103.455.890.8100.0124.9158.3192.0210.5212.3209.6232 8259.1258.0286.2330.2347 2366.13b6.3399 3420.7442.8448.9486.5506.0523.3563.8594.7635.7688.1753.0796.3868.5935.5982.41, 063.41 171 11,306.61,413.21,516.31, 692.41,372.71,399.41,431.61, 449.21, 446.21,482.31, 548.71,588.21,636.21,675.21,709.81, 748. 5102.655.590.599.6124.5157.9191.6210.1212.0209.0231.8257.9256.9284.8328.7345.7364.6364.5397.3418.5440.5446.6484.0503.5520.2560.2591.1631.4683.4748.8791.8863.7931.1977.81,056.81,164.11,297.51,398.71, 505.71, 679.11, 355.51,387.01,417.81,434.41,436.71,471.71, 537.41,577.11,623.21,662.81,696.11,734.395.449.180.689.4112.6139.9162.8174.2172.8183.8210.0234.9231.5257.5294.4307 3324.9323.9354 0372.1390.8393.1427.7442.5455 3490.4516.5550.7596.6651 1682.7742 2798.1831.58%. 9989 51,108.01,192 41,277.51,428.41,156.11,183.81,209.61,219.91,216.31,246.41,306.81,340.41,380.71,415.51,443.11, 474.284.743.872.981.8103.1127.7149.3156.2152.7164.2188 0212.7211.7235.5267.4282 5301.2301.3332 8354.3372.3370.7408.9423.0433 4465.9492.2529.2573.8625 0658.8720 2776.2807.6867.9955 81,055.31 137.31, 222.81,370.01,100.61,130.11,155.11,163.41,167.41,197.41, 246. 71,279.61,324.81, 354.71,384.49.74.66.36.58.913.015.315.316.018.920.223.318.820.022.922.220.319.618.818.618.420.719.120.220.220.520.519.322.022.922.222.625.225.927.732 050.148.550.350.853.146.646.947.242.549.055.054.848.755.050.049 41.1.71.41.1.5-.8-1.82.74.1.71.8-1.21.02.04.02.73.33.02.5-.8.21.7-.2-.71.64.03.72.2.93.21.7-.6-3.3-2.11.31 72.66.64.47.6? 47.17.79.36.4.15.16.17.25.88.72.91.72.32.42.52.93.23.74.14.55.15.65.96.46.97.27.88.19 19.810.511.412.313.8 47.114.4 50.515.5 54.316.6 58.017.8 62.919.2 67.621 1 76.523.9 85.126 4 95.229.2 103.731.634.737 240.544.749.755.942.744.045.746.448.149.050.451.553.354.857.058.64.34.77.67.89.415.125.632.235.220.816.717.419.420.927.431.231.932.534.236.639.142.144.0114.7125.2137 4149.1161.6178.5194.8156.7159.2162.5168.1172.4176.3180.1185.2189.2192.5196.0201.40.91.23.43.55.010.620.927.229.814.69.48.910.010.716.218 918.617.818.419.019.620.520.921.722.624.125.227.028.332.435.639.341.844.746.850 151.954.959.363.453.754.054.657.458.258.459.161.562.262.563.265.63.53.54.24.34.44.54.74.95.46.27.38.59.410.111.212.313.314.715.817.619.621.623.125.527.930.232.935.939.344.149.555.961.970.078.587 397.1106.7119.2131.4102.9105.2107.9110.7114.2117.9121.1123.7127.0130.0132.8135.80.8.3.3.4.4.4.3.4.3.5.91.21.11.31.51 51.51.82.02.22.32.22.42.53.13.63.74.34.74.24.64.84.54.66.67.09.114.510.613.317.212.413.814.89.410.611.311.113.012.413.714.2-4.17.010.125.026.821.49.6.9-1.410 911.3-.410.915.45 25.5-.09 05.35.21.48.44.03 37.75.56.88.29 65.79.17.85.08.110.111.57.87.711.53.19.69.24.8.710.119.110.812.210.18.29.31 Includes compensation of employees in government enterprises.2 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.198

TABLE B-10.—Gross national product by sector in 1972 dollars, 1929-76[Billions of 1972 dollars, except as noted; quarterly data at seasonally adjusted annual rates]Year or quarterGrossnationalproductTotalTotalGross domestic productBusinessNonfarm*FarmResidual2TotalGovernmentsHouseholdsandinstitutionsFederalStateandlocalRestof theworldPercentchangefromprecedingperiod,grossdomesticproduct*1929314.7312.8271.1244.223.83.115.626.15.220.91.91933222.1220.5179.7152.125.02.612.228.76.622.01.6-2.119391940...19411942194319441945 .1946194719481949 .1950195119521953195419551956195719581959319.7343.6396.6454.6527.3567.0559.0477.0468.3487.7490.7533.5576.5598.5621.8613.7654.8668.8680.9679.5720.4318.6342.3395.4453.5526.4566.0558.1475.9466.7485.9488.8531.5574.7596.7619.9611.4652.2666.1678.0676.5717.3261.5282.4324.4355.3381.9401.9396.9385.1392.8411.2409.4448.6477.2492.8515.6508.0546.5557.2566.0561.9600.5231.6254.1297.2330.3360.6371.2365.3362.3370.8387.2382.1417.9445.9460.7480.6473.4512.5529.3538.7528.2569.625.324.726.328.727.827.325.825.823.925.725.526.925.826.327.628.329.228.828.129.328.24.73.6.9-3.8-6.63.55.8-3.0-1.9-1.71.83.85.55.77.36.24.8-.9-.84.42.715.116.115.916.415.215.115.015.116.016 717.318.318.718.619.319.421.422.523.124.224.942.043.955.181.8129.3149.0146.275.857.958.062.264.678.885.385.083.984.486.588.990.491.816.918.629.656.7105.0125.2121.849.729.829.231.332.746.251.649.647.245.945.645.844.544.525.125.325.525.024.423.824.526 128.128 830.931 932.633 735.536.738.440.843.145.847.31.21.31.21.11.01.0.81.11.61 81.91.91.81.82.02.32.52.72.93.03.27.77.515.514.716.17.5-1.4-14.7-1.94 1.68.78.13.83.9-1.46.72.11.8-.26.0196019611962196319641965196619671968196919701971197219731974 . .19751976 ^1974' 1IIIllIV1975- 1II . .IIIIV1976: 1IIIIIIV v736.8755.3799.1830.7874.4925.9981.01, 007. 71,051.81, 078.81,075.31,107.51,171.11,235.01,214.01,191.71,265.01,230.41, 220.81,212.91,191.71,161.11,177.11,209.31,219.21,246.31,260.01,272.21,281.5733.6751.2794.3825.8868.7919.9975.61,001.91,045.71, 073.11,069.81,100.31,164.11,227.41,206.91,186.81, 259.11,219.81,215.31, 207.31,185.31,157.01,172.21,204.01, 214.11,240.41,254.31, 266.21,275.3611.8625.6663.9692.0730.4776 4822.4839.8878.2901.5898.3927.6989.51,050.41,027.31, 004.11,072.01,040.91,036.01, 027.01, 005.0975.6989.91,020.81,030.21,055.11,068.01,078.21,086.9580.5590.9629.6658.4697.1746.7791.1807.8850.6877.4871.3894.9955.81,013.2987.7968.11, 033.91,005.6994.6986.6964.1938.8956.6983.0994.11,018.01,031.51,039.41,046.729.529.629.530.029.230.128.529.629.429.931.132.832.032.332.034.135.230.632.832.232.531.834.636.034.234.334.935.036.41.85.14.83.64.0-.42.82.4-1.8-5.9-4.2-.11.74.97.51.83.04.78.68.38.44.9-1.31.81.92.81.63.83.826.827.228.329.029.931.132.834.835.936.636.336.637.238.138.238.540.738.238.138.537.938.338.438.538.839.840.441.541.494.998.5102.1104.8108.4112.4120.4127.2131.7135.0135.2136.0137.4138.9141.5144.2146.3140.7141.1141.9142.4143.1143.9144.7145.1145.5146.0146.6147.045.246.248.348.248.548.753.057.258.158.255.252.550.148.348.448.248.148.448.348.448.448.448.248.248.148.148.048.148.149.752.353.956 660.063 667 570.073 676.880.183.587.390.693.196.098.292.392.893.494.094 795.796.597.097.497.998.498.93.24.14.84.95.76.15.45.86.15.75.57.27.07.67.04.85.910.75.55.66.44.14.85.35.15.95.66.06.22.32.45.74.05.25.96.12.74.42.6-.32.85.85.4-1.7-1.76.1-4.9-1.5-2.6-7.1-9.25.411.33.49.04.63.82.91 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 thesum of gross product by industry.3 Compensation of government employees.* Changes are based on unrounded data and therefore may differ from those obtained from data shown here. See TableB-2 for percent changes in gross national product in 1972 dollars.Source: Department of Commerce, Bureau of Economic Analysis.199

TABLE B-ll.—Gross domestic product of nonfinancial corporate business, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Yearorquarter19291933....1939....1940....194119421943194419451946....1947....1948....1949....1950195119521953....1954....1955....1956....1957....19581959....I960....19611962....1963....1964....1965....19661967....19681969....1970....1971....1972....1973....1974....1975....1976 *__.1974:if.""IllIV1975:1IIIII....IV1976:if.""III.—Grossdomesticproductofnonfinancialcorporatebusiness50.124.443.750.465.682.998.7102.195.399.3120.0137.3133.5151.9174.5182.3195.0191.9216.7231.6242.3236.3265.7277.3284.5311.0330.9357.6392.1430.7452.9498.4541.8560.6602.5671.0752.0810.0870.4982.6787.9807.5821 5823.3822.3851.1892.0916.1949.0972.8993.8Cap-J4.nlnaiconsumptionallowanceswithcapitalconsumptionadjustment5.44.24.74.85.36.06.16.26.47.39.110.711.612.614.615.717.017.919.221.523.724.926.027.027.828.729.831.032.835.739.343.047.853.158.262.668.780.896.607.975.278.782 686.690.995.098.701.9104.2106.8108.9Net domestic productTotal44.720.239.145.660.477.092.695.988.992.1110.9126.5121.9139.3159.9166.7178.1174.1197.5210.1218.5211.4239.7250.3256.7282.3301.1326.6359.3394.9413.6455.4494.0507.5544.2608.4683.3729.3773.8874.8712.8728.7738 9736.6731.5756.1793.3814.2844.8866.1885.0Indirectbusinesstaxes i3.43.85.15.56.46.87.38.18.910.111.212.112.614.115.216.818.217.419.220.822.422.825.428.330.133.035.638.441.142.945.851.657.161.868.273.580.586.193.4100.583.085.687 987.788.492.095.697.597.499.7101.2Total41.316.434.040.153.970.185.387.880.081.999.8114.4109.3125.2144.7149.8159.9156.6178.3189.2196.2188.6214.4222.0226.5249.2265.6288.3318.2352.0367.9403.8437.0445.7476.0534.8602.8643.2680.4774.2629.8643.1651 0649.0643.1664.2697.7716.7747.4766.4783.7Compensationofemployees32.316.728.231.239.851.062.265.161.967.279.187.885.394.7110.2118.3128.7126.5138.5L51.4159.1155.9171.6181.1185.1199.8210.7226.3246.1273.5291.9321.6357.4377.1399.4443.8503.8554.7577.1641.5536.6549.9564 3568.0563.4566.2580.3598.5620.3635.4646.9Domestic incomeCorporate profits with inventory valuation and capitalconsumption adjustmentsTotal7.6-2.04.37.512.817.922.021.717.214.119.925.823.029.633.430.329.928.638.236.135.030.139.737.437.444.950.056.766.171.267.272.166.451.658.772.076.059.672.597.066.364.957 050.149.667.886.686.193.295.7100.3Profits before taxTotal8.4.66.18.816.420.123.622.217.822.029.131.824.938.539.133.834.932.142.041.839.833.743.139.539.243.748.354.664.469.565.471.968.455.163.375.992.7102.395.5127.296.9103.4113.995.174.887.0108.3112.0119.4125.6128.6Profitstaxliability1.2.51.42.77.511.213.812.610.28.610.811.89.316.921.217.818.515.620.220.119.116.220.719.219.520.622.824.027.229.527.733.633.327.329.933.539.642.639.752.140.643.347 539.030.235.445.847.651.153.454.7Profits after taxTotal7.3.14.76.19.08.99.89.67.613.418.320.015.621.617.916.016.416.421.821.820.717.522.320.319.723.125.530.737.240.037.738.335.127.933.342.453.159.855.875.156.460.266.456.144.551.762.564.468.372.273.9Dividends5.22.03.33.64.03.84.04.24.25.15.96.56.57.97.87.88.08.29.410.110.410.210.811.511.712.714.115.317.218.118.920.720.719.920.021.723.930.429.032.026.933.233.228.129.529.029.128.628.231.932.9Undistributedprofits2.0-1.91.42.54.95.15.75.43.48.312.413.59.113.610.18.18.48.212.411.610.37.311.58.78.010.311.415.420.021.918.817.614.48.013.320.729.229.426.743.129.526.933.228.015.022.733.435.940.140.341.0Inventoryvaluationadjustment0.5-2.1-.7-.2-2.5-1.2-.8-.3-.6-5.3-5.9-2.21.9-5.0-1.21.0-1.0-.3-1.7-2.7-1.5-.3-.5.3.1.1-.2-.5-1.9-2.1-1.7-3.4-5.5-5.1-5.0-6.6-18.6-39.8-11.4-14.6-30.4-36.6-53.4-38.8-16.5-7.8-9.0-12.3-11.5-14.4-12.6Capitalconsumptionadjustment-1.35-1.0-1.1-1.1-1.0-.8-.2-. 1-2.7-3.3-3.9-3.8-3.9-4.5-4.4-4.0-3.2-2.1-3.0-3.3-3.4-2.9-2.3-1.81.01.92.63.63.83.63.63.51.5.52.71.8-3.0-11.6-15.6-.3-1.9-3.5-6.3-8.6-11.4-12.7-13.6-14.7-15.5-15.7Netinterest1.41.71.51.41.31.31.11.01.0.7.8.91.0.91.11.21.31.61.61.72.22.73.13.53.94.54.85.36.17.48.710.113.117.017.919.123.129.030.835.826.828.4?9 730.930.030.230.832.033.935.236.51 Indirect business tax and nontax liability plus business transfer payments less subsidies.Source: Department of Commerce, Bureau of Economic Analysis.200

TABLE B-12.—Output, costs, and profits of nonjinancial corporate business, 1948-76[Quarterly data at seasonally adjusted annual rates]Year orquarterGross domesticproduct ofnonfinancialcorporatebusiness(billions ofdollars)Currentdollars1972dollarsTotalcostandprofit 2Current-dollar cost and profit per unit of output (dollarsCapitalconsumptionallowanceswithcapitalconsumptionadjustmentIndirectbusinesstaxes 3CompensationofemployeesNetinterestCorporate profits withinventory valuationand capitalconsumption adjustmentsTotalProfitstaxliabilityProfitsaftertax

TABLE B-13.—Personal consumption expenditures, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Durable goods 1Nondurable goods»Services lYearorquarter1929. . ..193319391940 .1941194219431944194519461947194819491950195119521953 .19541955195619571958195919601961196219631964196519661967196819691970197119721973 .197419751976 P1974* 1IIIII....IV....1975:1II....III....IV....1976:111III....IV p..Personal consumptionexpenditures77.345 867 071.080.888.699 4108.2119.5143 8161 7174 7178 1192 0207 1217 1229 7235 8253 7266 0280 4289 5310 8324.9335 0355 2374.6400 4430.2464 8490.4535 9579.7618.8668.2733 0809.9887 5973 21,078 6853 3878.7906.8911.1933.2960.3987.31,012.01,043.61,064.71, 088. 51,117.5I9.?3.56.77,89.76.96.56.78.015.820.4?? 925 030.829.8?9 13? 531.838.637 939.336.84? 443.141.646.751.456.362.867.769.680.085. 584.997.1111.?123.7121.6131.7156 3118.6122.5128.0117.4122.1127.0136.0141.8151.4155.0157.6161.2|f &13.31.12.32.83.5.7.8.81.04.16.68.010.613.712.211.313.913.017.815.817.214.818.919.717.821.524.426.029.830.129.735.837.734.943.850.655.247.953.270.646.248.553.043.747.649.556.359.268.070.471.772.41 Iisa> E~51®4.71.93 43.84.84.63.93.84.58 410 611.511.313.7 98.214 0 08 814.0 L13.9i4 6 16. 514 6 18 016 2 122.917 1 128.916.9 135.216 6 L39.817 8 146.417.717.918.920.322.824.727.729.532.635.036.739.444.850.754.757.662.953 754.955.754.454.657.058.260.661.262.362.965.137.722.335.137.042.950.858.664.371.982.790.996.694.9151.1155.3161.6L67.1L76.9188.6204.7212.6230.4247.0264.7277.7299.3333.8376.2409.1440.3360 6371.9383.8388.5394.4405.8414.6421.6429.1434.8441.8455.5I19.511.519.120.223.428.433.236.740.647 452.354.252.553.960.463.464 465 467.269.973 676 479.181.183.285.587.892.798.9106.6109.6118.3126.1136.3140.6150.4168.1189.9209.5224.5181 5186.4193.7198.0203.2207.8211.8215.2219.2223.1225.2230.4v>"ODOCS9.44.67.17.58.811.013.414.616.518 218.820.119.319.621 ?21.922.122.123.124.124.324.726.126.727.428.729.531.933.536.638.241.845.146.650.555.161.365.170.075.364.265.066.265.066.669.371.373.073.573.275.978.5:= oCO©1.81.52.22.32.62.11.31.41.83.44.04.85.35.56.16.87.47 88.69.410.210.611.312.012.012.612.913.514.716.017.018.420.422.023.424.927.836.338.941.431.836.238.039.337.938.639.239.940.140.341.643.61•o.-= oU-1.61.21.41.51.71.92.02.02.22.53 03.43.13.43.53.43.43.53.83.94.14.24.03.83.73.74.04.14.44.74.85.05.25.45.56.37.79.510.111.89.09.39.89.99.59.910.810.211.211.011.913.2I30.320.125.226.228.231.034.337.139.645.350.455.358.263.068.574.080.686.192.199.205.9112.8121.9130.7138.1L47.0156.1167.1L78.7192.4208.1225.6247.2269.1293.4322.4352.3389.6432.4482.0374.1384.3394.9405.2416.7427.4436.7448.6463.2474.9489.1500.8CS> 3OX11.78.19.49.710.411.211.812.312.814 216 017.919.621.724.327.029.832.234.336.739.342.045.048.151.254.758.061.465.569.574.179.986.894.0L02.7L12.3L23.2136.4150.2165.8131.8134.6137.8141.3145.0148.4151.8155.8159.7163.9167.8171.7Householdoperation lI4.02.83.84.04.34.85.25.96.46.87 58 18 59.510 411 1l?012 614.015?16.217 318.520.121.02? ?23.424 826.328.030.632.735.538.341.645.950.256.163.971.652.855.357.559.161.263.765.065.968.469.672.87,4I•o cCO:§1.21.11.41.51.51.61.71.81.92.12 32.62.93.33.74.14.55.05.56.16.57.17.68.38.89.49.910.410.911.512.213.114.215.517.018.920.624.028.932.121.623.324.826.327.628.929.529.631.030.632.634.1-.3|2.61.52.02.12.42.73.43.74.05 05.35.85.96.26.77.17.87.98.28.69.09.310.110.711.211.712.212.813.715. G16.217.418.921.123.826. C27. S31.134.037.429.730.631.632.533.333.634.135.036.537. C37.838.61 Total includes "other" category, not shown separately.2 Includes imputed rental value of owner-occupied dwellings.Source: Department of Commerce, Bureau of Economic Analysis.202

TABLE B-14.—Gross private domestic investment, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year orquarter192919331939..194019411942194319441945..19461947194819491950195119521953195419551956195719581959I96019611962 . . ..196319641965 . .1966196719681969 . .1970 . .197119721973197419751976"1974: 1 IIIII....IV....1975: 1 IIIII..-IV1976: 1 IIIII....IV*>_._.Grossprivatedomesticinvestment16.21.49.313.117.99.95.87.210.630.734.045.935.353.859.252.153.352.768.471.069.261.977.676.474.385.290.296.6112.0124.5120.8131.5146.2140.8160.0188.3220.0215 0183.7241.2216.4218.8213.3211.5172.4164.4196.7201.4229.6239.2247.0249.0Fixed investmentTotal14.53.08.810.913.48.16.48.111.724.334.441.138.447.048.949.052.954.362.466.367.963.472.372.772.178.784.290.8102.5110.2110.7123.8136.8137.0153.6178.8202.1204.3198.3227.7203.8205.8206.0201.7194.6194.3198.6205.7214.7223.2231.9241.1NonresidentialTotal10.52.45.87.59.46.05.06.810.116.822.926.224.327.131.131.234.334.038.343.746.741.645.347.747.151.253.659.771.381.482.189.398.9100.5104.1116.8136.0149.2147.1160.0145.1149.0150.9151.9148.0145.8146.1148.7153.4157.9163.0165.5StructuresTotal5.0.92.02.32.91.91.31.82.86.87.68.98.69.311.311.512.813.214.417.418.116.717.018.218.419.419.621.526.129.229.531.635.737.739.342.549.054.152.055.452.454.854.155.253.151.251.852.153.254.956.057.5Nonfarm4.8.91.92.22.81.81.21.72.66.16.88.17.88.610.510.612.012.413.716.617.416.016.117 317.518.518.620.525.128.128.230.434.336.137.841.146.951.849.853.150.152.351.952.950.948.849.649.951.052.553.755.1Producers'durableequipmentTotal5.51.43.95.26.44.13.75.07.39.915.317.315.717.819.919.721.520.823.926.328.624.928.329.528.731.834.038.245.152.252.657.763.362.864.774.387.095.195.1104.592.794.296.896.794.994.694.396.6100.2103.0107.0108.0Nonfarm4.81.33.34.55.53.53.24.26.39.013.414.712.814.916.917.118.718.421.324.126.221.925.227.026.128.930.634.641.247.948.053.458.958.159.969.180.187.286.995.685.586.589.088.086.586.286.788.091.394.198.098.8ResidentialTotal4.0,63.03.54.02.21.41.31.67 511.515.014 119.917 717 818.620.324.1??,621.221.827.025.025.027.430.631.231.228.728.634.537.936.649.662.066.155.151.267.858.756.855.049.846.648.652.657.061.365.368.975.6Nonfarmstructures3.8.52.83.23.71.91.21.11.46.810.513.812.918.716.616.617.519.223.021.420.020.725.823.923.826.329.429.929.927.427.233.136.335.147.960.364.352.749.065.156.454.652.747.244.946.750.254.258.662.966.372.7Farmstructures0.2.0.1.2.2.2.2.1.1.5.7.9.8.8.8.8.8.7.6.7.7.7.7.6.7.6.7.7.6.7.7.6.6.7.7.61.0.81.11.0.9.91.3.5.61.01.41.2.91.01.2Producers'durableequipment0.1.0.1.11.0.0.0.2334.4.4.4.4.4.5.5.5.6.5.5.5.6.6.7.7.7.8.9.9 ni?.61.31.41.4L.3L.21.3L.4L.41.51.51.61.7Change inbusinessinventoriesTotal1.7-1 6.42.24.51 8- 6-1 0-1.06.4-.54 7-3 16 810.33.1-1.56.04.71.3-1.55.23 82.26.56.05 89.514.310.17.79.43.86.49.417.910.7-14.613.512.613.07.39.7-22.2-30.0-2.0-4.314.816.015.17.9Nonfarm1.8-1.4.31.94.0 7- 6-.6-.66.41.33 0-2.26 09.12.11.1-2.15.55.1.8-2.35.33.51.95.85.26 48.514.59.47.69.23.75.18.814.712.2-17.613.614.513.97.412.9-25.6-31.2-4.2-9.512.717.315.68.9Source: Department of Commerce, Bureau of Economic Analysis.203

TABLE B-15.—Inventories and final sales of business, 1946-76[Billions of dollars, except as noted; seasonally adjusted]Inventories IInventory-finalsales ratioYear andquarterTotalFarmNonfarmWholesaletradeRetailtradeOtherFinalsales 2TotalTotalnonfarmManufacturingNonfarm'Fourth quarter:194619471948194973.786.990.681.021.825.823.419.551.961.167.261.426.731.834.831.09.610.611.310.911.914.116.115.03.74.64.94.4192.0219.6235.7234.60.384.396.384.3450.270.278.285.26219501951195219531954 ..98.8112.1109.4110.1107.224.226.523.121 620.574.685.686.388.586.737.446.247.349.347.013.414.014.014.214.518.619.218.819.519.75.26.26.25.55.6259.8295.6313.3325.8330.1.380.379.349.338.325.287.290.275.272.26319551956 .195719581959 ..112.1121.8126.7128.9132.317.618.320.924.923.694.6103.5105.8103.9108.751.457.557.956.057.515.616.716.916.918.021.922.924.024.125.35.66.46.96.98.0356.5377.0392.7405.0426.7.315.323.323.318.310.265.274.269.257.2551960196119621963 ..1964136.2138 4145 2151 5157.624.825 026 626.925.7111.3113 4118.6124.6131.858.159.562.564.868.518.419.019.721.222.326.826.327.929.431.18.18.78.69.29.9442.1465.3492.7524.2553.1.308.297.295.289.285.252.244.241.238.2381965 ...1966196719681969172.7189.1202 2215.3236.229.728.929 230.433.4143.0160.2173.0184.9202.873.783.491.197.4107.124.027.229.230.933.834.438.039.242.245.910.911.613.514.416.1610.7647.5688.0757.6804.5.283.292.294.284.294.234.247.251.244.2521970 . . . .197119721973197419751976 v244.2261.9288 6355 8428.0426.8462.131.736.844 666.261.763.361.1212.5225.1243.9289.6366.3363.5401.0110.8113.6120.4143.6188.7188.5206.336.839.443.652.867.064.772.547.152.958.066.876.374.782.617.719.221.826.434.435.639.5839.4915.21,019.91,120.51, 210.11, 344.71,466.3.291.286.283.318.354.317.315.253.246.239.258.303.270.2731974:1II.Ill .IV374.6392.0419.9428.064.759.265.961.7309.9332.7354.0366.3155.7170.0182.3188.757.261.264.967.068.470.774.076.328.630.932.834.4l f 143.51,170.81, 202.31, 210.1.328.335.349.354.271.284.294.3031975:1IIIIIIV419 0417.7426.8426.858.563.266.363.3360.5354.5360.5363.5187.7184.8186.4188.566.064.165.064.773.272.375.074.733.633.334.135.61,238.51, 276.41,308.81,344.7.338.327.326.317.291.278.275.2701976-1IIIIIIV p ..434.9445.4452.9462.164.265.462.361.1370.7380.0390.6401.0190.6194.7199.7206.366.669.070.472.577.279.482.282.636.336.938.339.51,365.91, 399.51,428.01,466.3.318.318.317.315.271.272.274.2731 End of quarter.2 Annual rates.» Ratio based on total final sales, which include a small amount of final sales by farms.Source: Department of Commerce, Bureau of Economic Analysis.204

TABLE B-16.—Inventories and final sales of business in 1972 dollars, 1947-76[Billions of 1972 dollars, except as noted; seasonally adjusted]Inventories IInventory-finalsales ratioYear andquarterTotalFarmNonfarmWholesaletradeRetailtradeOtherFinalsales 2TotalTotalnonfarmManufacturingNonfarm3Fourth quarter:1947 .19481949118.6124.1119.725.726.726.293.097.393.549.951.348.613.815.015.020.522.522.08.78.67.8397.2412.0415.10.299.301.2880.234.236.2251950 .1951195219531954130.2143.9148.2149.7147.527.529.130.430.231.1102.7114.8117.9119.6116.551.862.565.266.963.317.017.517.918.118.425.225.325.325.826.08.79.59.68.78.8442.6476.5499.1516.2517.0.294.302.297.290.285.232.241.236.232.2251955 . . . .1956195719581959155.3161.1162.6160.8167.231.530.731.432.432.4123.7130.3131.2128.4134.866.771.671.168.671.119.920.520.320.322.128.729.030.029.731.18.49.29.89.810.5547.4557.6565.3577.2596.8.284.289.288.279.280.226.234232.222.22619601961196219631964171.6174.5182.6190.4197.732.833.234.535.735.1138.8141.2148.1154.7162.672.474.278.480.884.722.723.424.326.227:533.032.234.035.737.610.711.411.412.012.8609.0636.6664.2699.3730.7.282.274.275.272.271.228.221.223221.22319651966196719681969209.0225.7237.7246.4257.036.236.036.837.037.3172.8189.7200.9209.4219.789.199.0105.9110.7115.828.932.033.934.936.541.044.444.847.049.413.814.316.316.818.0791.3809.2837.2882.8892.2.264.279.284.279.288218.234.240.237.24619701971197219731974261.3267.9211A293.9302.337.739.239.842.141.7223.6228.8237.6251.8260.7117.1115.4117.5123.6129.738.740.142.445.348.549.053.756.560.359.218.819.521.322.723.4891.7935.01, 007.61,031.8997.0.293.287.275.285.303.251.245.236.244.26119751976 P290.3299.442.642.5247.7256.9124.1127.544.947.855.657.923.123.71,035.71, 082. 2.280.277.239.2371974:1IIIllIV296.7299.1300.3302.341.941.941.841.7254.8257.2258.5260.7125.7127.4128.6129.746.647.748.048.559.659.258.959.222.922.923.023.41,029.51, 026.71,022.0997.0.288.291.294.303.247.251.253.2611975:1IIIllIV297.2291.9291.7290.341.942.042.242.6255.3249.9249.4247.7128.7126.6125.0124.147.345.745.544.956.455.256.255.622.922.522.623.1996.11,011.11,021.81,035.7.298.289.285.280.256.247.244.2391976:1 IIIIIIV x»292.9295.7298.2299.443.042.742.742.5249.9252.9255.5256.9124.1125.4126.4127.545.746.847.447.856.857.258.257.923.323.523.523.71,044.71,059.91,068.01,082.2.280.279.279.277.239.239.239.2371 End of quarter.2 Annual rates.3 Ratio based on total final sales, which include a small amount of final sales by farms.Source: Department of Commerce, Bureau of Economic Analysis.205224-250 O - 77 - 14

TABLE B-17.—Relation of gross national product and national income, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year or quarterGrossnationalproductLess:CapitalconsumptionallowanceswithcapitalconsumptionadjustmentEquals:NetnationalproductPlus:Subsidieslesscurrentsurplusof governmententerprisesIndirectbusinesstax andnontaxliabilityLess:BusinesstransferpaymentsStatisticaldiscrepancyEquals:Nationalincome1929103.49.793.7-0.27.10.61.184.81933_55.87.548.3-.07.1.7.739.9193990.88.782.1.49.4.51.471.31940194119421943194419451946194719481949100.0124.9158.3192.0210.5212.3209.6232.8259.1258.09.010.011.211.511.812.313.817.220.322.091.0114.9147.1180.5198.7200.0195.7215.6238.8236.1.4.1.1.1.6.7.9-.2-.1-.310.111.311.812.814.215.517.118.420.121.3.4.5.5.5.5.5.5.6.7.81.1.5-.8-1.82.74.1.71.8-1.21.079.7102.6135.7169.1181.9180.6178.3194.6219.0212.7195019511952 . .195319541955 -. .1956195719581959286.2330.2347.2366.1366.3399.3420.7442.8448.9486.523.927.629.631.633.135.338.942.044.146.1262.3302.6317.6334.5333.2364.0381.8400.8404.8440.4.1-.1-.5-.3-.0.7.71.1.123.425.327.729.729.632.235.137.538.741.8.8.91.01.21.11.21.41.51.61.82.04.02.73.33.02.5-.8.21.72236.2272.3285.8299.7299.1328.0346.9362.3364.0397.1I96019611962 . .1963196419651966196719681969506.0523.3563.8594.7635.7688.1753.0796.3868.5935.547.749 150.552.254.657.561.767.073.882.5458.3474.2513.3542.5581.2630.6691.3729.3794.7853.1.41 71.81.11.71.62.51.61.31.845.448.051.654.658.862.665.370.278.886.42.02.02.12.42.72.83.03.13.43.8-.71.64.03.72.2.93.21.7-.6-3.3412.0424.2457.4482.8519.2566.0622.2655.8714.4767.91970197119721973197419751976 v _ _982 41, 063.41 171.11,306.61,413.21,516.31, 692. 490 898.8105.4117.7137.7161.4179.8891.6964.71, 065. 81,188.91,275.51,355.01,512.72 72.43.63.9.82.01.294.0103.4111.0120.2128.4138.7149.74.04.24.75.45.66.37.1-2.11.31.72.66.64.47.6798.4858.1951.91, 064.61,135.71,207.61, 349. 41974: 1IIIIIIV1,372.71,399.41,431.61,449. 2128.5134.5140.6147.21, 244. 21,265.01,291.01,301.91.3.8.9.3124.0127.5131.0131.05.65.55.65.72.47.17.79.31,113.51,125.61,147.61,156.31975: 1IIIIIIV1, 446. 21, 482.31,548.71, 588.2152.9158.7164.4169.51,293.31,323.61,384.31,418.71.41.92.12.7132.6136.5141.5144.15.96.26.46.66.45.16.11,149.71,182.71,233.41,264.61976: 1IIIIIIV V1, 636.21,675.21,709.81, 748. 5173.6177.7181.6186.21,462.61,497.61, 528. 21, 562. 3.9.71.21.9144.9148.2151.0154.86.87.07.27.47.25.88.71,304.71,337.41, 362. 5Source: Department of Commerce, Bureau of Economic Analysis.206

TABLE B-18.—Relation of national income and personal income', 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year orq uarter1929.19331939 _ .194019411942 .19431944194519461947194819491950195119521953195419551956195719581959196019611962196319641965196619671968 . . .1969197019711972197319741975 _ _1976 v1974: 1...II...III..IV..1975: l__-II...III..IV..1976: 1...II...III..IV*.Nationalincome84.839.971.379.7102.6135.7169.1181.9180.6178.3194.6219.0212.7236.2272.3285.8299.7299.1328.0346.9362.3364.0397.1412.0424.2457.4482.8519.2566.0622.2655.8714.4767.9798.4858.1951.91, 064. 61,135.71,207.61,349.41,113.51,125.61,147. 61,156.31,149.71,182.71,233.41,264.61,304.71, 337.41, 362. 5Less:Corporateprofitswithinventoryvaluationandcapitalconsumptionadjustments9.2-1.75.38.714.119.323.523.619.016 622.229.126.933.738.135.435.534 644.642.942.137.548.246.646.954.959.667.077.182.579 385.881.467.977.292.199.184.891.6118.795.787.881.774.169.086.6105.3105.6115.1116.4122.0Netinterest4.74.13.63.33.33.12.72.42.21.62.12.12.22.32.73.03.44.34.85.26.58.08.89.811.212.814.315.918.521.924.326.830.837.542.847.052.367.174.682.159.465.970.073.273.774.074.975.878.680.383.586.0Contributionsforsocialinsurance0.2.32.12.32.83.54.55.26.16.15.85.45.97.18.59.09.110.111.512.914.915.218.021.121.924.327.328.730.038.843 448.154.958.764.873.691.5103.4109.7122.8100.4102.4105.0105.9107.6108.1110.3112.6119.3121.4123.7126.8Wageaccrualslessdisbursements.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-.6-1.5.0.0.0.0.0.0.0.0.0 Plus:Governmenttransferpaymentstopersons0.91.52.52.72.62.72.53.15.610.811.210.611.714.411.612.112.915.116.217.320.124.325.227.030.831.633.434.837.641.649 556.562.775.989.999.4113.5134.6168.9184.2123.2130.8138.5146.0157.8169.3172.7176.0181.8180.6185.2189.2Personalinterestincome6.95.55.45.35.35.25.1b.25.96.47.37.78.28.99.610.311.412.713.815.317.418.820.923.324.627.130.233.337.241.845.049.655.964.369.374.684.1101.4110.7123.192.999.7104.8108.2108.2109.0111.0114.4118.0120.7125.0128.7Dividends5.82.03.84.04.44.34.44.64.65.66.37.07.28.88.58.58.89.110.311.111.511.312.212.913.314.415.517.319.119.420.121.922.622.923.024.627.830.832.135.129.930.731.331.131.731.932.632.233.134.435.437.7Businesstransferpayments0.6.7.5.4.5.5.5.5.5.5.6.7.8.8.9L.O ?1?1.4 51.6 82.02.02.12.42.72.83.03 13.43.84.04.24.75.45.66.37.15.65.55.65.75.96.26.46.66.87.07.27.4Equals:Personalincome84.946.972.477.895.3122.4150.7164.4169.8177.3189.8208.5205.6226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8801.3859.1942.51,052.41,153.31,249.71,375.41,109.71,136.81,172.51,194.11, 203.11,230.31, 265. 51,299.71,331.31, 362.01, 386. 01,422.1Source: Department of Commerce, Bureau of Economic Analysis.207

TABLE B-19.—National income by type of income, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year orquarter192919331939..19401941.194219431944..1945.. .19461947..19481949195019511952..195319541955..1956195719581959..1960 .1961196219631964 .19651966 .19671968.. ..196919701971..19721973..197419751976*»1974: 1 II .illIV1975: 1 IIIllIV1976: 1 IIIllIV vNationalincomei84 839.971.379.7102.6135.7169.1181.9180.6178 3194.6219.0212.7236 2272.3285.8299.7299 1328.0346 9362.3364.0397.1412.0424.2457.4482.8519.2566.0622.2655 8714.4767.9798 4858.1951.91, 064.61,135. 71,207.61, 349.41.113.51,125.61,147.61,156.31,149.71,182.71,233.41,264.61,304.71,337.41,362.5Compensation of(Total51.129.548.152.164.885.3109.5121.2123.1118.1129.2141.4141.3154.8181.0195.7209.6208.4224.9243.5256.5258.2279.6294.9303.6325.1342.9368.0396.5439.3471.9519.8571.4609.2650.3715.1799.2875.8928.8,028.4846.3866.3888.8901.8904.0912.9935.2963.1994.4,017.2,037.5,064.5employeesWagesandsalaries50.529.046.049.962.182.1105.8116.7117.5112.0123.1135.5134.7147.0171.3185.3198.5196.8211.7228.3239.3240.5258.9271.9279.5298.0313.4336.1362.0398.4427.5469.5514.6546.5580.0633.8701.2764.5806.7890.4739.7756.7775.6786.0785.8792.8811.7836.4861.5881.1897.8921.0Supplementstowagesandsalaries20.6.52.12.32.73.23.84.55.66.06.15.96.67.89.710.411.011.613.215.217.217.720.623.024.127.129.531.834.540.944.450.356.862.770.381.498.0111.3122.1138.0106.6109.6113.3115.8118.2120.1123.5126.7132.9136.2139.6143.5Proprietors' income with inventory valuation and capitalconsumption adjustmentsTotal14.95.811.712.917.424.029.030.231.736.635.840.736.138.442.842.941.340.842.543.645.047.447.247.048.349.650.352.256.760.361.063.466.265.167.776.192.486.990.296.791.285.086.085.581.186.895.597.293.2100.396.197.1FarmTotal6.22.64.44.56.49.811.711.612.214.915.217.512.713.515.814.912.912.311.311.211.013.110.711.411.811.911.610.312.613.612.112.013.913.914.318.032.025.824.922.831.624.623.823.317.924.129.228.321.927.521.720.3Income36.32.54.44.56.510.312.212.212.615.115.618.113.414.116.615.713.712.911.911.811.813.911.612.312.712.812.511.213.514.613.213.315.415.316.020.034.228.428.627.033.926.926.426.421.427.833.132.326.131.725.924.5Capitalconsumptionadjustment-0.1.1-.0—.0-.0-.5-.5-.6-.4—.2-.6-.7-.8-.8-.7-.6-.6-.6— 8-.8-.9-.9-.9-1.0-.9-1.0-.9-1.0-1.2-1.3-1.4-1.4-1.7-2.0-2.2-2.6-3.8-4.2-2.3-2.3-2.6-3.1-3.5-3.7-3.9-4.1-4.2-4.2-4.2-4.2NonfarmTotal8.83.27.38.410.914.317.318.619.421.620.623.223.524.927.028.028.428.531.232.433.934.336.635.636.437.738.742.044.146.748.951.452.351.253.458.160.461.165.373.859.660.462.262.263.262.766.369.071.472.874.476.8Income*8.83.97.68.611.714.417.118.319.323.321.823.122.225.126.426.927.627.630.531.833.133.235.334.235.336.437.240.242.745.347.550.451.350.752.856.460.363.165.274.160.761.865.464.663.062.366.169.271.173.274.677.5Inventoryvaluationadjustment0.1-.5-.2-.0-.6-.4-.2-.1-.1-1 7-1.5-.4.5-1.1-.3.2_o-.0-.2-.5-.3-.1-.1.1-.1-.0-.0—.0-.2-.3-.3-.4-.5-.5-.4-.7-1.7-3.6-1.1-1.2-2.8-3.0-4.8-3.9-1.3-.9-1.1-1.2-.7-1.3-1.2-1.7Capitalconsumptionadjustment-0.2-.2-.1jY.2.3.4.2.0.4.5.8.9.9.9.91 01 01 11 ?1 11 31 ?1 61 8.6fi540.1) 5.8.6 3.97.6.6L.61.5L.4L.21.0.9.9.9.9See footnotes at end of table.208

TABLE B-19.—National income by type of income,[Billions of dollars; quarterly data at seasonally adjusted annual rates]1929-76—ContinuedYear orquarterRental i ncome of personswith capitalconsumptionadjustmentTotalTotalCorporate profits with inventory valuation and capital consumptionadjustmentsProfits with inventory valuation adjustment and withoutcapital consumption adjustmentTotalTotalProfitstaxliabilityProfits before taxTotalProfits after taxCapitalRental con-income sump-tion ofpersons adjustmentDividendsUndistributedprofitsInventorytionadjustmentCapitalconsumptionadjustmentNetinterest19294.95.7-0.89.210.510.01.48.65.82.80.5-1.34.719332.22.3-.1-1.7-1.21.0.5.42.0-1.6-2.1-.54.119392.63.1-.65.36.37.01.45.63.81.8-.7-1.03.61940. ..1941194219431944....1945194619471948...19492.73.14.04.44.54.65.55.35.76.13.33.95.05.65.96.27.37.78.58.9-.6-.8-1.0-1.2-1.4-1.6-1.8-2.5-2.8-2.88.714.119.323.523.619.016.622.229.126.99.815.220.324.423.819.219.325.633.030.810.017.721.525.124.119.724.631.535.228.92.87.611.414.112.910.79.111.312.410.27.210.110.111.111.29.015.520.222.718.74.04.44.34.44.64.65.66.37.07.23.25.75.96.66.54.49.913.915.711.5-.2-2.5-1.2-.8-.3-.6-5.3-5.9-2.21.9-1.1-1.1-1.0-.8-.2-.1-2.7-3.4-3.9-3.83.33.33.12.72.42.2l.fi2.12.12.21950..195119521953..195419551956.1957195819597.17.78.810.011.011.311.612.212.913.210.011.012.213.414.414.815.215.916.717.3-2.9-3.3-3.4-3.4-3.3-3.5-3.6-3.6-3.8-4.033.738.135.435.534.644.642.942.137.548.237.642.739.839.537.846.745.945.440.851.242.643.938.940.538.148.448.646.941.151.617.922.619.420.317.622.022.021.419.023.624.721.319.520.220.526.426.625.522.128.08.88.58.58.89.110.311.111.511.312.215.912.811.011.511.416.115.514.010.815.8-5.0-1.21.0-1.0-.3-1.7-2.7-1.5-.3-.5-4.0-4.6-4.5-4.1-3.2-2.1-3.0-3.3-3.4-2.92.3?J3.03.44.34.85.26.58.08.819601961196219631964196519661967 . .1968196913.814.315.015.716 117.118 219.418.618.117.818.319.019.620.121.022.123.423.824.8-4.1-4.0-4.0-3.9-4.0-3.9-3.9-4.0-5.2-6.746.646.954.959.667.077.182.579.385.881.448.948.753.757.664.273.378.675.682.177.948.548.653.657.764.775.280.777.385.683.422.722.824.026.228.030.933.732.539.439.725.825.829.631.536.744.347.144.946.243.812.913.314.415.517.319.119.420.121.922.613.012.515.216.019.425.227.624.724.221.2.3.1.1-.2-.5-1.9-2.1-1.7-3.4-5.5-2.3-1.81.22.12.83.83.93.73.73.59.811.?1?.R14.315.918.521.924.326.830.81970197119721973197419751976*..—18.620.121.521.621.022.423.525.827.729.431.333.337.040.5-7.1-7.6-7.9-9.8-12.3-14.6-17.067.977.292.199.184.891.6118.766.476.989.697.287.8103.171.582.096.2115.8127.6114.534.537.741.548.752.449.264.737.044.354.667.175.265.322.923.024.627.830.832.135.114.121.330.039.344.433.2-5.1-5.0-6.6-18.6-39.8-11.41.5.32.51.9-3.0-11.537.547.847.052.367.174.682.11974:1....II...III...IV...20.920.621.021.532.432.633.534.6-11.5-12.0-12.5-13.195.787.881.774.195.989.785.280.4126.3126.4138.6119.250.553.057.648.675.873.381.070.629.930.731.331.145.942.649.739.5-30.4-36.6-53.4-38.8-.2-1.9-3.5-6.359.465.970.073.21975:1....II...III...IV...21.922.322.422.935.636.637.338.4-13.6-14.2-14.9-15.569.086.6105.3105.677.797.9117.9119.194.2105.8126.9131.340.244.854.857.254.061.072.174.131.731.932.632.222.329.139.541.9-16.5-7.8-9.0-12.3-8.6-11.4-12.6-13.573.774.074.975.81976:1....II...Ml...IV p.23.323.123.424.339.639.640.642.1-16.3-16.5-17.2-17.8115.1116.4122.0129.6131.8137.6141.1146.2150.261.463.565.179.782.785.133.134.435.437.746.648.349.7-11.5-14.4-12.6-14.5-15.4-15.778.680.383.586.01 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.8 With inventory valuation adjustment and without capital consumption adjustment.4 Without inventory valuation and capital consumption adjustments.Source: Department of Commerce, Bureau of Economic Analysis.209

TABLE B-20.—Sources of personal income, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year or quarter19291933.1939194019411942194319441945194619471948194919501951195219531954195519561957195819591960196119621963196419651966.1967196819691970197119721973197419751976 v1974: I...II...III..IV..1975: I...II.ML.IV..1976: I...II...II!IV*Personalincome84.946.972.477.895.3122.4150.7164.4169.8177.3189.8208.5205.6226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8801.3859.1942.51, 052. 41,153.31, 249. 71,375.41,109. 71,136.81,172.51,194.11, 203.11, 230. 31, 265. 51, 299. 71,331.31, 362.01, 386. 01,422.1Wage and salary disbursements*Total50.529.046.049.962.182.1105.6116.9117.5112.0123.1135.5134.8147.0171.3185.4198.6196.8211.7228.3239.3240.5258.9271.9279.5298.0313.4336.1362.0398.4427.5469.5514.6546.5579.4633.8701.3765.0806.7890.4739.7757.3777.1786.0785.8792.8811.7836.4861.5881.1897.8921.0CommodityproducingindustriesTotal21.59.817.419.727.539.149.050.445.946.054.260.957.764.676.181.989.485.592.9106.4104.099.8109.3112.9113.4121.5126.6135.1145.7160.7168.0183.0199.1202.5207.8226.7253.5273.9275.3304.8266.6271.9278.8278.1269.9269.1276.2285.8295.3302.9307.0314.0Manufacturing16.17.813.615.621.730.940.942.938.236.542.547.144.650.359.364.171.267.573.879.482.478.686.889.789.896.7100.6107.1115.5128.0134.1145.8157.5158.2160.3175.4196.2211.4211.7237.0205.2209.6215.6215.2206.8206.9212.5220.3229.6235.6238.9243.8Distributiveindustries15.68.813.314.216.318.020.122.724.831.035.237.537.739.844.346.949.750.153.457.760.560.864.868.269.372.876.381.487.294.4100.9109.9120.7130.1139.3151.9168.1184.4195.6214.9178.0183.0187.3189.3191.0192.5196.8202.3208.3212.8216.5221.8Serviceindustries8.45.27.17.58.19.09.910.911.914.316.118.018.620.021.723.325.026.328.831.533.835.838.841.744.447.550.654.759.265.072.280.289.997.9106.8117.9131.0145.9159.9180.0139.6143.7148.3151.8154.8157.4161.3166.1172.4176.7182.7188.3Governmentandgovernmententerprises5.05.28.28.510.216.026.633.034.920.717.519.020.822.629.233.334.434.936.638.841.044.146.049.252.456.360.064.969.978.386.496.4104.9116.0125.6137.3148.6160.9175.8190.7155.5158.7162.7166.7170.0173.8177.3182.2185.4188.7191.7197.0Otherlaborincomei0.5.4.6.6.7.91.11.51.82.02.42.72.93.74.65.25.96.17.08.09.09.410.611.211.813.014.015.717.819.921.725.128.232.036.242.048.755.562.570.152.654.556.458.560.061.463.365.267.169.071.173.2Proprietors' incomewith inventoryvaluation andcapital consumptionadjustmentsFarm6.22.64.44.56.49.811.711.612.214.915.217.512.713.515.814.912.912.311.311.211.013.110.711.411.811.911.610.312.613.612.112.013.913.914.318.032.025.824.922.831.624.623.823.317.924.129.228.321.927.521.720.3Nonfarm3.27.38.410.914.317.318.619.421.620.623.223.524.927.028.028.428.531.232.433.934.336.635.636.437.738.742.044.146.748.951.452.351.253.458.160.461.165.373.859.660.462.262.263.262.766.369.071.472.874.476.8See footnotes at end of table.210

Year orquarter192919331939....1940194119421943194419451946....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....19741975....1976 P. ..1974:1..II.III.IV.1975: L.II..ill.IV.1976: L.II..III.IV v4.92.22.62.73.14 04.44.54.65.55.35.76.17.17.78.810.011.011.311.612.212.913.213.814.315.015.716.117.118.219.418.618.118.620.121.521.621.022.423.520.920.621.021.521.922.322.422.923.323.123.424.3TABLE B-20.—Sources of personal income, 1929-76—Continued5.82.03.84.04.44.34.44.64.65.66.37.07.28.88.58.58.89.110.311.111.511.312.212.913.314.415.517.319.119.420.121.922.622.923.024.627.830.832.135.129.930.731.331.131.731.932.632.233.134.435.437.7(Billions of dollars; quarterly data at seasonally adjusted annual rates]Personalinterestincome6.95.55.45.35.35.25.15.25.96.47.37.78.28.99.610.311.412.713.815.317.418.820.923.324.627.130.233.337.241.845.049.655.964.369.374.684.1101.4110.7123.192.999.7104.8108.2108.2109.0111.0114.4118.0120.7125.0128.7Total1.52.13.03.13.13.13.03.66.211.311.711.312.515.212.613.114.116.217.518.721.625.927.028.932.833.835.837.440.444.752.659.966.579.994.1104.1118.9140.3175.2191.3128.8136.3144.2151.8163.7175.5179.1182.5188.6187.6192.4196.6Old age,survivors,disability,and healthinsurancebenefits0.0.0.1.1\l.3.4.5.6.71.01.92.23.03.64.95.77.38.510.211.112.614.315.216.018.119.825.530.232.938.544.549.660.470.181.493.063.769.172.675.076.777.884.786.388.189.595.898.4Transfer paymentsRentalincomeof personswithcapitalconsumptionadjustmentDividendsGovernmentunemploymentinsurancebenefits0.4.5l!l.8.91.91.5.91.11.02.21.51.51.94.12.83.04.33.13.02.72.31.92.22.12.24.05.85.64.36.617.315.65.46.16.68.515.018.118.417.717.715.314.714.70.6.6.5.5.5.5.51.03.07.07.05.95.37.74.64.34.14.24.44.44.54.74.64.65.04.74.84.74.94.95.65.96.77.78.89.710.411.814.515.010.811.012.113.514.613.914.215.016.014.714.414.9VeteransbenefitsGovernmentemployeeretirementbenefits0.1.2.3.3.3.3.4.4.5.7.7.7.91.01.11.21.41.51.71.92.22.52.83.13.43.74.24.75.26.16.97.78.610.111.713.515.618.622.125.017.518.019.119.921.021.622.423.323.824.925.525.9Aid tofamilieswith dependentchildren(AFDC)o.81 41 71 71 81 81 R2.n22.'4.5.6.6.5'.6.6.6.7.8.91.01.11.31.41.51.71.92.32.83.54.86.26.97.27.99.29.87.57.78.18.48.79.09.49.79.89.79.910.0Other012.52.93.33.53.63.84.14.14.34.54.95.35.86.26.46.77.37.88.310.210.211.112.514.917.218.921.025.230.832.923.924.525.726.627.735.130.030.533.233.432.232.60.1.2.6.7.81.21.82.22.32.02.12.22.22.93.43.84.04.65.25.86.76.97.99.39.710.311.812.613.317.820.622.826.3Less:PersonalcontributionsforsocialinsuranceNonfarmpersonalincome2159.6171.5187.7189.9209.3234.3252.4269.0272.6294.7316.4335.0342.9367.7384.4399.0424.5447.0480.7519.5566.1609.1667.5725.828.0 780.730.8 838.034.2 ! 917.342.2 1,011.947.6 1,117.350.0 1,213.454.9 1,340.146.4 ' 1,068.447.3 1,102.248.2 1,138.548.5 1 1,160.149.4 11,174.049.5 1,195.250.1 1,224.951.0 , 1,259.753.4 11,297.754.3 1,322.455.2 1,351.756.6 1,388.6* The total of wage and salary disbursements and other labor income differs from compensation of employees in Table6-19 in that it excludes employer contributions for social insurance and the excess of wage accruals over wage disbursements.2 Personal income exclusive of farm proprietors' income, farm wages, farm other labor income, and agricultural neti nterest.Source: Department of Commerce, Bureau of Economic Analysis.211

TABLE B-21.—Disposition of personal income, 1929-76(Billions of dollars; quarterly data at seasonally adjusted annual rates, except as noted]Year orquarter19291933193919401941.. ..194219431944.194519461947.1948194919501951 . .1952.. ..19531954.195519561957.. ..19581959..19601961196219631964196519661967.. .196819691970197119721973197419751976 v1974:1....II....III...IV...1975:1....II.—III...IV...1976: 1 II....III...IV*>_.Personalincome84.946.972.477.895.3122.4150.7164.4169.8177.3189.8208.5205.6226.1253.7270.4286.1288.2308.8330.9349.3359.3382.1399.7415.0440.7463.1495.7537.0584.9626.6685.2745.8801.3859.1942.51, 052.41,153.31, 249.71, 375.41,109.71,136.81,172.51,194.11,203.1l f 230. 31,265. 51, 299.71,331.31, 362. 01, 386.01, 422.1Less:Personaltaxandnontaxpayments2.61.42.42.63.35.917 818.920.818 721.421.018.520 628.934.035.532.535.439.742.442.146.050.452.156.860.358.664.974.582.197.1115.4115.3116.3141.2150.8170.4168.8193.6161.3167.4174.5178.3179.3142.2174.0179.8183.8189.5195.8205.3Equals:Disposablepersonalincome82.345.569.975.292.0116.5132.9145.5149.0158.6168.4187.4187.1205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4685.9742.8801.3901.7982.91, 080.91,181.8948.4969.5998.01,015.81,023.81, 088.21,091.51,119.91,147.61,172.51,190.21,216.9Less: Personal outlaysTotal79.146.567.872.081.889.4100.1109.0120.4145.2163.5176.9180.4194.7210.0220.4233.7240.1258.5271.6286.4295.4317.3332.3342.7363.5384.0410.9441.9477.4503.7550.1595.3635.4685.5751.9831.3910.7996.91,104.0875.8901.6930.4935.0956.7983.61,011.11, 036.21, 068.01, 089.61,114.31,144. 0Personalconsumptionexpenditures77.345.867.071.080.888.699.4108.2119.5143.8161.7174.7178.1192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7618.8668.2733.0809.9887.5973.21,078.6853.3878.7906.8911.1933.2960.3987.31,012.01,043.61,064.71, 088.51,117.5Interestpaid byconsumerstobusiness1.5.5.7.8.9.5.5.5.71.01.41.72.32.52.93.63.84.45.15.55.66.17.07.37.88.89.911.112.012.513.314.715.516.217.920.222.222.824.421.421.922.622.922.522.422.823.323.423.924.825.5Personaltransferpaymentsto foreigners(net)0.3.2.2.2.2.1.2.4.5.7< .7.7.5.4.4.4.5.5.5.5.4.4.4.4.5.6.6.7.6.9.8.91.11.11.01.31.0.91.11.11.01.01.0.9.9.9.91.01.01.11.1Equals:Personalsaving3.1-1.02.13.310.227.032.736.528.513.44.910.66.710.814.816.017.015.614.919.720.621.718.817.120.220.418.826.130.333.040.938.135.150.657.349.470.372.284.077.872.667.867.680.867.2104.580.583.779.582.975.872.9Percent of disposablepersonal incomePersonaloutlaysTotal96.2102.297.095.688.976.875.474.980.891.597.194.396.494.793.493.293.293.994.693.293.393.294.495.194.494.795.394.093.693.592.593.594.492.692.393.892,292.792.293.492.393.093.292.093.490.492.692.593.192.993.694.0Consumptionexpenditures93.9100.795.894.387.776.174.874.480.290.696.193.295.293.492.191.891.692.292.891.391.491.392.593.092.392.593.091.691.191.190.091.192.090.290.091.589.890.390.091.390.090.690.989.791.288.290.590.490.990.891.591.8Personalsaving3.8-2.23.04.411.123.224.625.119.28.52.95.73.65.36.66.86.86.15.46.86.76.85.64.95.65.34.76.06.46.57.56.55.67.47.76.27.87.37.86.67.77.06.88.06.69.67.47.56.97.16.46.0Source: Department of Commerce, Bureau of Economic Analysis.212

TABLE B-22.—Total and per capita disposable personal income and personal consumption expendituresin current and 1972 dollars, 1929-76[Quarterly data at seasonally adjusted annual rates, except as noted]Disposable personal incomePersonal consumption expendituresYear or quarterTotal (billionsof dollars)Per capita(dollars)Total (billionsof dollars)Per capita(dollars)Population(thousands)lCurrentdollars1972dollarsCurrentdollars1972dollarsCurrentdollars1972dollarsCurrentdollars1972dollars1929..82.3229.86751,88677.3215.66341,769121, 8751933..45.5169.73621,35045.8170.73641,358125.6901939-69.9230.15341,75667.0220.35111, 681131, 0281940..1941..1942..1943..1944..1945..1946..1947-1948-1949-1950..1951-1952..1953..1954..1955..1956..1957-1958..1959..75.292.0116.5132.9145.5149.0158.6168.4187.4187.1205.5224.8236.4250.7255.7273.4291.3306.9317.1336.1244.3278.1317.3332.2343.9338.6332.4318.8335.5336.1361.9371.6382.1397.5402.1425.9444.9453.9459.0477.45706908639721,0511,0651,1221,1681,2781,2541,3551,4571,5061,5711,5741,6541,7311,7921,8211,8981,8492,0842,3532,4292,4852,4202,3512,2122,2882,2532,3862,4082,4342,4912,4762,5772,6432,6502,6362,69671.080.888.699.4108.2119.5143.8161.7174.7178.1192.0207.1217.1229.7235.8253.7266.0280.4289.5310.8230.4244.1241.7248.7255.7271.4301.4306.2312.8320.0338.1342.3350.9364.2370.9395.1406.3414.7419.0441.55376056577277818541,0171,1221,1921,1941,2661,3421,3831,4391,4521,5351,5811,6371,6621,7551,7441,8301,7921,8191,8471,9392,1312,1242,1332,1452,2292,2192,2362,2832,2842,3912,4152,4212,4062,493132,122133, 402134, 860136, 739138, 397139,928141,389144,126146, 631149,188151, 684154,287156,954159, 565162,391165,275168,221171, 274174,141177,073I960..1961_.1962..1963..1964..1965..1966.1967.1968.1969.1970...1971...1972...1973...1974...1975...1976 P..1974:1II-III.IV..349.4362.9383.9402.8437.0472.2510.4544.5588.1630.4685.9742.8801.3901.7982.91,080.91,181.8948.4969.5998.01,015.8487.3500.6521.6539.2577.3612.4643.6669.8695.2712.3741.6769.0801.3854.7840.8855.5890.7846.7840.6841.7834.01,9341,9762,0582,1282,2782,4302,5972,7402 9303,1113,3483,5883,8374,2854,6395,0625,4944,4874,5794,7054,7792,6972,7252,7962,8493,0093,1523,2743,3713,4643,5153,6193 7143,8374,0623,9684,0074,1414,0063,9703,9683,923324.9335.0355.2374.6400.4430.2464.8490.4535.9579.7618.8668.2733.0809.9887.5973.21,078.6853.3878.7906.8911.1453.0462.2482.9501.4528.7558.1586.1603.2633.4655.4668.9691.9733.0767.7759.1770.3812.9761.8761.9764.7748.11,7981,8241,9041,9792,0872,2142,3652,4682,6702,8603,0203,2273,5103,8494,1884,5585,0144,0374,1514,2754,2862,5072,5162,5892,6492,7552,8722,9823,0353,1563,2343,2653,3423,5103,6483,5823,6083,7793,6043,5993,6053,519180, 671183.691186,538189,242191,889194,303196,560198,712200,706202,677204,878207,053208, 846210,410211,901213, 540215,118211,361211, 705212,134212, 5781975:1—II..111.IV..1, 023. 8"., 088.2., 091.5,119.9827.9869.7857.1867.54,8095,1025,1055,2273,8894,0784,0094,049933.2960.3987.31,012.0754.6767.5775.3783.94,3834,5034,6184,7243,5453,5993,6263,659212, 897213, 278213, 805214, 2451976:1..II.IV *,147.6, 172.5, 190.21,216.9880.4890.5892.0900.25,3475,4555,5265,6394,1034,1434,1424,1711,043.61, 064.71, 088. 51,117.5800.7808.6815.7826.64,8634,9545,0545,1783,7313,7623,7883,830214, 599214,926215, 355215, 805» Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning 1960. Annualdata are for July 1; quarterly data are for middle of period, interpolated from monthly data.Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).213

19291933Year orquarter1939...19401941194219431944194519461947194819491950195119521953195419551956 . ...1957195819591960196119621963196419651966196719681969197019711972197319741975 ..1976P1974: 1in".".".".IV....1975: 1II....III....IV....1976: 1IIIII....Total15.9.98 713.518.510.55.32.35.134 641.249 034.849.755.549 348.149 465.673.672.660 475.878 975 883 689 6100 1115.4122.9120 3130 8147 5143.4155 4177.5216.8205.3191.2231.9213.0206.5200.0201.7172.1180.2204.6208.0222.1234.2234.2TABLE B-23.—Gross saving and investment, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Gross private savingTotal14.92.210.914.222.241.949.454.144.629.226.840.638.241.649.453 155.056 562.468.471.773.077.375.880.087.488.9102.4114.9124.2134.6136 3136.8151.9173.0180.4210. 5211.6255.6276.4216.4206.4201.0222.4217.0273.2262.7269.4273.8279.1278.9273.6Personalsaving3.1-1.02.13.310.227.032.736.528.513 44.910 66.710.814.816 017.015 614.919.720.621 718.817 120.220 418 826 130.333.040 938 135.150.657 349.470.372.284.077.872.667.867.680.867.2104.580.583.779.582.975.872.9Gross savingGrossbusinesssaving*11.73.28.810.912.014.816.717.716.015.821.830.031.430.834.637.138.041 047.548.751.151.358.558.759.867 070.176.284.691.293.798 2101.7101.4115 7131.0140.2139.4171.6198.6143.8138.6133.4141.6149.8168.7182.2185.7194.3'96. 2203.1Government surplus ordeficit (-), nationalincome and productaccountsTotal1.0-1.4-2.2-.7-3.8-31.4-44.1-51.8-39.55.414.48.4-3.48.06.1-3.8-6.9-7.13.15.2.9-12.6-1.63.1-4.3-3.8.7-2.3.5-1.3-14.2-5.510.7-9.4-18.3-3.56.3-4.2-64.4-44.54.7-l'.O-20.8-45.0-92.9-58.1-61.5-51.6-44.9-44.71.2-1.3-2.2-1.3-5.1-33.1-46.6-54.5-42.13.513.48.3-2.69.26.5-3.7-7.1-6.04.46.12.3-10.3-1.13.0-3.9-4.2.3-3.3-13.2-5.88.5-12.1-22.0-17.3-6.7-11.5—71.2-58.3-4.1-7.6-9.0-25.3-49.8-99.9-66.0-69.4—63.8-54.1-57.4Stateandlocal-0.2-.1.0.61.31.82.52.72.61.91.0-.7-1.2-.0.1-1.1-1.3-.9-1.4-2.4-.4.1-.4.5.51.0-.0-1.132.12.83.713.713.07.36.913.98.77.88.04.54.76.97.97.912.29.212.7Capitalgrantsreceivedby theUnitedStates,(net) 2FederalGross investmentGrossprivateTotal domesticinvestment17.0 16.21.6 1.410.1 9 314.6 13.119.0 17.99.7 9.93.5 5.85.1 7.29.2 10.635.3 30 742.9 34.047.8 45 935.9 35.351.7 53.859.5 59.251.9 52 151.4 53.352.4 52 768.0 68.472.8 71.072.8 69.262.0 61.975.5 77.678.2 76.477.3 74.387.6 85.293.4 90.2102.3 96.6116.3 112.0126.1 124.5122.1 120.8130.2 131.5144.2 146.2141.4 140.8156.8 160.0179.2 188.3219.4 220.0211.9 215.0195.6 183.7239.5 241.2215.4 216.4213.6 218.8207.7 213.3211.0 211.5.0 178.5 172.4.0 180.3 164.4.0 209.8 196.7.0 214.0 201.4.0 229.4 229.6.0 240.0 239.2.0 242.9 247.0.0 245.8 249.00.9.7.7.04-2.0.0.04-8.0.0.0.0Netforeigninvestment30.8.2.91.51.1-1.1-2.1-1.44.69.02.0.6-2.12-1.9_ 3~L83.6-2.01.73.02.43.25.74.31.61.2-1.4-2.0.5-3.2-9.0-.6-3.011.9-1.7-1.0-5.2-5.6-.56.115.913.112.6-.2.8-4.1-3.2Statisticaldiscrepancy1.1.71 41.1-.8-1.82.74.1.71.8-1 21.02.04.02 73.33 02.5 g21 711.64 03.72.2.93.21.7— 6-3.3-2.11 31.72.66.64.47.611 Undistributed corporate profits with inventory valuation and capital consumption adjustments, corporate and noncorporatecapital consumption allowances with capital consumption adjustment, and private wage accruals less disbursements.2 Allocations of special drawing rights (SDR), except as noted in footnote 4.3 Net exports of goods and services less net transfers to foreigners and interest paid by government to foreigners pluscapital grants received by the United States, net.< In February 1974, the U.S. Government paid to India $2,010 million (quarterly rate) in rupees under provisions of theAgricultural Trade Development and Assistance Act. This transaction is being treated as capita! grants paid to foreigners,and is included in the first quarter of 1974 as—$8.0 (annual rate) in capital grants received by the United States.Source: Department of Commerce, Bureau of Economic Analysis.2142.47.17.79.36.45*.l6.17.25.88.7

TABLE B-24.—Saving by individuals, 1946-76 l[Billions of dollars; quarterly data at seasonally adjusted annual rates]Increase in financial assetsNet investment inLess:Increase innet debtYear orquarterTotalTotal 2SecuritiesCurrencyanddemanddepositsSavingsaccountsGovernmentsecurities'CorporateandforeignbondsCorporateequities'Insuranceandpensionreserves( 5 )NonfarmhomesConsumerdurablesNoncorporatebusinessassetsMortgagedebtonnonfarmhomesConsumercreditOtherdebt*194619471948194919501951195219531954195519561957195819591960196119621963196419651966196719681969 . .1970197119721973197419751975: 1IIlitIV1976: 1II . .IN. ..16.520 618.714.319.126.325.626.724.329.732.631.830.533.330.730.935 740.048.755.062.964.267.657.974.791.5102.0121.7115.3131.2108.7149.1134.5132.9135.2131.2123.918.913.29.09.913.719.1?3 1??.622.1?7.930.028.631.637.131.935.839 646 555.258.459.467.973.261.578.7104.4127.6143.0137.7167.8134.8187.2163.9185.9176.4180.1182.7f5.6-2.9-2.02.64.61.61.02.21.21.8-.43.8.81.0-.9-1.2-.54.97.52.49.911.12.58.99.114.812.75.16.9-14.840.811.5-10.08.9-1.43.86.33.4?.?2.6?.54.87.88 ?9.28 69.512.013.911.1]?.]18.326.226.326.228.019.135.331.19.143.667.871.067.957.984.980.683.174.5101.587.279.2112.5-1.41.61.31.8^-.1-.62.52.51.05.83.92.3-2.59.13.31.91.36.45.44.011.0-.65.619.9-8.9-10.71.723.518.314.4-4.99.428.524.513.927.610.8-0.9-.8-.1-.4-.8.2-.0-.1-.9.71.0.91.2.4.7-.1 4.1-.5.51.44.04.25.49.58.34.2.95.310.415.012.18.56.02.39.72.31.11.11.0.7.71.81.61.0.81.02.01.51.5.6-.5-2'.1-2.5-.1-2.1-.7-4.2-6.5-4.5-.8-3.7-4.5-6.9-1.2-1.8-4.21.4-3.7-.6-7.73.8-7.95.35.45.35.66.96.37.77.97.88.59.59.510.411.911.512.112 713.916.116.919.219.020.221.324.427.329.232.836.043.740.041.843.550.252.648.849.1-3.09.76.36.88.311.011.812.113.216.115.513.312.515.414.112.512.613.613.613.512.012.013.913.812.418.925.927.923.220.418.218.521.024.029.432.535,15.87 36.96.79.34.93.04.73.58.04.63.3.44.03.3.94 56.98.812.012.910.214.413.77.913.921.525.411.18.13.55.010.413.419.218.817.81.277.1.64.13.11.9.91.42.8.72.12 13.83.23.16 48.47.911 29.77.99 311.08.813.017.219.43.3-2.4-2.0-4.4-1.8-1.5.5-4.5-6.23.64 74.64.4fi,76.66.67.59 111.711.29.09 812 411.612.613 916.417.217 113.413.416 818.214.727.141.547.035.339.428.538.542.248.251.553.260.62.73 22.92 94.11 24.83.91 l6.43.52 6?6 44.61.85 8i. 98.59 66.44.510 010.45.911.618.621.79.88.5.91.314.317.718.120.619.20.12 53.22 45.43 9? 82.35 77.03.54.06 28 05.66.97 611.111.113 511.415.816 413.51 Saving by households, personal trust funds, nonprofit institutions, farms, and other noncorporate business.2 Includes commercial paper and miscellaneous financial assets, not shown separately.3 Consists of U.S. savings bonds, other U.S. Treasury securities, U.S. Government agency securities and sponsoredagency securities, and State and local obligations.4 Includes investment company shares.6 Private life insurance reserves, private insured and noninsured pension reserves, and government insurance andpension reserves.6 Security credit, policy loans, noncorporate business mortgage debt, and other debt.Source: Board of Governors of the Federal Reserve System.12.519.930.225.415.014.816.417.42.423.120.721.825.6215

TABLE B~25.- -Number and money income {in 1975 dollars) ojfamilies and unrelated individualsby race of head, 1947-75YearFAMILIES19471948194919501951195219531954195519561957. ....1958195919601961 . .. .1962196319641965.196619671968196919701971197219731974197421975.37 238.639.339.940 640.841.242 042.943.543.744.245.145.546.447.147.548.048.549.250.150.851.652.253.354.455.155.755.756.2UNRELATEDINDIVIDUALS19478.219488.419499.019509.419519.119529.719539.519549 719559 919569.8195710 4195810.9195910.91960Ul.l1961U1.21962U1.01963111.21964 . . .. U2.11965112.21966U2.51967113.21968U3.91969114.61970U5.5197116.31972 . .16.8197318.3197418.919742..18.9197520.2TotalMedianincome$7, 3037,1267,0167,4227 6847,8888,5368 3458,8819,4669,4969,46910, 00310,21410,31810, 59710, 98411,39811,86712, 49112,78813,35413, 84913,67613, 66814,30114, 59514, 00914, 08213,719$2, 3622,2282,3702,3362 4752,8582,8092 4472 6482,8232 8562,7662,8753,1263,1553,1193,1653,4413,6723,7983,8354,3104,3034,3484,4074,5305,0074,8455,0254,882Percent withincomesTotalnumber(milions)Below$5,00029 330.531.829.427.025.523.925 322.920.921.221.320.119.719.718.417.516.615.613.613.311.811.412.011.911.210.811.511.112.0Below$3, 00058.260.057.256.854 651.851.955 954 452 151 652.551.649.349.049.348.746.343.642.542.238.237.937.436.434.330.731.229.829.7Belowpovertylevel18.518.118.117.215.915.013.911 811.410.09.710.110.09.38.89.28.89.7Belowpovertylevel46.145.245.945.444.242.739.838.338.134.034.032.931.629.025.625.524.125.134 135 338 239 039 539.740.240.941.141.942.442.743.143.544 144.845.446.046.547.648.548.949.549.449.97.27.38.38 58.58 99.29.39.69.69.59.710.410.510.711.312.012.513.414.214.515.816.316.317.5WhiteMedianincome$7 6081 4007'2967 7027 9968'3438* 8518 6879 2719 9069 8829 86610, 42010, 60410, 76011,09811,51111,90012,37012 97713,27313, 82614, 37914,18814,18214, 85815,25414, 57714,63314,268$2, 4952,3542,5592,4922 6063,0792 9642 6342 8152 8983 0552,9643,0723 3803,3923,3373,3183,6243,8303,9943,9824,5674,5194,5514,6054,7315,1725,0605,2055,099Percent withincomesTotalnumber(millions)Below$5,00026 027 428 826 523 922 221 422 820 318 118 418.517.217.217.115.914.914.513.511 811.610.29.910.310.39.59.19.69.210.2Below$3, 00056.158.355.155.253.549.350.454.052 351.249 850.649.747.246.646.947.044.742.240.640.736 636.235.734.532.6?9.029.027.827.4Belowpovertylevel15.214.914.813.912.812.211.19 39.08.07.78.07.97.16.67.06.87.7Belowpovertylevel44.143.043.242.742.040.738.136.136.532.232.130.829.627.123.723.221.822.7Black and other race s3 13 33 83 94 04 04.04.24.34.54.64.84.84.85 05.05.15.25.45.75.96.16.36.36.41.01.01.41.41.31.51.61.61.51.61.51.51.61.71.61.81.82.01.92.12.32.52.62.62.7Medianincome$3 8883'9533 7264 1784 2104 7414 9624 8395 1135' 2115 2845,0545,3825,8715,7415,9216,0906,6606,8127 7808,2128,6489,0899,0328,9239,1429,2009,0209,3619,321$1,7981,7641,8501,8261,9252,1302,3311,7491,8802,1521,9412,0101,9841,9402,0822,2282,2772,4832,7922,5112,9423,0933,1863,1093,0903,5143,8653,4373,6383,528Percent withincomesTotalnumber(millions)Below$5,00064 363 465 960 459 353 450 551 449 148 248 149 847.143.444.541.840.935.834.530 028.926.025.026.026.126.125.126.625.726.3Below$3, 00072.371.869.567.561.266.359.265.666.457.562.863.863.462.863.363.560.456.052.755.251.249.048.349.149.244.541.444.942.644.4Belowpovertylevel50.449.049.048.043.740.039.733 932.128.226.928.127.427.726.226.025.125.3Belowpovertylevel1 Revised using population controls based on the 1970 Census. Such controls 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. Thatindex reflects different consumption requirements for families based on size and composition, sex and age of family head,and farm-nonfarm residence. The poverty threshold is updated every year to reflect changes in the consumer price index.For further details, see "Current Population Reports," Series P-60, No. 103, Bureau of the Census.Source: Department of Commerce, Bureau of the Census.21657.459. 362.762.158 355.050.753.148.245.745.546.744.940.937.840.038.040.9

POPULATION, EMPLOYMENT, WAGES, ANDPRODUCTIVITYTABLE B-26.—Population by age groups, 1929-76[Thousands of persons]Age (years)July 1TotalUnder 55-1516-1920-2425-4445-6465 andover1929121,76711,734x 26,8009,12710, 69435, 86221, 0766,4741933 .125, 57910,61226, 8979,30211,15237, 31922,9337,3631939130, 88010,41825,1799,82211,51939, 35425, 8238,76419401941194219431944132,122133, 402134, 860136, 739138, 39710, 57910,85011,30112,01612, 52424,81124, 51624, 23124, 09323,9499,8959,8409,7309,6079,56111,69011,80711,95512, 06412,06239, 86840, 38340,86141,42042, 01626, 24926,71827,19627, 67128,1389,0319,2889,5849,86710,147194519461947 . . . .19481949139,928141 389144,126146 631149,18812,97913, 24414,40614 91915, 60723, 90724,10324,46825 20925, 8529,3619,1199,0978 9528,78812,03612, 00411,81411,79411,70042, 52143, 02743,65744, 28844,91628, 63029, 06429,49829, 93130, 40510, 49410,82811,18511,53811,921195019511952 ..19531954152,271154 878157, 553160 184163, 02616,41017,33317,31217, 63818, 05726, 72127, 27928, 89430 22731, 4808,5428,4468,4148 4608,63711,68011,55211,35011,06210,83245, 67246,10346, 49546, 78647, 00130. 84931,36231,88432, 39432, 94212,39712,80313, 20313,61714, 07619551956195719581959 .165 931168 903171, 984174 882177, 83018, 56619, 00319, 49419, 88720,17532, 68233, 99435, 27236, 44537, 3688 7448,9169,1959,54310,21510,71410,61610,60310,75610, 96947,19447, 37947, 44047, 33747,19233, 50634, 05734, 59135,10935, 66314,52514,93815,38815, 80616, 2481960 .1961....19621963 _._1964180,671183,691186 538189, 242191,88920, 34120,52220, 46920, 34220,16538, 49439,76541,20541,62642,29710,68311,02511,18012,00712,73611,13411,48311,95912,71413, 26947,14047, 08447,01346, 99446, 95836,20336,72237,25537, 78238, 33816,67517,08917,45717,77818,127196519661967196819691970197119721973 ...197419751976194, 303196, 560198 712200, 706202,677204, 878207,053208 846210,410211,901213, 540215,11819,82419,20818, 56317,91317, 37617,14817,17716,99016, 69416, 28815, 88215, 33942, 93843,70244, 24444,62244, 84044,77444, 44143,94843,22742, 53841, 95641, 45413,51614,31114, 20014, 45214, 80015,27515,63515,94616,31016, 59016, 79316, 93413,74614,05015,24815, 78616,48017,18418,08918,03218, 34518, 74119, 22919, 63046, 91247,00147,19447,72148, 06448, 43548,81150, 25451,41152, 59353, 73355,12038,91639, 53440,19340, 84641,43741,97542,41342,78543,07743, 31943, 54243, 70718,45118,75519,07119,36519,68020 08720, 48820, 89221,34621,83322, 40522, 934Note.—Includes Armed Forces overseas beginning 1940. Includes Alaska and Hawaii beginning 1950.Source: Department of Commerce, Bureau of the Census.217

TABLE B-27.—Noninstitutional population and the labor force, 1929-76[Monthly data seasonally adjusted, except as noted]Year or monthNoninstitutionalpopulationiTotallaborforce(includingArmedForces)ArmedForces 1TotalTotalCivilian labor forceEmploymentAgriculturalNonagriculturalUnemploymentUnemploymentrate(percentofcivilianlaborforce)Laborforceparticipationrate(totallaborforce aspercentof noninstitutionalpopulation)Thousands of persons 14 years of age and overPercent192949,44026049,18047,63010,450"37,1801,5503.2193351, 84025051, 59038, 76010, 09028, 67012, 83024.9193955, 60037055, 23045, 7509,61036,1409,48017.21940..194119421943194419451946 _.1947100,380101,520102,610103,660104,630105,530106,520107, 60856,18057,53060,38064,56066,04065,30060,97061,7585401,6203,9709,02011,41011,4403,4501,59055,64055,91056,41055,54054,63053,86057,52060,16847,52050,35053, 75054,47053,96052,82055,25057,8129,5409,1009,2509,0808,9508,5808,3208,25637,98041,25044,50045,39045,01044,24046,93049,5578,1205,5602,6601,0706701,0402,2702,35614.69.94.71.91.21.93.93.956.056.758.862.363.161.957.257.4Thousands of persons 16 years of age and over194719481949103,418104 527105', 61160,94162 08062,9031,5911 4591,61759,35060 62161,28657,03858 34357,6517,8907 6297,65849,14850 71449,9932,3112 2763,6373.93.85.958.959.459.61950..195119521953 2195419551956195719581959I960 219611962 219631964106,645107,721108 823110,601111,671112 732113,'811115,065116,363117,881119,759121 343122,981125,154127, 22463,85865,11765 73066,56066,99368 07269,40969,72970, 27570,92172,14273,03173,44274,57175,8301,6503,1003 5923,5453,3503 0492,8572,8002,6362,5522,5142 5722,8282,7382,73962,20862,01762 13863,01563,64365 02366,55266,92967,63968, 36969,62870 45970,61471,83373,09158,91859,96160 25061,17960,10962 17063,79964,07163,03664, 63065,77865 74666,70267,76269,3057,1606,7266 5006,2606,2056 4506,2835,9475,5865,5655,4585 2004,9444,6874,52351,75853, 23553 74954,91953,90455 72257,51458,12357,45059,06560,31860, 54661,75963,07664,7823,2882,0551 8831,8343,5322 8522,7502,8594,6023,7403,8524,7143,9114,0703,7865.33.33.02.95.54.44.14.36.85.55.56.75.55.75.259.960.460.460.260.060.461.060.660.460.260.260.259.759.659.6196519661967 .19681969129 236131,180133,319135 562137;84177 17878,89380, 79382 27284, 2402 7233,1233,4463 5353,50674 45575,77077,34778 73780, 73471 08872 89574,37275 92077,9024 3613,9793,8443,8173,60666 72668,91570,52772,10374, 2963 3662,8752,9752,8172,8324.53.83.83.63.559 760.160.660.761.119 7 0197119722..1973 21974 .140 182142,596145,775148,263150,82785 90386,92988,99191,04093, 2403,1882,8172,4492,3262,22982 71584,11386, 54288,71491,01178, 62779,12081,70284,40985, 9353,4623,3873,4723,4523,49275,16575,73278,23080,95782, 4434,0884,9934,8404,3045,0764.95.95.64.95.661.361.061.061.461.81975 ..._1976153,449156,04894,79396,9172,1802,14492,61394,77384,78387,4853,3803,29781,40384,1887,8307,2888.57.761.862.1See footnotes at end of table.218

TABLE B-27.—Noninstitutional population and the labor force,1929-76—Continued(Monthly data seasonally adjusted, except as noted]Year or monthNoninstitutionalpopulationiTotallaborforce(includingArmedForces)ArmedForces 1TotalTotalCivilian labor forceEmploymentAgriculturalNonagriculturalUnemploymentUnemploymentrate(percentofcivilianlaborforce)Laborforceparticipationrate(totallaborforce aspercentof noninstitutionalpopulation)Thousands of persons 16 years cf age and overPercent1975: Jan..Feb..Mar.Apr..May.June.152, 230152, 445152, 646152, 840153, 051153, 27894,14693, 81994, 21894,40594, 97094, 7732, 1932, 1982, 1982, 1952, 1812, 17891, 95391, 62192, 02092, 21092, 78992, 59584, 67384, 25984, 24384, 24684,47584, 4963,3373,2863,3013,2833,5353,36181, 33680, 97380, 94280, 96380, 94081, 1357,2807,3627,7777,9648,3148,0997.98.08.58.69.08.761.861.561.761.862.161.8July.Aug.Sept.Oct..Nov.Dec.153, 585153, 824154, 052154, 256154,476154 70095,10395,22095, 29695, 29995,18095, 3052, 1862, 1852, 1702, 1642, 1552, 15792, 91793, 03593,12693 13593, 02593 14884, 85685,11485,11585,08785, 21285, 4433,4353,4173,5063,3893,3153,25581, 42181, 69781, 60981, 69881, 89782 1888,0617,9218,0118,0487,8137,7058.78.58.68.68.48.361.961.961.961.861.661.61976: Jan..Feb..Mar.Apr..May.June.154 915155, 106155 325155 516155,711155,92595, 61395, 74396,00996, 52096,69396, 8412,1402, 1462 1482 1442 1422 13793 47393 59793, 86294 37694 55194 70486, 22686,47186, 84587, 32987, 64087, 5333,3053,1983,2153,3983,3323,3138283838384849212736309313082207,2477,1267,0177,0476,9117,1717.87.67.57.57.37.661.761.761.862.162.162.1July.Aug.Sept.Oct..Nov.Dec.156 142156 367156 595156 788157 006157 17697, 32997, 49897,38797, 44998,02098,1062 1402,1472 1452 1472 1492 14695959595959518935124230287196087, 78387, 83487, 79487, 73888,22088, 4413,3333,3723,2783,3103,2483,25784 45084, 46284 51684 42884859721847,4067,5177,4487,5647,6517,5197.87.97.87.98.07.862.362.462.262.262.462.41 Not seasonally adjusted.2 Not strictly comparable with earlier data due to population adjustments as follows: Beginning 1953, introduction of1950 Census data added about 600,000 to population and about 350,000 to labor force, total employment, 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 populationby 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. Overallcategories of the labor force other than those noted were not appreciably affected.Note.—Labor force data in Tables B-27 through B-30 are based on household interviews and relate to the calendarweek including the 12th of the month. For definitions of terms, area samples used, historical comparability of the data,comparability with other series, etc., see "Employment and Earnings."Source: Department of Labor, Bureau of Labor Statistics.219

TABLE B-28.—Civilian employment and unemployment by sex and age 1947-76[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]EmploymentUnemploymentYear ormonthTotalTotalMales16-19years20yearsandoverTotalFemales16-19years20yearsandoverTotalTotalMales16-19years20yearsandoverTotalFemale16-19yearsj20yearsandover1947...1948...1949...1950...1951...1952...19531..1954...1955...1956...1957...1958...1959...19601..1961...1962 i._1963...1964...1965...1966...1967...1968...1969...1970 .1971...19721..19731..1974...1975...1976...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.57,03858, 34357,65158,91859,96160, 25061,17960,10962,17063,79964, 07163, 03664,63065, 77865,74666,70267. 76269,30571,08872,89574,37275,92077,90278,62779,12081.70284,40985, 93684,78387, 48584, 67384, 25984, 24384, 24684, 47584, 49684, 85685,11485,11585, 08785,21285, 44386,22686, 47186, 84587, 32987, 64087, 53387, 78387,83487, 79487, 73888, 22088, 44140, 99441,72640, 92641,58041,78041,68442,43141,62042,62143,38043, 35742,42343,46643, 90443, 65644,17744,65745,47446, 34046,91947,47948,11448,81848,96049,24550, 63051,96352, 51951,23052, 39151, 39951, 19251, 06750, 96051,13851, 02451,26751,36551^29651,24451, 32451, 40151,78951,94252, 07852, 39752, 49052, 33252, 50752,59652, 54652,57652, 64352,7992,2182,3452,1242,1862,1562,1062,1351,9852,0952,1642,1172,0122,1982,3602,3142,3622,4062,5872,9183,2523,1863,2553,4303,4073,4703,7504,0174,0743,8033,9043,8503,8063,8053,7533,8513,7583,7993,7753,8203,7853,8123,7943,8483,8633,8773,9423,9483,8893,9633,9583,8453,8923,8703,94038,77639,38238, 80339,39439,62639.57840, 29639,63440, 52641,21641,23940,41141,26741,54341,34241,81542,25142, 88643,42243,66844,29344,85945,38845, 55345.77546.88047,94648, 44547,42748, 48647, 54947, 38647, 26247, 20747, 28747,26647, 46847, 59047,47647, 45947,51247, 60747,94148, 07948, 20148, 45548, 54248, 44348, 54448, 63848, 70148, 68448, 77348, 85916,04516,61816,72317,34018,18218,57018,75018,49019,55020,42220,71420,61321,16421,87422, 09022,52523,10523,83124,74825, 97626,89327, 80729,08429,66729,87531.07232,44633,41733, 55335, 09533,27433, 06733,17633,28633, 33733, 47233, 58933, 74933, 81933, 84333, 88834, 04234,43734, 52934, 76734, 93235,15035,20135, 27635, 23835, 24835,16235, 57735, 6421,6911,6831,5881,5171,6111,6121,5841,4901,5481,6541,6631,5701,6401,7691,7931,8331,8491,9292,1182,4692,4972,5252,68614,35414,93715,13715, 82416,57016,95817,16417,00018,00218,76719,05219,04319,52420,10520, 29620,69321,25721,90322,63023,51024, 39725,28126,3972,734 26.9332,725j 27! 1492.972 28.1003,219 29,2283,329 30, 0883,243 30,3103,365 31,7303,2983,2323,2013,2233,2443,2453,2093,2453,2723,2213,2283,2753,2963,3013,3533,3863,4793,4003,4233,3553,3423,3513,3693,30229, 97629, 83529,97530, 06330, 09330, 22730, 38030, 50430, 54730, 62230, 66030, 76731,14131, 22831,41431, 54631,67131,80131, 85331,88331,90631,81132,20832,3402,3112,2763,6373,2882,0551,8831,8343,5322,8522,7502.8594,6023,7403,8524,7143,9114,0703,7863,3662,8752,9752.8172,8324,0884.9934,8404,3045,0767,8307,2887,2807,3627,7777,9648,3148,0998,0617,9218,0118,0487,8137,7057,2477,1267,0177,0476,9117,1717,4067,5177,4487,5647,6517,5191,6921,5592,5722,2391,2211,1851,2022,3441,8541,7111,8413,0982,4202,4862,9972,4232,4722,2051,9141,5511,5081,4191,4032,2352,7762.6352,2402,6684,3853,9683,9194,0704,2894,4454,6654,6024,6134,4584,6154,5984,4304,2563,9493,8583,7983,8123,8303,9314,0203,9684,0604,1784,2444,1522702553523181912051843102742692994163984254794075004874794324484274415996917076477499579289249439519729551,0661,0099889329358929229469209249909378828899089109509519331,4221, 3052,2191,9221,0299801,0192,0351,5801,4421,5412, 6812,0222,0602,5182,0161,9711,7181,4351,1201,0609939631,6362,0861.9281,5941,9183,4283,0412,9953,1273,3383,4733,7103,5363,6043,4703,6833,6633,5383,3343,0032,9382,8742,8222,8933,0493,1313,0603,1503,2283,2933,2196197171,0651,0498346986321,1889981,0391,0181,5041,3201,3661,7171,4881,5981,5811,4521,3241,4681,3971,4291,8532,2172.2052,0642,4083,4453,3203,3613,2923,4883,5193,6493,4973,4483,4633,3963,4503,3833,4493,2983,2683,2193,2353,0813,2403,3863,5493,3883,3863,4073,36714415222319514514012319117620919726225628634931338338639540439141241250656759557966079577380275580575185576980082579980276582177977577576875376375287075475376776947E5648418546895595109978238328211,2421,063l,08C1,3681.17E1,2161.19E1,0569211, 07f98Ei,oie1.34J1,65(1.6K1,48!1,7412,64

TABLE B-29.—Selected unemployment rates, 1948-76[Percent 1 ; monthly data seasonally adjusted]By sex and ageBy colorBy selected groupsYear or monthBothsexes16-19yearsMales20yearsandover: emales20yearsandoverWhiteBlackandotherAllworkersExperiencedwageandsalaryworkersHouseholdheadsMarriedFulltimeworkers3Bluecollarworkers*Laborforce*timelost *194819493.85.99.213.43.25.43.65.33.55.65.98.94.36.83.55.44.28.01950195119521953195419551956195719581959 .. .5.33.33.02.95.54.44.14 36 85.512.28.28.57.612.611.011.111.615.914.64.72.52.42.54.93.83.43 66.24.75.14.03.22.95.54.44.24.16.15.24.93.12.82.75.03.93.63 86.14.89.05.35.44.59.98.78.37 912.610.76.03.73.33.26.24.84.44.67.25.74.61.51.41.74.02.82.62.85.13.65.02.62.55.23.83.74.07.27.23.93.63.47.25.85.16.210.27.64.85.15.38.16.6196019611962196319641965196619671968...19695.56 75.55.75.24.53 83.83.63.514.716.814.717.216.214.812.812.812.712.24.75.74.64.53.93.22.52.32.22.15.16.35.45.45.24.53.84.23.83.74.96.04.95.04 64.13 43.43.23.110.212.410.910.89.68.17 37.46.76.45.76.85.65.55.04.33 53.63.43.33.73.22.72.22.11.91.83.74.63.63.42.82.41.91.81.61.56.75.54.94.23.53.43.13.17.89.27.47.36.35.34.24.44.13.96.78.06.76.45.85.04.24.24.03.919701971197219731974197519764.95.95.64 95 68 57 715.216.916.214 516 019.919 03.54.44.03 23 86.75 94.85.75.44 85 58.07 44.55.45.04 35.07 87 08.29.910.08 99 913.913 14.85.75.34 55 38.27 32.93.63.32.93.35.85 12.63.22.82 32.75.14 24.55.55.14 35.18.17 36.27.46.55 36.711.79 45.36.46.05.26 19.18 31975: JanFebMarApr.MayJune7.98.08.58 69 08.719.519.420.019 820 320.85.96.26.66 97 37.07.97.88.28 48 58.37.37.37.87 98 38.113.013.313.914 214 314.17.77.78.28 58 98.65.25.35.75 96 26.14.44.75.05 45 75.57.57.78.18 48 78.410.610.712.012 412 812.58.78.79.29.39.79.1JulyAugSeptOctNovDec1976: JanFebMarAprMayJune8.78 58.68.68.48.37.87.67.57.57.37.620.520 519.619.919.119.819.419.119.019.318.518.47.16 87.27.26.96.55.95.85.65.55.65.98.08 07.88.07.97.97.57.47.27.36.87.28.07 87.87.97.77.67.16.86.86.86.76.813.5U 314.514.213.813.613.213.612.613.012.313.48.48 38.48.48.28.07.57.37.17.17.17.26.05 86.06.05.75.65.25.05.04.84.95.15.45 35.45.35.04.84.14.24.14.04.14.38.48 28.48.48.27.97.37.17.07.06.97.212.412 012.011.711.210.69.49.39.18.99.09.39.19 C9.29.29.18.88.48.18.18.18.17.9JulyAugSept....OctNovDec7.87.97.87.98.07.818.219.618.819.019.219.06.15.96.16.26.36.27.67.87.67.67.6,47.17.17.27.27.37.112.913.612.813.413.513.47.47.57.47.57.67.45.35.25.55.45.35.14.44.34.54.44.54.37.37.57.57.67.67.59.79.89.89.89.79.68.18.48.48.68.6S A1 Unemployment as percent of civilian labor force in group specified, except as noted.* Married men living with their wives. Data for 1949 and 1951-54 are for April; 1950, for March.» Data for 1949-61 are for May.4 Includes craft and kindred workers, operatives, and nonfarm laborers. Data for 1948-57 are based on data forJanuary, April, July, and October.4 Aggregate hours lost by the unemployed and persons on part-time for economic reasons as a percent of potentiallyavailable labor force hours.Note.—See footnote 2 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.221224-250 O - 77 - 15

TABLE B-30.— Unemployment by duration, 1947-76[Monthly data seasonally adjusted i]Year or month1Total unemploymentLess than5 weeksDuration of unemployment5-14weeks15-26weeks27 weeksand overAverage(mean)durationin weeksThousands of persons 16 year 5 of age and over1947194819491950195119521953195419551956 . .1957195819591960 . . ..19611962196319642,3112,2763,6373,2882,0551,8831,8343,5322,8522,7502,8594,6023,7403,8524,7143,9114,0703,7861,2101,3001,7561,4501,1771,1351,1421,6051,3351,4121.4087531,5857191,8066637511,6977046691,1941,0555745164821,1168158058911,3961,1141,1761,3761,1341,2311,11723419342842516614813249536630132178546950372853453549116411625635713784783173362322396675714548045855534828 610.012 19 78 48 011.813 011 310 513 914.412 815 614 714.013 319651966196719681969197019711972197319741975. .19761975- JanFeb ---MarApr - - -MayJune -JulyAueSept .OctNovDec1976"JanFebMarAprMay .JuneJulyAugSeptOctNovDec. ._3,3662,8752,9752,8172,8324,0884,9934,8404,3045,0767,8307,2887,2807,3627,7777,9648,3148,0998,0617,9218,0118,0487,8137,7057,2477,1267,0177,0476,9117,1717,4067,5177,4487,5647,6517,5191,6281,5731,6341,5941,6292,1372,2342, 2232,1962,5672,8942,7903,1962,8183,1982,9363,0382,8292,8502,7832,8392,9602,6622,6512,6352,6372,6302,9882,7952,7302,9312,8672,8522,9522,7592,7659837798938108271,2891,5781,4591,2961,5722,4522,1592,5782,5362,5582,6212,6212,4652,2002,4452,4192,4482,3732,2002,0651,8901,9151,9021,9782,2152,0932,4332,4262,3672,4942,3194042872712562424276655974755631,2901,0039391,1221.234404515,467535,4053411,2611,2531,3491,1659688707158509021,0581,1271,1181,0941,1881,1303512391771561332355175623373731,1931,3366277217679521,0711,2511,3441,4181,5811,4731,6961,6321,6161,5631,4551,3881,1921,2711,1891,2141,1931,2661,3291,38411.810 48.88.47 98.711.312.010.09.714.115.810.811.711.512.913.515.314.915.416.115.516.816.916.916.316. C15.815.116. S15.615.415.415.315.515.6i Because of independent seasonal adjustment of the various series, detail will not add to totals.Note.—See footnote 2 and Note, Table B-27.Source: Department of Labor, Bureau of Labor Statistics.222

Yearor month1946...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*..1975:Jan...Feb___Mar...Apr...May-June..July..".Aug...Sept..Oct...Nov...Dec...1976: Jan._.Feb.._Mar...Apr...May__June..July..Aug...Sept*.OtTABLE B-31—Unemployment insurance programs, selected data, 1946-76Coveredemployment1All programsInsuredunemployment(weeklyaverage^Thousands31,85633,87634,64633,09834, 30836, 33437,00638,07236,62240,01842,75143, 43644,41145,72846, 33446,26647,77648, 43449, 63751, 58054, 73956, 34257,97759,99959, 52659, 37566, 45869, 89772,4516 71,0372,8041,7931,446.2, 4741,6051,0001,0691,0672,0511,3991,3231,5713,2692,0992,0712,9941,9467 1,9731,7531,4501,1291,2701,1871,1772,0702,6082,1921,7932,5584,9433,8225,2135,7515,8865,6475,2024,8924,9794,5764,2384,0374,1204,4614,9624,7214,3663,9173,5643,4573,6423,4463,2363,2273,453Totalbenefitspaid(millionsof dollars^*2,878.51.785.51,328.72,269.81,467.6862.91,043. 51,050.62,291.81, 560.21,540.61,913.04.290.62, 854.33, 022.84, 358.13.145.13,025.92.749.22,360.41,890.92,221. 52,191.02, 298.64.209.36,214.95, 491.14,517.36,933.916,802.4256.6312.3490.4539.7395.2256.7365. 5218.4126.5115.8972.5231.9,344.9,231.9, 334.4,150.7945.7981.7960.5951.5892.8821.6InitialclaimsState programsnsuredunemploymentExhaustions'Weekly average; thousands1,2959979801,9731,5139691,0449901,8701,2651,2151,4462,5261,6841,9082,2901,78371, 8061,6051,3281,0611,2051,1111,1011,8052,1501,8481,6322,2623,9922,9683,6033,8324,1254,2714,4804,3314,2104,1304,0703,9403,5763,2422,9612,8592,7592,7172,8622,9473,0863,2033,2613,3283,1652,9331891872003402362082152183042262272703691113313503027 2982682322032262012002962952612463634783825435305345085044944564734634453923623713433503613983974034174274373853565058668492104106988476737376747169666461595653Insuredunemploymentaspercentof coveredemployment4.33.13.06.24.62.82.92.85.23.53.23.66.44.44.85.64.44.33.83.02.32.52.22.13.44.13.52.73.56.04.5*5.55.86.36.46.76.56.36.26.15.95.44.94.54.34.24.14.44.54.74.95.05.14.84.5Benefits paidTotal(millionsofdollars)*1,094.9775.1789.91,736.01,373.1840.4998.2962.22,026.91, 350.31,380.71,733.93,512.72,279.02,726.73,422.72,675.42,774.72,522.12,166.01,771.32,092.32,031.62,127.93, 848.54,957.04,471.04,007.65,974.911 754.71,128.21,164.21,290.61,301.21,145.1984.01,037.1891.4779.4759.5677.8893.21,018.6945.11,018.2869.6698.7719.3711.5698.7640.8610.5Averageweeklycheck(dollars)818.5017.8819.0320.4320.7621.0922.7923.5824.9325.0427.0228.1730.5830.4132.8733.8034.5635.2735.9237.1939.7541.2543.4346.1750.3453.2356.7659.0064.2570.2367.8368.7369.0769.0869.3369.5871.5671.0671.3272.3773.1173.6474.7175.6675.6975.6174.7974.1673.6673.8374.1975.50Dec*.* Monthly data are seasonally adjusted.1 Includes persons under the State, UCFE (Federal employee, effective January 1955), and RRB (Railroad RetirementBoard) programs. Beginning October 1958, also includes the UCX program (unemployment compensation for ex-servicemen).a Includes State, UCFE, RR, UCX, UCV (unemployment compensation for veterans, October 1952-January 1960), andSRA (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.1 Covered workers who have completed at least 1 week of unemployment.4 Annual data are net amounts and monthly data are gross amounts.* Individuals receiving final payments in benefit year.0 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 92 percent ofthe total.Source: Department of Labor, Employment and Training Administration.223

TABLE B-32.—Wage and salary workers in nonagricultural establishments, 1929-76[Thousands of persons; monthly data seasonally adjusted]Year ormonthTotalManufacturingTotalwageandsalaryworkersDurablegoodsNondurablegoodsMiningContractconstructionTransportationandpublicutilitiesWholesaleandretailtradeFinance,insurance,andrealestateGovernmentServicesFederalStateandlocal1929..1933..1939..1940..1941..1942..4943..;1944_.1945..1946-1947..'1948..1949..1950..1951..1952..fl953_.1954..1955..1956..1957..1958..1959..{I960..1961..1962..1963..1964..1965..1966..1967..1968..1969..1970..1971..1972..1973 .fl974_.1975..1976P.31,33923,71130,61832,37636,55440,12542,45241,88340, 39441,67443,88144,89143,77845, 22247,84948,82550, 23249,02250,67552,40852,89451,36353,31354,23454,04255,59656,70258,33160,81563, 95565, 85767, 95170,44270, 92071,22273,71476, 89678, 41376, 98579,11510,7027,39710,27810, 98513,19215, 28017,60217,32815, 52414,70315, 54515, 58214, 44115,24116,39316,63217,54916,31416,88217,24317,17415,94516,67516,79616,32616,85316,99517,27418, 06219,21419,44719,78120,16719, 34918, 57219, 09020, 06820, 04618, 34718,9544,7155,3636,9688,82311,08410, 8569,0747,7428,3858,3267,4898,0949,0899,34910,1109,1299,5419,8349,8568,8309,3739,4599,0709,4809,6169,81610, 40611,28411,43911,62611,89511,19510, 59711,00611,83911,89510, 67911,0285,5645,6226,2256,4586,5186,4726,4506,9627,1597,2566,9537,1477,3047,2847,4387,1857,3407,4097,3197,1167,3037,3367,2567,3737,3807,4587,6567,9308,0088,1558,2728,1547,9758,0848,2298,1517,6687,9261,0877448549259579929258928368629559949309019298988667917928228287517327126726506356346326276136066196236096256446947457831,4978091,1501,2941,7902,1701,5671,0941,1321,6611,9822,1692,1652,3332,6032,6342,6232,6122,8022,9992,9232,7782,9602,8852,8162,9022,9633,0503,1863,2753,2083,3063,5253,5363,6393,8314,0153,9573,4573,3703,9162,6722,9363,0383,2743,4603,6473,8293,9064,0614,1664,1894,0014,0344,2264,2484,2904,0844,1414,2444,2413,9764,0114,0043,9033,9063,9033,9514,0364,1514,2614,3114,4354,5044,4574,5174,6444,6964,4984,5076,1234,7556,4266,7507,2107,1186,9827,0587,3148,3768,9559,2729,2649,3869,74210,00410,24710,23510, 53510,85810, 88610, 75011,12711,39111,33711, 56611,77812,16012,71613, 24513,60614, 09914, 70415,04015,35215,97516,67417,01716, 94717,4901,5091,2951,4621,5021,5491,5381,5021,4761,4971,6971,7541,8291,8571,9191,9912,0692,1462,2342,3352,4292,4772,5192,5942,6692,7312,8002,8772,9573,0233,1003,2253,3813,5623,6873,8023,9434,0914,2084,2234,3163,4402,8733,5173,6813,9214,0844,1484,1634,2414,7195,0505,2065,2645,3825,5765,7305,8676,0026,2746,5366,7496,8067,1307,4237,6648,0288,3258,7099,0879,55110,09910,62211,22811,62111,90312, 39213,02113,61713,99514, 607533565905996l,a402,2132,9052,9282,8082,2541,8921,8631,9081,9282,3022,4202,3052,1882,1872,2092,2172,1912,2332,2702,2792,3402,3582,3482,3782,5642,7192,7372,7582,7312,6962,6842,6632,7242,5322,6013,0903,2063,3203,2703,1743,1163,1373,3413,5823,7873,9484,0984,0874,1884,3404,5634,7275,0695,3995,6485,8506,0836,3156,5506,8687,2487,6968,2278,6799,1099,4449,83010,19210, 65611,07511,4532,748 112,0252,736 12,352See footnotes at end of table.224

TABLE B-32.—Wage and salary workers in nonagricultural establishments,1929-76—Continued(All employees; thousands of persons; monthly data seasonally adjusted!Year ormonthTotalManufacturingTotalwageandsalaryworkersDurablegoodsNondurablegoodsMiningoontractconstructionTransportationandpublicutilitiesWhrvlnwnoiesaleandretailtradeFinance,insurance,andrealestateGovernmentServicesFederalStateandlocal1974: Jan._.Feb...Mar...Apr...May...Jun._.July...Aug...Sep...Oct...Nov.-Dec...1975: Jan._.Feb...Mar...Apr...May—Jun.__July..Aug.-Sep...Oct...Nov...Dec...1976: Jan._.Feb...Mar._.Apr...May...Jun.__July...Aug...Sep...Oct._.NOVP.Decp..78, 03378, 20578, 27578, 42378, 55978, 62878, 66078, 70978, 77478,71878, 33977, 70377, 30076, 80476,51876, 49176, 57776, 44476, 70676,98877, 23977, 47077, 54277,76478,14278, 35878,69279,01179, 00679, 04379,18379,27879, 57279,46779,70079,95720, 30520,22020,19620, 23520, 22020, 23420,20920,12820,07419, 93819, 63519,18318,78418, 37518, 23718,18318,19218,13118,11518,27218,39518,45218,47218, 55518,70418,77418,89719, 00819, 00018,98418, 94518, 97919,10018, 94119, 05719,09312,03711, 96711,95712,00911,98912,02012,02611,95411,92711, 85611,65811,35311,09210,81610, 73710, 65010, 60710,53910, 48810, 57810,64510,64410,65210, 70910,81010, 85710,95611,01611,06211,05911,03411,08311,14611,01811,13411,1818,2688,2538,2398,2268,2318,2148,1838,1748,1478,0827,9777,8307,6927,5597,5007,5337,5857,5927,6277,6947,7507,8087,8207,8467,8947,9177,9417,9927,9387,9257,9117,8967,9547,9237,9237,9126736796806886926947007037077147186847257287327347417437457507537597617667677677737757767817917527988008088064,0504,1214,0984,0624,0373,9853,9213,9343,8913,8693,8183,7593,7323,5963,4833,4553,4463,4053,4043,4123,4203,3993,4063,3923,4093,3793,3803,4133,3933,3753,3823,3493,3303,3403,3533,3494,7054,7164,7114,7074,7084,7044,6994,7034,6834,6864,6744,6594,5994,5564,5114,5084,4964,4744,4734,4664,4724,4724,4824,4774,4894,5044,5074,5104,5034,4824,5084,5014,5284,5064,5104,53716, 86416,87816,91116,96817,02917,05117,11117,12517,13917,14217, 04916, 93916,90316, 87816, 86416, 85616,87316, 88216, 94916,96817,01617, 04317, 02717, 08417,20717, 30814, 39917, 46517, 46117,46017,53117, 55417,62517,61017, 58517,6854,1724,1864,1964,2024,2094,2104,2104,2174,2204,2244,2264,2254,2194,2104,2074,2054,2084,2064,2114,2184,2354,2424,2484,2604,2664,2664,2764,2894,2824,3014,3124,3124,3384,3594,3814,40313,31313,40013,45313, 48813,57313, 62113, 65613,69613,75313,79713, 82213, 83313,85713,86513, 86413, 87813,90313, 88513, 99014,05014,09914,15714,18814,22914,30714,36014,42214,49814, 52914, 57114,62314,70914,75814,78114,84414,8972,6832,6992,7022,7112,7172,7232,7292,7342,7422,7402,7402,7382,7362,7352,7352,7352,7362,7412,7482,7532,7572,7612,7562,7532,7492,7422,7352,7332,7302,7282,7232,7322,7282,7302,7342,73611,26811,30611,32811,36211,37411,40611,42511,46911,56511,60811,65711,68311,74511,86111,88511,93711,98211,97712,07112,09912,09212,18512, 20212,24812,24412,25812,30312,32012, 33212,36112,36812, 39012, 36712,40012,42812,451Note.—Data in Tables B-32 through B-34 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-30), which include proprietors, self-employed persons,domestic servants, and unpaid family workers; which count persons as employed when they are not at work becauseof industrial disputes, bad weather, etc.; and which are based on a sample of the working-age population, whereas theestimates 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.225

TABLE B-33.—Average weekly hours and hourly earnings in selected private nonagriculturalindustries, 1947-76[For production or nonsupervisory workers; monthly data seasonally adjusted]194719481949Yearormonth1950 ....195119521953 . .19541955195619571958195919601961 . .1962196319641965 . .196619671968196919701971 .. .19721973197419751976 P1975: JanFebMarAprMayJuneJulyAug.SeptOctNovDec1976:JanFebMarAprMayJuneJulyAugSeptOct ..Nov *.--Dec*Totalprivatenonagriculturali40.340.039.439.839.939.939.639.139.639.338.838.539.038.638.638.738.838.738.838.638.037.837.737.137.037.137.136 636.136.236.236.035.935.936.036.036.036.136.136.236.336.436.436.436.236.136.336.236.236.136.036.136.236.3Average weekly hours40.440.039.140.540.640.740.539.640.740.439.839.240.339.739.840.440.540.741.241.340.640.740.639.839.940.640.740.039.440.139.138.938.939.039.139.339.439.739.839.839.940.340.440.340.339.440.340.240.140.039.739.940.140.1ManufacturingContractconstruction38.238.137.737.438.138.937.937.237.137.537.036.837.036.736.937.037.337.237.437.637.737.337.937.337.236.937.036.936.637.137.136.634.936.736.836.036.436.736.736.736.937.237.637.736.037.437.137.336.936.835.937.337.437.3Retailtrade 240.340.240.440.440.439.839.139.239.038.638.138.138.238.037.637.437.337.036.635.935.334.734.233.833.733.733.332.732.432.232.332.332.532.332.432.432.332.432.332.432.432.432.532.332.232.532.232.032.132.032.132.032.032.2Average gross hourly earnings,current dollarsTotalprivatenonagricultural1$1,1311.2251.2751.3351.451.521.611.651.711.801.891.952.022.092.142.222.282.362.452.562.682.853.043.223.443.673.924.224.544.864.414.434.454.474.494.524.554.584.604.634.674.684.724.744.774.794.834.854.884.904.924.954.995.01$1,2171.3281.3781.4401.561.651.741.781.861.952.052.112.192.262.322.392.462.532.612.722.833.013.193.363.573.814.084.414.815.194.654.684.724.734.754.784.824.854.884.904.934.965.005.045.085.085.135.165.215.255.295.295.345.37$1.5411.7131.7921.8632.022.132.282.392.452.572.712.822.933.083.203.313.413.553.703.894.114.414.795.245.696.036.376.757.257.677.046.987.187.187.167.267.327.307.327.347.407.457.487.477.577.577.667.687.777.747.717.767.817.85Retailtrade 2$0.838.901.951.9831.061.091.161.201.251.301.371.421.471.521.561.631.681.751.821.912.012.162.302.442.572.702.873.093.343.553.233.263.273.283.303.323.343.373.383.403.423.433.463.473.483.493.513.523.553.573.603.633.663.67Adjusted hourly earnings,total private nonagricultural 3Index,1967 = 100ManufacturingContractconstructionCurrentdollars42.646.048.250.053.756.459.661.763.767.070.373.275.878.480.883.585.988.391.695.4100.0106.3113.3120.8129.4137.8146.6158.6172.7184.7166.0167.4168.9169.3170.3171.81 Also includes other private industry groups shown in Table B-32.3 Includes eating and drinking places.3 Adjusted for overtime (in manufacturing only) and for interindustry employment shifts.4 Current dollar earnings index divided by the consumer price index.* Monthly data are computed from indexes to two decimal places.Note.—See Note, Table B-32.Source: Department of Labor, Bureau of Labor Statistics.226172.7174.2174.8176.2177.6178.0179.4180.3181.1182.1183.3184.0185.2186.4187.2188.2189.2190.01967dollars*63.763.867.569.369.070.974.476.679.482.383.484.586.888.490.292.293.795.197.098.1100.0102.0103.2103.9106.7110.0110.1107.4107.1106.1106.4107.0106.7106.8106.9106.5107.0106.9107.1107.3107.0107.3107.8108.0108.2108.3108.1108.4108.5108.5108.7109.0Percentchangefroma yearearlier»Currentdollars8 04 83 77.45 05 73.53 25.24 94.13.63.43 13.32.92.83.74.14.86.36.66.67.16.56.48.28.96.99.59.810.09.69.08.68.78.88.18.28.47.98.07.77.27.67.77.17.37.07.16.86.56 71967dollars0 25 82.7-.42 84 93.03.73.71 31.32.71.82.02.21.61.52.01.11.92.01.2.72.73.1.1-2.5-.3-1.9-1.1-.3-.6-.5-.8-.9.1.1.51.0.81.21.31.01.41.41.11.81.41.51.51.6

TABLE B-34.—Average weekly earnings in selected private nonagricultural industries, 1947-76[For production or nonsupervisory workers; monthly data seasonally adjusted]Average gross weekly earningsPercent change from ayear earlier, total privatenonagricultural 4Year or monthTotal privatenonagricultural 1Currentdollars1967dollars 2ManufacturingContractconstructionCurrent dollarsRetailtrade 3Currentdollars1967 dollars194719481949$45.5849.0050.24$68.1367.9670.36$49.1753.1253.88$58.8765.2767.56$33.7736.2238.427.52.5-0.23.519501951 . .19521953195453.1357.8660.6563.7664.5273.6974.3776.2979.6080.1558.3263.3467.1670.4770.4969.6876.9682.8686.4188.9139.7142.8243.3845.3647.045.88.94.85 11.24 7.92.64 3 71955195619571958 .195967.7270.7473.3375.0878.7884.4486.9086.9986.7090.2475.7078.7881.5982.7188.2690.9096.38100.27103. 78108.4148.7550.1852.2054.1056.155.04.53.72.44.95.42 9 .1-.34.11960196119621963196480 6782 6085.9188.4691 3390.9592.1994.8296.4798.3189.7292.3496.5699.63102.97113.04118. 08122.47127.19132.0657.7658.6660.9662.6664.752.42.44.03.03.2.81.42.91.71.91965196619671968196995.0698.82101.84107.73114.61100.59101.67101.84103.39104.38107.53112.34114.90122.51129.51138. 38146.26154.95164.49181.5466.6168.5770.9574.9578.664.14.03.15.86.42.31.1.21.51.019701971197219731974119.46127.28136.16145.43154.45102.72104.93108.67109.26104.57133.73142.44154.69166.06176.40195.45211.67222.51235.69249.0882.4786.6190.9995.57101.044.26.57.06.86.2-1.62.23.6.5-4.319751976 v163.89175.93101.67189. 51208.12265.35284. 56108.22114.316.17.3-2.81975: JanFebMarAprMayJune_ _.159.64159.48159 76160.47161.64162.72102.01101.39101.17101.12101.34101.32181.82182.05183.61184.47185.73187.85261.18255.47250. 58263.51263.49261.36104.33105.30106.28105.94106.92107.576.86.25.97.05.4-4.4-4.4-4.0-2.9-4.0-3.6JulyAugSeptOctNov...Dec .163.80165. 34166.06167.61169.52170.35100.99101.56101.57101.89102.43102.37189.91192.55194.22195.02196. 71199.89266.45267.91268. 64269.38273.06277.14107.88109.19109.17110.16110.81111.135.15.95.55.87.67.1-4.2-2.5-2.2-1.7.3.11976: Jan.._FebMar..AprMayJune171.81172.54172.67172.92175.33175 57102.82103.13103.03102.74103.56103 22202.00203.11204.72200.15206.74207.43281.25281.62272. 52283.12284.19286.46112.45112.08112.06113.43113.02112.648.28.17.97.58.57.61.31.71.61.42.11.6JulyAugSept . .OctNov pDec v176.66176 89177.12178.70180. 64181. 86103.37102 96102.68103. 24104.06208.92210.00210.01211.07214.13215. 34286.71284.83276.79289.45292.09292.81113.96114.24115.56116.16117.12118.177.97.06.66.96.56.82.31.31.01.51.51 Also includes other private industry groups shown in Table B-32.2 Earnings in current dollars divided by the consumer price index.3 Includes eating and drinking places.* Based on unadjusted data.Note.—See Note, Table B-32.Source: Department of Labor, Bureau of Labor Statistics.227

TABLE B-35.—Productivity and related data, private business economy, 1947-76[1967 = 100; quarterly data seasonally adjusted]Output iHours of allpersons 2Output perhour of allpersonsCompensationper hour*Unit laborcostsImplicit pricedeflator*Year or quarterTotalprivatebusinessPrivatenonfarmbusinessTotal)rivatebusinessPrivatenonfarmbusinessTotalprivatebusinessPrivatenonfarmbusinessTotalprivatebusinessPrivatenonfarmbusinessTotalprivatebusinessPrivatenonfarmbusinessTotalprivatebusinessPrivatenonfarmbusiness194719481949 |1950195119521953195419551956195719581959I9601961196219631964 -19651966196719681969197019711972197319741975 --1974:1 -.IIIIIIV1975:1 .IIIIIIV1976:1IIIII48.650.849.954.557.759.161.960.865.667.568.466.971.873.174.178.882.286.892.998.0100.0105.1108.3107.4110.3117.6124.5120.8118.1123.0121.8120.6117.7114.2116.7120.1121.2124.2125.8126.947.549.548.753.256.758.460.859.664.566.567.565.871.072.273.378.181.686.492.698.1100.0105.4108.6107.4110.3117.9125.0121.1118.0123.7122.1121.0117.9114.4116.6119.9121.3124.3126.0127.192.993.590.391.293.993.994.791.594.896.294.690.293.493.692.093.493.895.198.1100.3100.0101.7104.5102.8102.3106.0110.1110.6105.9111.3111.3110.9109.3105.7104.8105.7107.0107.7108.2108.280.982.178.981.385.085.887.984.788.190.389.785.889.389.988.790.591.493.396.8100.0100.0102.1105.3104.0103.7107.6112.2112.7107.9113.2113.5113.3111.5107.9106.7107.4109.2110.4110.4110.652.354.455.359.761.563.065.366.569.270.272.374.276.878.180.684.487.791.394.797.8100.0103.3103.7104.5107.8110.9113.1109.2111.5110.5109.4108.7107.6108.1111.4113.6113.2115.3116.3117.258.760.361.765.566.768.169.270.373.273.675.376.879.680.382.686.289.392.695.798.1100.0103.2103.1103.2106.3109.5111.4107.5109.4109.3107.6106.7105.7106.0109.2111.6111.0112.6114.1114.935.138.138.841.645.648.651.853.554.958.662.565.568.571.474.277.780.785.188.494.7100.0107.6115.1123.3131.5138.9150.3164.3180.2157.1161.8166.7170.7176.0179.0181.3185.0189.8193.3196.737.540.742.044.548.451.054.055.857.861.465.067.770.673.776.279.482.386.289.194.5100.0107.3114.2121.9129.9137.4148.1162.0177.7155.3159.6164.0168.3173.1176.4179.3182.2186.4190.4193.667.170.170.269.674.377.179.380.579.383.586.588.289.191.492.192.192.093.293.496.8100.0104.1111.0118.1121.9125.2132.9150.4161.6142.1147.9153.3158.6162.9160.7159.5163.4164.7166.1167.863.967.568.167.972.575.078.079.379.083.386.488.188.891.792.392.092.293.193.296.4100.0103.9110.9118.1122.2125.5133.0150.8162.4142.1148.3153.6159.3163.3161.6160.6164.1165.5166.9168.565.170.669.870.876.077 477.978.679 882.284.886 488.189.389 890.691.492.794.297.2100 0103.9108.8113 9118.9123.2130 3143.8157.5137.4141.5146.0150.4154.5155 9158.4160.9161.7163.8165.462.367.568.069.173.775 276 877.879 481 984 685 988 089.289 890 591.592.994 196.8100 0104 0108.7114 0119.2122.9128 0142.0156.4134.7140.1144.6149.2154.0155.0157.0159.3161.0162.5164.81 Output refers to gross domestic product originating in the sector in 1972 dollars.2 Hours of all persons in private industry engaged in production, including hours of proprietors and unpaid familyworkers. Estimates based primarily on establishment data.3 Wages and salaries of employees plus employers' contributions for social insurance and private benefit plans. Alsoincludes 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.228

TABLE B-36.—Changes in productivity and related data, private business economy, 1948-76[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]Output iHours ofall persons 2Output per hourof all personsCompensationper hour'Unit laborcostsImplicit pricedeflator*Year or quarter1948 .-19491950195119521953195419551956 .. ..195719581959 -. -.196019611962196319641965196619671968196919701971 -.19721973197419751974: 1II . .IIIIV1975: 1IIIII. ..IV1976: 1IIIIITotalprivatebusiness4.6-1.89.25.92.54.6-1.78.02.81.3-2.17.31.81.56.24.45.67.05.52.05.13.0g2.86.65.9-3.0-2.3-6.4-3.8-3.9-9.4-11.28.912.33.610.25.53.4Privatenonfarmbusiness4.4-1.79.46.53.04.1-1.98.23.11.5-2.47.91.61.56.54.55.97.16.01.95.43.0-1.12.76.96.0-3.1-2.6-5.2-4.8-3.8-9.9-11.37.912.14.510.55.43.4PrivateTotalnonfarmprivatebusinessbusiness0.6 1.6-3.4 -4.01.1 3.12.9 4.6.0 1.0.9 2.4-3.5 -3.63.7 4.01.4 2.4-1.6 -.7-4.7 -4.33.6 4.1.2 .6-1.7 -1.31.5 2.1.4 1.01.4 2.13.1 3.72.3 3.3-.3 -.01.7 2.12.7 3.2-1.6 -1.2-.4 -.33.6 3.73.9 4.3.4 .4-4.2 -4.3.3 -.9-.0 1.2-1.4 -.6-5.7 -6.2-12.7 -12.4-3.3 -4.13.5 2.55.2 6.92.6 4.41.6 .1.2 .5Totalprivatebusiness3.91.78.02.92.53.71.84.11.43.02.73.61.63.34.64.04.13.73.22.33.3.3.73.22.91.9-3.42.1-6.6-3.8-2.6-4.01.612.78.5-1.57.43.83.1Privatenonfarmbusiness2.82.36.11.82.01.61.74.1.62.22.03.61.02.84.43.53.73.32.51.93.2-.2.22.93.01.7-3.51.8-4.3-5.9-3.2-3.91.312.69.3-2.25.85.42.9Totalprivatebusiness8.61.87.19.86.46.63.42.66.76.74.74.64.24.04.73.95.43.97.05.67.67.07.26.65.78.29.39.78.012.712.69.913.16.95.28.310.97.57.3Privatenonfarmbusiness8.73.25.88.75.65.73.33.76.25.94.04.44.33.54.13.74.83.46.15.87.36.56.76.65.87.89.49.79 311.511.510.911.87.96.86.69.58.96.9Totalprivatebusiness4.5.1-.86.73.82.91.5-1.55.23.71.91.02.6.7.1-.11.3.23.73.34.16.66.43.22.76.213.27.515.617.115.514.511.3-5.1-3.010.03.23.64.1Privatenonfarmbusness5.8.8-.36.73.54.01.6-.45.53.72.0.73.3.6-.3.11.0.13.43.83.96.66.53.52.76.013.47.714 318.515.215.510.4-4.2-2.29.03.53.33.9Totalprivatebusiness8.4-1.11.57 31.9.691.53.03.21.92.01.4.6.9.91.41.63.22.93.94.74.74.43.65.810.39.59.112 513.212.911.33.56.66.62 15.23.9Privatenonfarmbusiness8.3.71.66 52 12.11 32 13. 23.31 52. 41 4 6.81 01 51.32 93.34.04.54 94.53.14 111.010.19 417 013.413.513 52.65 36.24 33.65.81 Output refers to gross domestic product originating in the sector in 1972 dollars.2 Hours of all persons in private industry engaged in production, 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. Alsoincludes 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-35.Source: Department of Labor, Bureau of Labor Statistics.229

PRODUCTION AND BUSINESS ACTIVITYTABLE B~37.—Industrial production indexes, major industry divisions, 1929-76[1967 = 100; monthly data seasonally adjusted]Year or monthTotalindustrialproductionTotalManufacturingDurable NondurableMiningUtilities1967 proportion192919331939 .1940 .19411942 .194319441945194619471948194919501951195?19531954. . . .19551956195719581959I9601961196219631964196519661967 . .19681969 .1970197119721973 . _ _197419751976 P. _.1975- JanFeb.. .MarADrMayJuneJulyAugSeDtOctNovDec1976: Jan..FebMarAprMayJuneJulyAugSeptOctNov pDec p100.0021.613.721.725.031.636.344.047.440.735.039.441.138.844.948.750.654.851.958.561.161.957.964.866.266.772.276.581.789.897.8100.0106.3111.1107.8109.6119.7129.8129.3117.8129.8115.2112.7111.7112.6113.7lib. 4118.4121.0122.1122.2123.5124.4125.7127.3128.1128.4129.6130.1130.7131.3130.8130.4131.9132.887.9522.814.021.525.432.437.847.050.942.635.339.440.938.745.048.650.655.251.558.260.561.257.064.265.465.671.575.881.089.797.9100.0106.4111.0106.4108.2118.9129.8129.4116.3129.7113.4110.8109.3110.9111.8114.6117.0119.7121.4121.2122.7123.6125.2127.0127.9128.5129.6130.2131.0131.6130.7130.0131.8132.751.9822.59.117.723.531.439.954.259.945.231.637.739.335.743.548.951.958.751.859.261.161.653.961.962.961.868.673.178.389.098.9100.0106.5110.6102.3102.4113.7127.1125.7109.312.. 5109.0105.6104.7105.4105.5107.0109.3112.3113.5112.7113.4114.4115.8117.9119.0120.1121.7122.3124.2125.1122.4121.4123.8124.835.9723 219.926.127.533.334.637.138.638.539.741.342.742.046.748.349.251.251.657.260.161.161.667.769.371.575.880.085.290.996.7100.0106.2111.5112.3116.6126.5133.8134.6126.4141.4119.8118.4116.1118.8120.8125. 5128.1130.5132.9133.6136.2136.9138.4140.2140.7140.7140.9141.3141.1140.9142.6142.3143.4144.26.3643 130.642 146 849 751 352.556 255.154.261.364.457.163.870.069.471.269.977.982.082.175.378.780.380.883.186.489.993.298.2100.0104.2108.3112.2109.8113.1114.7115.3112.8114.6113.8114.1113.7112.9111.8113.3110.8111.6111.6113.8114.2112.9113.6112.7113.9113.5113.0114.4112.5114.4115.7117.4116.8116.85.697 46 710 711 813 314 916 517 517 818 620.122 423 927.231 033 736.539.343.948.251.553.959.363.467.072.077.083.688.795.5100.0108.4117. 3124.5130.5139.4145.4143.7146.0151.7144.4145.1146.8143.3144.5148.1145.5148.3144.6143.8148.8147.2152.0152.5151.4150.8153.0151.2150.8151.3150.1150.8151.9154.4Source: Board of Governors of the Federal Reserve System.230

TABLE B—38.—Industrial production indexes, market groupings, 1947—76[1967 = 100; monthly data seasonally adjusted]Year ormonthTotalindustrialproductionFinal productsTotalConsumer goods lTotalAutomotiveprod-HomegoodsEquipmentTotalBusi-IntermediateproductsMaterials 2TotalDurablegoodsNondurablegoods1967 proportion...19471948.19491950.1951.1952195319541955195619571958195919601961196219631964196519661967196819691970197119721973197419751975: Jan...Feb..Mar..Apr..May..June.July..Aug_.Sept..Oct...Nov..Dec.1976: Jan...Feb..Mar..Apr..May..June.July..Aug..Sept..Oct.,.Nov p.Decp.100.0039.441.138.844.948.750.654.851.958.561.161.957.964.866.266.772.276.581.789.897.8100.0106.3111.1107.8109.6119.7129.8129.3117.8115.2112.7111.7112.6113.7116.4118.4121.0122.1122.2123.5124.4125.7127.3128.1128.4129.6130.1130.7131.3130.8130.4131.9132.847.82 27.68 2.83 5.06 20.14 12.63 12.8938.640.038.843.747.250.754.151.355.458.660.357.663.265.365.871.475.579.787.695.9100.0106.2109.6105.3106.3115.7124.4125.1118.2115.2113.5113.4114.7115.6118.2119.7120.8121.5120.9122.3123.5123.9125.3126.4126.3127.3127.6127.6128.3127.4127.3129.5131.342.443.743.449.649.150.253.252.959.061.262.662.168.170.772.277.181.385.992.697.3100.0105.9109.8109.0114.7124.4131.5128.9124.0117.0116.1117.0119.0120.4124.3126.6127.5129.0128.7131.1132.3133.1134.9136.1136.1137.4137.8136.8137.5136.2136.9138.7141.445.347.447.059.152.347.159.555.473.660.663.550.563.372.566.180.187.791.9113.3112.8100.0119.4118.198.8124.4141.4153.0132.8125.898.695.6108.4118.1122.4128.9137.0139.1142.1140.8143.2147.7142.8148.9155.1155.2154.0156.6155.9158.4147.4147.7161.9181.037.539.136.249.943.043.048.644.953.055.754.551.459.059.461.366.571.878.497.9100.0106.4113.2110.2115.6129.5142.5136.8118.8110.4109.7108.0113.2115.5117.3120.8123.5126.7127.0126.5126.4130.3131.7132.0133.1137.2137.4133.8135.6133.3133.5133.5134.330.632.228.731.143.351.956.349.350.455.357.551.556.558.157.363.767.571.480.794.0100.0106.5109.3100.194.7103.8114.5120.0110.2112.7110.0108.6108.7109.2109.8110.0111.4111.3110.0110.0111.5111.2112.1112.9112.9113.5113.8114.9115.7115.2114.4116.7117.738.039.534.537.045.251.253.346.850.858.861.151.557.959.457.762.765.873.784.497.7100.0105.5112.5107.0104.1118.0134.2142.4128.2130.8128.0125.7125.6126.0126.6127.3129.9129.2128.8129.6131.6131.0132.6134.0134.1134.6135.0136.9137.7137.5136.0139.5140.941.944.342.048.851.350.954.554.361.764.464.463.069.570.071.475.779.985.290.696.2100.0106.3112.9112.9116.7126.5137.2135.3123.1119.5117.9115.9116.9118.1120.8125.0127.9127.6128.0129.3129.9133.6135.3134.9134.7135.0135.9137.6137.8138.7138.4139.3140.439.2939.541.237.645.049.850.556.151.861.362.862.856.565.266.166.272.176.782.992.4100.7100.0106.5112.5109.2111.3122.3133.9132.4115.5113.7110.1108.3108.8109.8112.6114.5119.0121.0122.0123.1123.3125.3127.3128.2129.2130.6131.1132.2133.0132.5131.6132.3132.320.3538.339.435.344.450.551.660.352.063.763.963.853.764.064.863.370.475.181.993.8103.3100.0106.2112.1103.8104.9117.7134.6132.7109.1110.6105.3103.0103.2102.9104.3107.3112.9114.5114.6115.2115.5118.3121.6122.4124.5126.8127.0130.6131.4130.0128. 5129.1128.110.4745.952.554.954.754.462.163.265.871.375.682.290.397.5100.0108.8115.7115.4120.2132.9142.2142.6126.6116.6113.9110.8115.2118.7123.2127.1131.6138.8140.3141.3142.6142.9145.5146.7146.9146.2147.5146.0146.1147.8147.0148.1148.61 Also includes clothing and consumer staples, not shown separately.2 Also includes energy materials, not shown separately.Source: Board of Governors of the Federal Reserve System.231

TABLE B-39.—Industrial production indexes, selected manufactures, 1947-76[1967=100; monthly data seasonally adjusted]Period1967 proportion.1947194819491950..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..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 p..Dec p..Durable manufactures'rimary metalsTotal6.5763.365.855.469.775.869.278.563.582.582.078.562.372.772.471.176.382.392.8102.1108.4100.0104.3113.8106.6100.2112.1126.7123.196.4105.5103.498.495.090.890.692.397.797.995.498.192.69S.1103.9101.4105.4113.2111.5116.9118.6114.1109.8106.7100.4Ironandsteel4.2170.193.291.588.266.576.577.774.277.384.395.9105.2108.4100.0103.2112.6104.796.1107.1122.3119.895.8107.7108.7104.497.989.489.487.092.793.492.096.589.192.9100.997.7103.5110.7110.0115.3116.2110.3105.1102.794.6Fabricatedmetalproducts5.9349.950.845.856.159.958.566.059.467.868.870.663.371.071.169.475.477.882.690.897.2100.0105.6107.9102.4103.5112.1124.7124.2109.9105.9104.1103.9106.4106.2106.7108.9113.8115.3114.4116.3117.3116.6120.9120.2121.5121.4124.0124.6125.8126.6123.5126.2126.6Nonelectricalmachinery9.1539.039.233.437.547.751.954.046.150.658.057.948.656.756.955.462.166.375.685.098.8100.0101.8109.3104.4100.2116.0133.7140.1125.1128.4125.7122.7122.1122.0122.6123.9126.2125.5125.4126.6128.6129.0131.5132.9133.5134.0133.5135.0136.4136.8134.4137.2138.0Electricalmachinery8.0522.223.021.629.629.834.039.034.739.943.142.839.247.651.654.862.964.768.481.797.9100.0105.5111.9108.1107.7122.2143.1143.8116.5118.4113.5110.6112.7112.4112.4116.5118.0120.2120.1120.1122.7124.7126.5127.8130.0131.8132.0131.0135.3133.7134.8135.6137.0TransportationequipmentTotal9.2731.834.834.941.846.654.268.059.268.066.070.755.863.265.461.571.178.080.095.1102.0100.0111.1108.489.597.9108.2118.3108.797.488.783.388.590.894.697.9101.1105.0105.9104.4104.7106.7105.8109.0111.2110.6112.9112.6113.3115.0104.4104.3113.0120.9Motorvehiclesandparts4.5060.581.265.869.051.066.274.765.579.888.390.7115.9113.9100.0120.3116.592.3118.6135.8148.8128.2111.191.784.795.2101.7104.9110.2116.3123.7126.8126.5127.1130.1126.7135.2140.8141.3144.3146.5148.5150.6130.2128.3145.6161.1Lumberandproducts1.6458.961.354.165.765.564.768.468.075.975.068.869.979.374.778.282.586.392.796.3100.0100.0105.5107.9105.6113.8120.8126.0116.2107.695.096.798.0100.8105.4108.6110.6113.6115.8116.8114.1116.4123.5123.9121.1122.8123.0120.3124.6128.1128.7130.7131.7Nondurable manufacturesApparelproducts3.3157.860.359.764.363.166.367.266.473.375.074.972.880.181.782.285.589.L92.297.499.9100.0102.9106.7101.4104.7109.4117.3114.3107.696.6102.497.6100.4104.5105.1106.3112.8111.5115.9118.3121.2123.8128.0126.3126.1130.3126.8125.6123.7122.5126.6Printingandpublishing4.7243.345.446.648.949.749.752.054.159.563.265.463.968.271.071.373.977.882.687.994.6100.0103.2107.4107.0107.1112.7118.2118.2113.3111.7111.5109.9108.5111.4113.3115.5115.3114.7113.2115.4118.4120.0121.0121.0122.0120.5119.7122.0120.6120.6119.2121.3Chemicalsandproducts7.7419.721.321.026.229.731.133.634.139.842.745.246.654.356.459.265.771.878.887.895.7100.0109.5118.4120.4125.9143.6154.5159.4147.3141.7136.9134.6136.4139.5144.7147.1150.8154.4157.5161.9163.3162.9167.6170.6168.7166.6170.0167.6170.4170.5170.1172.8Foods8.7555.855.255.957.959.060.261.462.766.370.171.172.976.578.680.983.486.490.492.496.0100.0102.6106.1108.9112.8116.8120.9124.0123.4117.8117.9116.6120.2121.1124.3125.4125.8126.2126.4128.8128.5129.2130.8128.3129.2131.2130.5131.8133.4135.7136.1135.8Source:Board of Governors of the Federal Reserve System.232

TABLE B-40.—Capacity utilization rate in manufacturing, 1948—76[Percent; quarterly data seasonally adjusted]FRB series *Commerce series 2Wharton series 3Year orquarterTotalmanufacturingPrimaryprocessingAdvancedprocessingTotalmanufacturingDurablegoodsNondurablegoodsPrimaryprocessedgoodsAdvancedprocessedgoodsTotalmanufacturingDurablegoodsNondurablegoods1948 _.194982.574.287.376.280.073.2195019511952195319541955195619571958195982.885.885.489.280.187.086.183.675.081.688.590.284.989.480.692.089.484.775.483.079.883.485.989.380.084.284.483.174.981.188.990.388.492.482.991.490.888.077.584.083.787.286.093.379.590.289.186.170.878.696.194.891.891.287.793.193.490.887.492.01960196119621963196480.177.381.483.585.779.877.981.583.887.880.577.281.683.484.682.179.182.584.086.877.072.977.779.682.989.888.589.890.892,81965196619671968196989.591.186.987.086.291.091.485.787.688.688.991.187.686.885.092.496.693.595.095.390.696.091.893.794.095.397.596.097.097.21970197119721973197479.278.083.187.584.282.882. C88.092.487.577.375.980.584.982.387.986.491.897.193.084.282.388.996.691.993.592.996.398.094.7197573.673.473.780.477.186.01971: IIL...III...IV....77.577.977.879.081.782.981.182.475.375.275.977.186.286.386.087.282.582.581.482.892.092.393.194.11972: L.__.IL...III...IV....80.982.483.485.885.287.288.691.178.679.880.683.189.390.992.194.985.687.789.393.195.196.096.497.81973: I.....IL__.III...IV...87.187.687.887.791.892.192.793. G84.585.285.085.096.497.297.497.595.496.497.197.498.198.597.997.61974: IIII."!IV....85.785.885.579.790.590.089.080.483.083.483.679.394.794.894.687.893.393.593.986.996.996.895.789.21975: !..._.III."."IV....70.971.375.376.869.570.075.878.171.572.175.076.177.477.982.484.074.874.778.880.081.583.388.390.71976: I.....II—III*.79.080.280.281.582.578.279.279.686.487.888.082.684.985.792.792.691.81 For description of the series, see "Federal Reserve Bulletin," November 1976.2 Quarterly data ate for last month in quarter. Annual data are averages of the four indexes, except for 1965 (Decemberindex) and 1966-67 (averages of June and December indexes). For description of the series, see "Survey of Current Business,"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.233

TABLE B-41.—New construction activity, 1929-76{Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]Private constructionPublic constructionYear or monthTotalnewconstructionTotalResidentialbuildings 1Total *NewhousingunitsNonresidential buildings and otherconstruction^TotalCommercial3Other*TotalIndustrialFederalStateandlocal 519291933....19391940194119421943 .194419451946New series10.82.98.28.712.014.18.35.35.814.38.31.24.45.16.23.42.02.23.412.13.6.52.73.03.51.7.9.81.36.23.0.32.32.63.01.4.7.6.74.84.7.81.72.12.71.71.11.42.15.81.1.3.3.4.2.0.1.21.20.9.2.3.4.8.3.2.2.61.72.6.51.21.31.51.2.91.11.33.02.51.63.83.65.810.76.33.12.42.20 2.5.81.23.89.35.62.51.7.92 31.13 12.42 01.37.6.71.4194719481949.1950 ..1951...1952...1953..1954...1955 ..195619571958...1959...1960...196119621963- .1964...19651966196719681969...1970. .197119721973..- _ _19741975...20.026.126.733.635.436.839.141.446.547.649.150.055.454.756.460.264.867.773 776 478 187.193.994.9110.0124.1137.9138.5132.016.721.420.526.726.226.027.929.734.834.935.134.639.338.939.342.345.547.351 752 452 559.566.066.880.193.9105.4100.293.09.913.112.418.115.915.816.618.221.920.219.019.824.323.023.125.227.928.027 925.725 630.633.231.943.354.359.750.446.57.810.510.015.613.212.913.414.918.216.114.715.419.217.317.119.421.721.821 719 419 024.025.924.335.144.950.140.634.46.98.28.08.610.310.211.311.512.914.716.114.815.115.916.217.217.619.323 826.727 028.932.834.936.839.645.749.846.61.01.41.21.41.51.11.82.23.23.63.63.63.94.24.75.15.05.47.89.49.811.613.515.515.912.81.71.41.01.12.12.32.22.02.43.13.62.42.12.92.82.82.93.66.06.86.55.44.76.27.98.04.25.55.96.16.76.87.37.27.38.09.08.89.08.98.79.29.710.315.116.618.619.821.524.026.025.73.34.76.36.99.310.811.211.711.712.714.115.516.115.917.117.919.420.422.124.025.527.628.028.129.930.232.538.339.0.81.21.51.63.04.24.13.42.82.73.03.43.73.63.93.94.03.94.04.03.53.43.33.34.04.44.95.36.12.53.54.85.26.36.67.18.38.910.011.112.112.312.213.314.015.416.518.020.0"24 224.724.825.925.827.733. C32.9See footnotes at end of table.234

TABLE B-41.—New construction activity, 1929-76—Continued[Value put in place, billions of dollars; monthly data at seasonally adjusted annual rates]Private constructionPublic constructionYear or monthTotalResidentialbuildings iTotal JNewTotalnewconstructionnousingunitsNonresidential buildings and otherconstruction iTotalOther *TotalCommercialsIndustrialFederalStateandlocal*1975:JanFebMarAprMayJuneJuly....AugSept....OctNovDec1976:JanFebMarAprMay....JuneJuly....AugSept....OctNov*—130.2127.4123.7126.2127.1129.7133.1132.2136.3136.2138.0137.8136.7139.0145.1144.5143.4145.4141.1142.0146.3146.7150.293.891.189.589.289.990.692.092.195.495.697.398.199.3102.6107.1106.6107.2106.5104.3104.7108.7112.8116.344.042.842.743.243.944.746.146.348.449.450.452.152.855.258.158.958.858.757.255.458.763.566.633.431.931.431.331.532.233.433.635.737.538.939.939.341.143.844.243.945.446.946.548.851.152.949.848.346.846.145.945.945.845.747.046.246.946.046.647.448.947.748.447.847.149.349.949.349.715.114.513.412.712.312.212.312.412.412.412.412.211.512.813.312.612.312.012.613.012.812.612.48.58.48.18.08.48.18.28.07.97.67.77.67.57.87.67.27.06.76.16.96.96.46.526.225.425.325.325.225.525.325.326.726.226.826.227.626.828.027.929.129.128.429.430.330.430.736.436.334.237.037.239.141.140.140.940.640.739.837.436.438.037.936.238.936.837.337.634.033.95.76.05.95.85.85.86.26.36.35 96.66.66.26.76.16.66.06.46.46.47.65.77.030.730.228.431.231.433.335.033.934.634.734.133.231.229.732.031.330.232.630.430.930.028.226.91 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), publicutilities, and all other private.5 Includes Federal grants-in-aid for State and local projects.Source: Department of Commerce (Bureau of the Census), except as noted.235

TABLE B-42.—New housing units started and authorized, 1959-76[Thousands of units]New housing units startedYear or monthPrivate andpublic 1Total(farmandnonfarm)NonfarmTotalPrivate 1Total (farm and nonfarm)OneunitType of structure2 to 4units5 unitsormoreTotalNew private housing unitsauthorized 2Oneunit2 to 4units5 unitsor more1959_.., 553.7,531.3517.01, 234.0283.01, 208.3938.377.1192.91960_.1961_.1962_.1963_.1964_.., 296.1 ., 274.0., 365.0 1,336.8, 492.5 ,468.7., 634.9 ,614.8., 561.0 , 534.0252.2313.0462.9603.2528.8994.7974.3991.41,012.4970.5257.4338.7471.5590.8108.4 450.0998.01,064.21,186.61, 334.71, 285.8746.1722.8716.2750.2720.164.667.687.1118.9100.8187.4273.8383.3465.6464.91965..1966..1967..1968-.1969_.., 509.7 ., 487.51,195.8 ,172.81,321.9 , 298.8., 545.4 ,521.4, 499. 5 , 482.3472.8164.9291.6507.6466.8963.7778.6843.9899.4810.686.661.171.680.985.0422.5325.1376.1527.3571.21, 239.8971.91,141.01, 353.41, 323. 7709.9563.2650.6694.7625.984.861.073.084.385.2445.1347.7417.5574.4612.71970..1971.1972_1973.1974_1, 469.02,084.52, 378. 52,057. 5" 352.5, 433.6,052.2, 356.6, 045.3, 337. 7812.91,151.01,309.21,132.0888.184.8120.3141.3118.368.1535.9780.9906.2795.0381.61,351.51,924.62,218.91, 819. 51, 074. 4646.8906.11, 033.1882.1643.888.1132.9148.6117.064.3616.7885.71, 037.2820.5366.21975.1,171.4160.4 892.264.0 204.3939.2675.563.9199.8Seasonally adjusted annual rates1975:Jan...Feb..Mar..Apr..May..June.56.956.281.198.4117.0110.91,0059539869821,0851,080748722763774853874414846455356216183177163179150718729721843903938525529541605647667455744615762148143136177199209July..Aug..Sept..Oct...Nov..Dec.120.1118.7112.8125.097.277.11,2071,2641,3041,4311,3811,2839169799661,0931,04896276677610379772152182622352542441,0169981,0921,1111,1271,0916997257727948148127261718483722452122492332302071976:Jan...Feb..Mar..Apr_.May..June.72.991.6118.8137.4148.3155.11,2361,5471,4171,3671,4221,5109571,2951,1101,0551,0651,1397062807694762091902272362632951,1471,1651,1881,0821,1581,150851863882803807829717677717572225226229208276249July...Aug...Sept...Oct....Nov p.137.5147.6153.1150.2128.21,3821,5371,8401,8131,7051,1231,1711,2801,3401,2376984114102941902824463713741,2151,2961,5041,4921,5858708749269981,08573931061101092723294723843911 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 but 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 "EconomicReport" for this earlier series.Source: Department of Commerce, Bureau of the Census.236

TABLE B-43.-—Business expenditures for new plant and equipment, 1947-77 l(Billions of dollars; quarterly data at seasonally adjusted annual rates]ManufacturingNonmanufacturingYearor quarterTotalTotalDurablegoodsNondurablegoodsTotalMiningRailroadTransportationAirOtherPublicutilitiesCommunicationCommercialandothers19471948194919.3321.3018.988.449.017.123.253.302.455.195.714.6810.8912.2911.860.69.93.880.911.371.420.17.10.121.131.17.761.542.543.101.401.741.345.054.424.2419501951 .19521953195420.2125.4626.4328.2027.197.3910.7111.4511.8611.242.944.825.215.314.914.455.896.246.566.3312.8214.7514.9816.3415.95.841.111.211.251.281.181.581.501.42.93.10.14.24.24.241.091.331.231.291.223.243.563.744.343.991.141.371.611.781.825.225.675.456.026.4519551956 .19571958195929.5335.7337.9431.8933.5511.8915.4016.5112.3812.775.417.457.845.615.816.487.958.686.776.9517.6420.3421.4319.5120.781.311.641.691.431.361.021.371.58.861.02.26.35.41.37.781.301.311.301.061.334.034.525.675.525.142.112.823.192.792.727.638.327.607.488.44196019611962 . .1963196436.7535.9138.3940.7746.9715.0914 3315.0616.2219.347.236.316.797.539.287.858.028.268.7010.0721.6621.5823.3324.5527.621.301.291.401.271.341.16.821.021.261.66.66.73.52.401.021.301.231.651.581.505.245.004.904.985.493.243.393.854.064.618.759.139.9910.9912.02196519661967 ...1968196954.4263.5165.4767.7675.5623.4428.2028.5128.3731.6811.5014.0614.0614.1215.9611.9414.1414.4514.2515.7230.9835.3236.9639.4043.881.461.621.651.631.861.992.371.861.451.861.221.742.292.562.511.681.641.481.591.686.137.438.7410.2011.615.306.026.346.838.3013.1914.4814.5915.1416.05197019711972.. .1973197479.7181.2188.4499.74112.4031.9529 9931.3538 0146.0115.8014.1515.6419.2522.6216.1515.8415.7218.7623.3947.7651.2257.0961.7366.391.892.162.422.743.181.781.671.801.962.543.031.882.462.412.001.231.381.461.662.1213.1415.3017.0018.7120.5510.1010.7711.8912.8513.9616.5918.0520.0721.4022.0519751976 31977 3112.78121.23134.9547.9552.9859 5821.8423.6026 4726.1129.3833.1164.8268.2575.373.793.974.412.552.352.591.841.321.673.183.582.5620.1422.4425.6012.7413.63*•38. 5420.6020.961974: 1II....III...IV....107.27111.40113.99116.2242.9645.3247.0448.0821.4322.5023.0823.2821.5322.8223.9624.8064.3166.0866.9468.142.803.073.273.562.102.422.683.052.132.211.841.811.631.842.162.7120.1220.9720.1620.9313.8313.9414.0114.0421.6921.6322.8422.041975: 1II....III....114.57112.46112.16111.8049.0548.7847.3946.8222.8622.5921.0121.0726.2026.1926.3825.7565.5263.6864.7664.983.763.783.823.822.392.702.752.392.091.602.121.652.822.752.993.5620.2819.5219.7920.9113.3612.5012.9512.2220.8220.8320.3420.441976: 1IL...III....114.72118.12122.5549.2150.6454.7821.6322.5424.5927.5828.0930.2065.5167.4867.763.833.834.212.082.642.691.181.441.123.294.163.4421.9121.8521.6712.5412.6213.6420.6820.9420.99IV 3...127.8756.2325.2331.0071.644.031.981.513.3424.0536 731977: |3..__113129.38131.2856.9957.5825.5226.4531.4731.1272.3873.704.222.221.452.6724.5737 261 Excludes agricultural business; real estate operators; medical, legal, educational, and cultural services; and nonprofitorganizations. These figures do not agree precisely with the nonresjdential 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 Estimates based on expected capital expenditures reported by business in October-December 1976. Includes adjustmentswhen necessary for systematic tendencies in expectations data.Note.—Annual total is the sum of unadjusted expenditures; it does not necessarily coincide with the average of seasonallyadjusted figures.Source: Department of Commerce, Bureau of Economic Analysis.224-250 O - 77 - 16237

TABLE B-44.—Sales and inventories in manufacturing and trade, 1947-76(Amounts in millions of dollars; monthly data seasonally adjusted]Year or monthTotal manufacturingand tradeManufacturingMerchant wholesalersRetail tradeSales iInventoriesRatio 3 Sales i2Inventories2Ralio 3Sales iInventories2Ratio 3Sales iInventories2Ratio 31947..1948..1949..35,26033,78852, 50749,4971.421.5315,51317,31616,12625,89728, 54326,3211.581.571.756,8086,5147,9577,7061.131.1910,20011,13511,14914,24116,00715,4701.261.391.411950..1951..1952..1953..1954..38, 596 59,82243,356 70, 24244, 840 72,37747,987 76,12246,443 73,1751.361.551.581.581.6018,63421,71422, 52924,84323,35531,07839,30641,13643,94841,61248667876817,6958,5978,7829,0528,9939,2849,88610,21010,68610,6371.071.161.121.171.1812,26813,04613, 52914,09114,09519,46021,05021, 03121,48820,9261.381.641.521.531.511955..1956..1957..1958..1959..I960..1961.1962..1963..1964..51,694 79,51654, 063 87,30455, 879 89, 05254, 200 87, 09459,728 92,13260,828 94, 71861,160 95, 59665,660 101, 06468, 995 105,48273, 682 111,5011.471.551.591.601.501.561.541.501.491.4726,48027, 74028,73627, 24730,28630, 87930,92333, 35735,05837, 33045,06950,64251,87150, 24252,94853, 78554,88758,18760, 04863, 407627380847076747069649,89310,51310,47510, 25711,49111,65611,98812,67413, 38214,52911,67813, 26012,73012, 73913,87914,12014,48814,93616, 04817,0001.131.191.231.241.151.221.201.161.151.1415,32115,81116,66716,69617,95118, 29418, 24919,63020, 55621,82322,76923,40224,45124,11325,30526, 81326, 22127,94129,38631,0941.431.471.441.431.401.451.431.381.391.401965..1966..1967..1968..1969..1970..1971..1972..1973..1974..80, 283 120,91287,186 136,78989,746 145,364"97,124 155, -".,364103,120 168, 2971.451.481.571.551.5740,99544, 86946,48750, 26953, 54068,19077, 95184, 52790,39498,011104, \, 708 175, 418 1.64 52,831 101, 502112, !, __ 323 184, , 756 1.61 55,925 102, 490125, 269 198, 045145,297166, 771 227,9261.52 63, 042 108,0721.46 72,954 124, 395278, 386 1.51 84, 612 157,9716062767476898367586615,611 18,31716,987 20,76517,108 21,88518,366 22,99719, 756 24,91020, 58322,32724,86230, 40037,34427,29029,69532,81738.30246,5641.151.151.231.221.211.261.271.241.161.1323,67725,33026,15128,49029,82431,29434,07137, 36541,94344,81534,40538,07338,95241,97345,37646,62652,57157,15665,22973,8511.391.441.461.431.461.471.471.461.461.531975..172, 525 275, 4841.6087, 240 155, 69336,58345,1151.2448,70274,6761.511975: JanFebMarAprMayJune166,596 278, , 710168,070 277, 867164,116 276, 634167, 687 275, 628167,995 274,139 .170, 625 ""1,418 273,1.671.651.691.641.631.6083,937 159, 27183, 996 159; 159, 67782, 564 159,08785,511 158, 39284, 382 157,65985, 787 156, 582.90.90.93.85.87.8336.67537,12035,59035,22835,44236,18646,19745,95145,52745,30344,55844,8501.261.241.281.291.261.2445,98446,95445,96246,94848,17148,65273,24272,23972,02071,93371,92271,9861.591.541.571.531.491.48JulyAugSeptOctNovDec173, 802 273,277176, 001 274, 906177, 475 275, 576178,621 277, .... 680178,119 276, 804181,647 275, 4841.571.561.551.551.551.5287, 824 155, 1,92689,061 155,42690, 227 155, 53491,177 155,98490, 549 156,12192, 553 155i '".,693.78.75.72.71.72.6836,56737,16637,60437,44937,C1837,36C44,65345,5C145,62545,71545,55445,1151.221.221.211.221.231.2149,41149,77449,64449,99550,55251,73472,69873,97974,41775,98175,12974,6761.471.491.501.521.491.441976: JanFebMarAprMayJune183, 818 277, 057186,968 279, 008190, 224 281, 256191, 745 283,062190, 800 285,693193, 700 289,1381.511.491.481.481.501.4994,067 ] 156,12095, 551 1156,45897,786 157;! 157, 56098, 519 158,13498, 546 159,48898; 937 161,118.66.64.61.61.62.6338,15938,81639,09439,53039,38640,78045,64546,30746,39846,82647,79948,6451.201.191.191.181.211.1951,59252,60153,34453,69652,86853,98375,29276,24377,29878,10278,40679,3751.461.451.451.451.481.47JulyAugSeptOctDec*193,704 290, 866194,672 293, 308194, 261 296, 537192,963 298,179196,942 298,4901.50 99,334 162, !,1441.51 99, 448 163,1841.53 98,780 164,9661.55 97, 653 166,6741.52 100, 458 166,915.63.64.67.711.6640,61640,58141,38140.67640,82748,80549,00649,72349,84750,1651.201.211.201.231.2353,75454,64354,10054,63455,65757,37179,91781,11881,84881,65881,4101.491.481.511.491.461 Monthly average for year and total for month.2 Seasonally adjusted, end of period.3 Inventory /sales ratio. For annual periods, ratio of weighted average inventories to average monthly sales; for monthlydata, ratio of inventories at end of month to sales for month.Note.—The inventory figures in this table do not agree with the estimates of change in business inventories includedin the gross national product since these figures cover only manufacturing and trade rather than all business, and showinventories in terms of current book value without adjustment for revaluation.Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).238

TABLE B-45.—Manufacturers 9 shipments and inventories, 1947-76[Millions of dollars; monthly data seasonally adjusted]Shipments *Inventories 1Year or montlTotalTotalTotalDurable goods industriesWorkinprocessDurablegoodsindustriesNondurablegoodsindustriesMaterialsandsuppliesFinishedgoodsNondurable goods industriesTotalWorkinprocessMaterialsandsuppliesFinishedgoods1947.1948..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...1975: Jan....,FebMarAprMayJuneJuly....AugSept....OctNovDec1976: JanFebMarAprMay....JuneJuly....AugSept....OctN15,5117,31116,12118,63421,71422,52S24,84323,35!26,48027,74028,73627, 24730, 28630,87930,92333,35735,05837, 33040, 99544, 86946, 48750,26953, 540>2, 83115,925i3, 042r 2, 954!4, 61237, 24083, 93783, 99682, 56485,51184, 382B5, 78787, 82489, 06190, 22791,17790, 54992, 55394,06795, 55117, 786'8, 51938, 54698, 93799, 33499,44898,78017,65310,4586,6947,5797,198,84!10,49;11 3113,34'11,82.14,0714,71515,23713, 56315, 60915,88315,61617, 26218, 28019,63722, 22124, 64825, 26727,69829,47728,21529, 97334,04239, 70444, 04343, 91143, 05842, 86442,24243,40642, 56842, 96343,96244, 55245,29245, 24344, 54846, 77247, 28948,43050, 38250,14650, 55830, 6061, 0901, 64830, 06019, 267il,3658,81!9,7318,93!9,78S11,22111,21611,49411,52712,40913,02513,49913, 68414, 67714, 99615,30716,09516, 77817,69318, 77320, 22021, 22022, 57024,06424,61625,95328, 99933, 25040, 56941,13240, 32242,10441, 81342, 82443, 86244, 50944, 93545, 93446, 00145, 78146, 77847,12147, 40448, 37447, 98848, 33148, 24447, 79948, 72048,38649, 09325,89!28,54:26,32!31,07139, 30641,13643,94841,61245,06950,64251,87150, 24252, 94853, 78554, 88758,18760,04863, 40768,19077, 95184, 52790, 39498,011.01, 50202, 49008, 07224, 395.57, 97159, 27159, 67759, 08758, 39257, 659.56, 58255, 92655, 42655, 53455, 98456,12155, 69356,12056,458.57, 56058,13459, 48861,11862,14463,18464, 966:66, 67466, 91513,06!14,66:13,06115,53920,99:23,73:25,87823,71026,40130,44731,72830,25932,07732, 37532, 54434, 63235,86738, 50642,26449, 92254,88558,67564, 56166,64866,14970, 09881,218.01, 780[02, 828:03, 808.03, 70503, 88003, 73003, 21602, 79601,97601, 40301,22101,01600, 31099, 98099, 94200, 74001, 03301, 50202, 42902,85603, 28204,11705, 58906,0118,9667,8949,19410,41710,60810, 04110, 78:10,35410, 27610, 80211,06211,95813,31115, 03316, 39717,31418, 63819,12319,68120, 75225,89235, 80936, 54036, 93836,66336,16635,68135, 47035, 02534, 65034, 25933, 89933, 75433,14533, 55133, 26933, 54133, 41633,66933, 92734,06433, 82234,11335, 04735,32910,7209,72110,75612,31712 83712, 39113, 06512,77713, 21014,17014,88516, 20918, 09822, 58324, 98427, 26530, 32929, 78528, 58630, 73835, 44041, 25412,83613,88113,26143, 328 55, 693 00, 310 33,145 41, 304 25, 747 55, 382 23, 02341,06941,35841, 28641, 76641, 88941, 86642, 03041, 62241, 36241, 38441, 41241,30440, 91040, 56840, 74540, 91040, 97841,41141, 49941, 74341,98742,62742, 8896,2066,0406,3487,5658,1257,8298,2329,2439,0589,6599,92010, 34210, 85312, 30513, 50514,12115,60617,71417,83918, 55619,81224, 61325,07625, 38925, 71425, 96226, 23126, 02625, 86725, 79425, 83525, 93925,79325, 74725, 37125,43825, 55825, 85526, 04526, 34426,49526, 86227,11427, 91527, 79315,53918,31517,40518,07017,90218,66420,19520,14319, 98320,87121,41022, 34323, 55524,18224, 90125, 92628,02929, 64131,71933, 45034, 85436,34137, 97443,17756,19156,44255, 86955, 38254, 51253, 92853, 36653,12953,45054,13154, 76355,10555, 38256,14056, 51656, 82057,10157, 98658, 68959, 28859,90260, 85061,08560, 9048,3178,1678,5568,9718,7758,6749,0979,1049,5199,84410, 00510,15110, 46411,16311,71412, 28712,71813,13913,66114, 65517, 88223, 96323,88123, 55923, 35122, 83822,63022,07722,10521, 94822, 20022, 66322, 83723,02323, 28823,46023,66623, 76524, 36624,45324,90025,02325, 50226,88027, 3542,4722,4402,5712,7212,8642,8352,9502,9493,1093,2973,4103,5223,8204,2224,4324,8515,1175,2695,6766,0096,7518,5038,2348,2148,1618,0308,0017,8797,9297,9908,0598,1528,1508,2558,2348,3918,5208,6408,6778,7058,8738,9299,0049,0968,5248,5077,4097,4157,6668,6228,6248,4748,8259,3579,71510,41410,76411,22911,64312,64513,49614,58115,61216,44717,00317,30618, 54523, 72624,12424,34524,14924, 00123,67223,42023,35923,03623,44423, 77823,95024,01424,12424,46124, 53624,51224,66024,91325,36425,46025,87526, 25025,68125,043* Monthly average for year and total for month.s Book value, seasonally adjusted, end of period, except as noted.M Ote.—Data are as published by Bureau of the Census, but beginning 1968 detail for durable goods inventories doesnot add to totals. Correction will be published later by Census.Source: Department of Commerce, Bureau of the Census.239

TABLE B-46.'—Manufacturers 1 new and unfilled orders, 1947-76[Amounts in millions of dollars; monthly data seasonally adjusted!New orders'Unfilled orders»Unfilled ordersshipmentsratio 3Year or monthTotalDurable goodsindustriesTotalTotalCapitalgoodsindustries,nondefenseNondurablegoodsindustriesDurablegoodsindustriesNondurablegoodsindustriesTotalDurablegoodsindustriesNondurablegoodsindustries1947.1948.1949.1950..1951..1952..1953..1954..1955..1956..1957..1958..1959..15,25617,69315,61420,11023,90723,20423,58622,33527,46528,36827. 55927, 00230, 7246,3888,1266,63310,16512,84112,06112,14710, 76814,99615,36514,11113, 29016, 0038,8689,5668,9819,94511,06611,14311,43911,56612, 46913,00313, 44813,71214, 72034,47330,73624,04541,45667,26675,85761,17848,26660,00467, 37553,18347, 28052, 57128, 57926,61919,62235,43563, 39472,68058,63745,25056,24163, 88050, 35244, 46549, 2075,8944,1174,4236,0213,8723,1772,5413,0163,7633,4952,8312,8153,3643.423.633.873.353.073.004.124.274.554.003.673.530.961.121.04.85.86.941960..1961..1962..1963..1984..30, 23531,10433, 43635, 52438, 35715, 30315,75917,37418, 70920, 65214,93215,34516,06116,81517, 70545,06147, 38448, 60054,38467, 00142, 49144, 34545,98351,32163, 8062,5703,0392,6173,0633,1952.782.642.682.813.103.363.143.213.383.71.72.79.68.73.721965..1966..1967..1968..1969..1970..1971..1972..1973..1974..1975..1975:Jan..Feb..Mar..Apr..May_.June.July..Aug._Sept..Oct...Nov..Dec.1976:Jan..Feb..Mar..Apr..May..June-42,10046, 40247, 06250, 72054,01452, 09655,93764, 24676,21786, 98885,67380, 76081,15678, 96682,96883,11483, 48687,72088, 20589, 53390, 39290,62091, 81692, 82295,04498, 55098, 75699, 37999, 47623, 27826,17725,83128,14929, 93427, 44729,95135,14242, 88846, 57042.16440,15640.16538, 59040, 72341,15640, 37343, 53443, 36844,18143, 84044, 28245, 98545, 90447, 93051,11150, 24551, 35451, 2497,0797,8217,0537,5758,94711,16912,65610,89911,61910, 59310,15210, 75010, 56310, 30511,31910, 91511, 07011, H211, 36911,05411,66311, 90012,17312, 47612, 66612, 60718, 82320, 22521, 23222,57124, 07924, 64925, 98629,10433,32940, 41843, 50940, 60440, 99140, 37542, 24541, 95843.11344,18644, 83745, 35246, 55246, 33745, 83046, 91847.11447, 43948,51148, 02548, 22780,17498, 519105,114110,537116,330107, 460107,656122,362161, 766190, 271171, 438187, 094184, 255180, 656178,114176, 846174, 545174, 441173, 584172, 890172,104172,175171,438170,193169, 686170, 450170, 687171, 520172,05976, 39594, 689101,144106, 563112,158102,867102, 623116, 004154,361184, 697163, 582181, 795179, 097175, 445172, 762171, 350168, 760168, 332167,148166, 037164,634164, 368163, 582162,197161, 697162,426162, 525163, 322163, 9653,7783,8303,9703,9744,1724,5935,0336,3587,4045,5757,8565,2995,1585,2115,3515,4965,7846,1086,4366,8537,4707,8067,8567,9967,9898,0248,1628,1988, 0943.343.803.733.853.763.703.393.353.944.233.634.174.114.123.994.023.963.893.813.733.703.723.633.533.463.373.393.353.383.974.544.444.644.504.454.063.964.665.094.405.044.994.994.844.904.814.734.624.514.474.524.404.264.194.064.084.024.06.76.73.69.69.77.78.88.93.64.78.60.58.60.60.61.64.66.69.72.77.79.77.79.77.77.77.78.77July...Aug...Sept...Oct....NOVP_.99, 21497, 92498, 86999,701100,88851,18050, 38050, 06851, 07851, 98613, 77812,69013,46814, 30212, 79948, 03347, 54448,80148,62448,902171, 938170, 414170, 503172, 553172, 992164, 055162,787162, 795164, 607165, 2347,8837,6277,7087,9467,7583.383.313.333.433.374.043.974.024.124.05.76.73.72.77.741 Monthly average for year and total for month.2 Seasonally adjusted, end of period.3 Ratio of unfilled orders at end of period to shipments for period; excludes industries with no unfilled orders. Annualfigures relate to seasonally adjusted data for December.Source: Department of Commerce, Bureau of the Census.240

PRICESTABLE B-47.—Consumer price indexes by expenditure classes, 1929-76For urban wage earners and clerical workers[1967 = 100]Year or monthAllitemsFoodTotalHousingRentApparelandupkeepTransportationMedicalcarePersonalcareReadingandrecreationOthergoodsandservices1929193351 338 848 330 676.054.148.536.9193919401941194219431944194519461947194819491950195119521953 . .19541955195619571958195919601961196219631964196519661967196819691970197119721973 .197419751975: JanFebMar..AprMayJuneJulyAugSeptOctNovDec41.642.044.148.851.852.753.958.566.972.171.472.177.879.580.180.580.281.484.386.687.388.789.690.691.792.994.597.2100.0104.2109.8116.3121.3125 3133.1147.7161.2156.1157.2157.8158.6159.3160.6162.3162.8163 6164.6165.6166.334.635.238.445.150.349.650.758.170.676.673.574.582.884.383.082.881.682 284.988.587.188.089. i89.991.292.494.499.1100.0103.6108.9114.9118.4123.5141.4161.7175.4170.9171.6171.3171.2171.8174.4178.6178.1177.8179.0179.8180.752.252.453.756.256.858.159.160.665.269.870.972.877.278.780.881.782.383.686.287.788.690.290.991.792.793.894.997.2100.0104.2110.8118.9124.3129.2135.0150.6166.8161.3162.8163.6164.7165.3166.4167.1167.7168.9169.8171.3172.256.056.257.258.558.558.658.859.261.16§. 168.070.473.276.280.383.284.385 987.589.190.491.792.994.095.095.996.998.2100 0102.4105.7110.1115.2119.2124.3130.6137.3134.5135.1135.5135.9136.4136.9137.3138.0138.4139.3139.9140.642.442.844.852.354.658.561.567.578.283.380.179.086.185.384.684.584.185.887.387.588.289.690.490.991.992.793.796.1100.0105.4111.5116.1119.8122.3126.8136.2142.3139.4140.2140.9141.3141.8141.4141.1142.3143.5144.6145.5145.243.042.744.248.147.947.947.850.355.561.866.468.272.577.379.578.311A78.883.386.089.689.690.692.593.094.395.997.2100.0103.2107.2112.7118.6119.9123.8137.7150.6143.2143.5144.8146 2147.4149.8152.6153.6155 4156.1157.4157.636.736.837.038.039.941.142.144.448.151.152.753.756.359.361.463.464.867.269.973.276.479.181.483.585.687.389.593.4100.0106.1113.4120.6128.4132.5137.7150.5168.6161.0163.0164.6165.8166.8168.1169.8170.9172.2173.5173.3174.740.340.241.245.249.953.455.159.066.068.568.368.374.775.676.376.677.981.184.186.988.790.190.692.293.494.595 297.1100.0104.2109.3113.2116.8119.8125.2137.3150.7146.5147.8148.9149.5149.9150.3151.2151.4152.1152.9153.6154.645.346.147 750 054.160.062.464.568.772.274.974 476.676.977.776.976.777.880.783.985.387.389.391.392.895.095.997.5100.0104.7108.7113.4119.3122.8125.9133.8144.4141.0141.8142.0143.5143.8144.1144.4144.7146.0146.6147.0147.546.948.349.250.753.354.756.958 863.866.868.769.972.876.678.579.879.881 083.384.486 187 888.589.190 692.094 297.2100.0104.6109.1116.0120.9125.5129.0137 2147.4144.8145.9146.5146 8147.1147 3147.6148.1148 0148.5148.9149.81976: Jan... _FebMar.Apr__ _MayJuneJulyAugSeptOctNov166.7167.1167.5168.2169.2170.1171.1171.9172.6173.3173.8180.8180.0178.7179.2180.0180.9182.1182.418L6181 6181.1173.2173.8174.5174.9175.6176.5177.5178.4179.5180 1180.7141.2142.1142.7143.2143.8144.4145.0145.6146.2146 9147.5143.3144 0145.0145.7146.8146.9146 5148.1150.2150 9151.9158.1158 5159.8161.3163.5165.9167 6168.5169.5170 9171.4176.6178 8180.6181.6182.6183.7185.5186.8187.9188 9191.3155.7157 0157.4158.3158.9159.8160 5161.6.162.8163 9164.8148.2148.5149.0149.5150.3150.9151.2151.4152.8153.5154.1150.5151.3151.8152.5152.9153.2153.6153.8153.9154.4155.3Source: Department of Labor, Bureau of Labor Statistics.241

TABLE B-48.—Consumer price indexes by commodity and service groups, 1939-76For urban wage earners and clerical workers(1967=1001Year ormonth19391940 .194119421943 ...1944194519461947194819491950 . ...19511952195319541955 . ..195619571958195919601961196219631964196519661967196819691970197119721973197419751975: JanFebMar .AprMay....JuneJulyAugSeptOctNovDec1976: JanFebMarAprMay ....JuneJulyAugSeptOctNovAllitems41.642.044.148.851.852.753.958 566.972.171.472.177.879.580.180.580.281.484.386 687.388 789.690.691.792.994.597.2100.0104.2109.8116.3121.3125.3133.1147.7161.2156.1157.2157.8158.6159.3160.6162.3162.8163.6164.6165.6166.3166.7167.1167.5168.2169.2170.1171.1171.9172.6173.3173.8CommoditiesAllcommodities40.240.643.349.654.054.756.362.475.080.478.378.885 987.086.785.985.185.988.690 690.791 592.092.893.694.695.798.2100.0103.7108.4113.5117.4120.9129.9145.5158.4153.4154.4155.0155.7156.5157.9160.1160.4160.8161.7162.2162.7162.4162.3162.3163.1164.2165.2166.0166.6167.0167.4167.7Food34.635.238.445.150.349.650.758.170.676.673.574.582.884.383.082.881.682.284.988.587.188 089.189.991.292.494.499.1100.0103.6108.9114.9118.4123.5141.4161.7175.4170.9171.6171.3171.2171.8174.4178.6178.1177.8179.0179.8180.7180.8180.0178.7179.2180.0180.9182.1182.4181.6181.6181.1Commodities less foodAll47.748.050.456.058.461.664.168.176.882.781.581.487.588.388.587.586.987.890.591.592.793 193.494.194.895.696.297.5100.0103.7108.1112.5116.8119.4123.5136.6149.1143.9144.9146.0147.2148.1148.9149.9150.7151.4152.2152.6152.8152.3152.7153.3154.2155.5156.5157.1158.0158.9159.6160.3Durable48.548.151.458.460.365.970.974 180.386.287.488.495.196.495.793.391.591.594.495 997.396 796.697 697.998.898.498.5100.0103.1107 0111.8116.5118.9121.9130.6145.5139.3140.3142.1143.6144.8145.8146.9147.5148.2148 9149.2149.3149.0149.3150.4151.9153.5154.7155.8156.4156.9157.8158.0Nondurable44.344.746.751.653.856.658.662.972.277.876.376.282.082.483.183.583.585.387.688.289.390 791.291.892.793.594.897.0100.0104.1108.8113.1117.0119.8124.8140.9151.7147.2148.2148.8149.8150.5151.2152.2153.0153.8154 6155.1155.4154.7155.2155.5156.0157.0157.9158.1159.1160.4161.0161.9ServicesAllservices43.543.644.245.646.447.548.249 151.154.356.958.761.864.567.369.570.972.775.678.580.883 585.286.888.590.292.295.8100.0105.2112.5121.6128.4133.3139.1152.1166.6161.3162.6163.2164.1164.5165.7166.6167.4169.1170 1172.0173.1174.9176.1177.2177.7178.4179.5180.7181.8183.2184.1185.1Rent56.056.257.258.558.558.658.859 261.165.168.070.473.276.280.383.284.385.987.589.190.491 792.994.095.095.996.998.2100.0102.4105.7110 1115.2119.2124.3130.6137.3134.5135.1135.5135.9136.4136.9137.3138.0138.4139.3139.9140.6141.2142.1142.7143.2143.8144.4145.0145.6146.2146.9147.5Serviceslessrent38.138.138.640.342.144.245.146 749 051.954.556.059 362.264.866.768.270 173.376 479.081 983.985 587.389.291.595.3100.0105.7113 8123 7130.8135.9141.8156.0171.9166.2167.5168.3169.2169.6170.9171.9172.7174.6175.7177.7179.0181.0182.2183.4184.0184.7185.8187.2188.4189.8190.8191.8Special indexesAllitemslessfood47.247.348.752.153.655.756.959 464 969.670.371.175 777.579.079.579.781 183.885 787.388 889.790.892.093.294.596.7100.0104.4110.1116.7122.1125.8130.7143.7157.1151.9153.0153.9154.9155.6156.6157.6158.3159.5160.4161.5162.1162.6163.4164.2165.0166.0167.0167.9168.9170.0170.8171.6Allitemslessshelter39.739.942.447.751.352.253.659 068 573.972.673.179 280.881.081.080.681 784.486 987.688 989.990 992.193.294.697.4100.0104.1109.0114.4119.3122.9131.1146.1159.1154.1155.0155.6156.3157.0158.4160.3160.8161.6162.6163.4164.1164.4164.9165.3166.1167.1168.1169.0169.7170.4171.0171.6Nondurablecommodities38.438.941.647.651.852.253.759.671.977.274.975.482.583.483.283.282.583.786.388.688.289.490.290 992.093.094.698.1100.0103.9108.9114.0117.7121.7132.8151.0163.2158.7159.6159.7160.1160.8162.4165.0165.2165.4166.4167.1167.6167.3167.2166.7167.2168.2169.0169.7170.4170.7171.0171.3Source: Department of Labor, Bureau of Labor Statistics.242

TABLE B-49.—Consumer price indexes, selected commodities and services, 1939-76For urban wage earners and clerical workers[1967=100]Year or month1939... .19401941...194219431944194519461947 ..194819491950195119521953195419551956195719581959196019611962196319641965 .196619671968196919701971..19721973197419751975: JanFebMarAprMayJuneJulyAugSeptOctNovDec1976:JanFebMarAprMayJuneJulyAugSeptOctNovDurable commoditiesTotal i48.548.151.458.460.365.970.974.180.386.287.488.495.196.495.793.391.591.594.495.997.396.796.697.697.998.898.498.5100.0103.1107.0111.8116.5118.9121.9130.6145.5139.3140.3142.1143.6144.8145.8146.9147.5148.2148.9149.2149.3149.0149.3150.4151.9153.5154.7155.8156.4156.9157.8158.0Newcars43.243.346.669.275.682.883.487.494.995.894.390.993.598.4101.5105.9104.5104.5104.1103.5103.2100.999.1100.0102.8104.4107.6112.0111.0111.1117.5127.6123.4124.5127.3127.5126.8127.0126.6126.8126.5129.9131.3134.0134.2134.3134.5134.4134.5134.5134.4134.4134.2139.1139.7Usedcars"89." 275.971.869.177.480.289.583.686.994.896.0100.199.497.0100.0(i)103 1104.3110.2110.5117.6122.6146.4134.9133.5135.3138.1142.2147.5153.2156.1156.6156.5153.7149.6144.6144.9150.9159.4167.8173.4177.5179.6180.1179.9179.0Householddurables56.655.959.866.969.576.081.886.595.6101.799.0100.2109.8106.9105.7102.9100.199.7101.4102.1102.0101.9100.7100.6100.3100.298.798.6100.0103.3107.4110.2112.9115.0118.8128.9140.3136.8137.3138.3139.4140.0140.3140 6141.0141.7142.3142.9143.0143.3144.0144.8145.5145.8146.1146.5146.3146.7147.2147.8Nondurable commoditiesless foodTotal44.344.746.751.653.856.658.662.972.277.876.376.282 082.483.183.583.585.387.688.289.390.791.291.892.793 594.897.0100.0104.1108.8113.1117.0119.8124.8140.9151.7147.2148.2148.8149.8150 5151.2152 2153.0153.8154.6155.1155.4154.7155.2155.5156.0157.0157.9158.1159.1160.4161.0161.9Apparelcommodities43.043.545.853.555.959.863.069.580.485.482.081.188.787.786.786.385.887.388.288.289.090.390.891.292.092.893.696.0100.0105 6111.9116.5120.1122.7127.1136.1141.2138.6139.2139.9140.3140.8140.3139 8141.1142.3143.5144.4143.9141.5142.2143.1143.9145.1145.0144.4146.2148.5149.2150.1Nondurableslessfoodandapparel46.346.848.451.153.254.755.858.266.272.372.472.977 579.081.081.882.184.187.488.389.690.991.392.193.193 995.597.5100.0103 3107.0111.2115.2118.2123.4143.8157.9152.3153.6154.2155.4156.3157.7159 5160.1160.7161.3161.5162.2162.6162.9162.8163.2164.2165.6166.3166.8167.4168.1169.0Services less rentTotal38.138.138.640.342.144.245.146.749.051.954.556.059.362.264.866.768.270.173.376.479.081.983.985.587.389.291.595.3100.0105.7113.8123.7130.8135.9141.8156.0171.9166.2167.5168.3169.2169.6170.9171.9172.7174.6175.7177.7179.0181.0182.2183.4184.0184.7185.8187.2188.4189.8190.8191.8Householdserviceslessrent"iV.i75.479.481.685.086.087.189.090.492.195.7100.0105.9115.3126.8132.6139.2146.8166.0184.7179.0180.4180.8181.7182.1183.9184.8185.6187.0188.2190.7192.0193.7194.4195.1195.4196.1197.3198.7200.1201.5202.3202.6Transportationservices36.136.136.338.238.238.238.239.040.344.950.053.358.362.466.469.269.470.573.878.581.283.385.386.687.589.692.996.8100.0104.0111.3123.1133.0136.0136.9141.9152.7146.5147.2148.3149.5149.6150.4151.1151.9156.1157.0161.7163.2167.0168.9171.1171.7172.3173.2174.7175.5177.3178.9180.2Medicalcareservices32.532.532.733 735.436.937.940.143.546.448.149.251.755.057.058.760.462.865.568.772.074.977.780.282.684.687.392.0100.0107.3116.0124.2133.3138.2144.3159.1179.1170.7172.9174.7175.9177.0178.4180.4181.7183.2184.6184.2185.8188.0190.4192.5193.5194.6195.8197.9199.4200.6201.7204.5Other 37l7l73.976.278.080.883.485.687.790.192.696.2100.0105.6110.6116.7122.5125.8131.6141.6152.1148.8149.7150.1150.6151.0151.4152.0152.4153.8154.4155.2155.7156.6157.4158.4159.1159.7160.5161.2162.0163.6164.3165.21 Also includes the "other durables" group.1 Includes the services components of apparel, personal care, reading and recreation, and other goods and services.»Not available.Source: Department of Labor, Bureau of Labor Statistics.243

TABLE B—50.—Consumer price indexes, for commoditity groups, seasonally adjusted, 1973—76For urban wage earners and clerical workers[1967 = 100, seasonally adjusted]Year andmonth1973:Jan.__Feb...Mar „Apr...May..June..July...Aug...Sept..Oct...Nov...Dec...1974:Jan___Feb...Mar...Apr...May..June-July...Aug...Sept..Oct.-Nov...Dec...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.Allcommodities123.8124.8126.1127.3128.3129.1129.3132.5132.6133.3134.6135.8137.6139.5141.0141.7143.3144.4145.2147.4149.2150.5151.9153.1154.0154.6155.0155.6156.5157.6159.6160.1160.6161.5162.2162.9163.1162.7162.4163.1164.3164.9165.6166.4166.8167.3167.6Food129.0130.8134.0136.3138.3139.7140.0148.6148.2148.9150.8152.1154.2157.2158.4158.4160.1160.3159.8162.2165.2166.8168.7170.4171.3171.1170.6171.0172.5174.6177.8177.5178.0179.6180.6181.6181.2179.4177.9178.9180.6181.0181.2181.8181.8182.3181.9Commodities less foodTotal121.0121.5121.9122.5122.9123.3123.5123.9124.1124.9125.9127.0128.6129.9131.6132.7134.3135.9137.4139.3140.6141.7142.9143.8144.7145.7146.6147.4147.9148.5149.8150.7151.2151.7152.2152.8153.1153.5153.9154.4155.3156.0156.9157.9158.5159.115J.8Durable commoditiesTotal l120.2120.7121.0121.4121.7121.8121.8122.3122.4122.6122.8123.1123.7124.3125.1126.1127.6129.3130.8132.7134.4136.0137.4138.7140.0141.6143.2144.4144.8145.4146.2147.0147.6148.1148.5149.2149.7150.6151.7152.7153.6154.1155.0155.7156.3156.8157.4Householddurables116.4116.7117.1117.7118.4118.9119.2119.4119.8120.2120.6121.1122.2123.1124.1125.2126.4127.9129.2131.3132.6133.8135.2136.1137.3138.0138.7139.6139.9140.0140.3140.8141.3142.1142.7143.2143.7144.7145.2145.6145.7145.8146.2146.0146.3146.9147.7Newcars109.8110.2110.4110.9111.1111.0111.2111.7111.6111.5111.5111.4111.8112.1112.5113.2114.7116.4118.3119.0120.8123.3123.7124.2122.4124.0127.0127.4127.0127.1126.9127.7129.0129.5130.5133.4133.1133.8134.2134.3134.8134.6134.7135.3136.8138.7138.9Usedcars116.4118.8119.6120.8120.3119.5118.8118.0116.7114.7113.5112.4110.8109.3108.0110.7114.6119.5123.7128.0131.1134.4138.2138.2139.9142.0143.3143.3142.7144.3148.0151.2150.8150.7150.1149.4150.0154.1159.9165.4168.5169.7171.5173.9173.5173.3174.8Nondurabies less foodTotal l121.5122.0122.5123.3123.7124.4124.7125.0125.3126.6128.1129.7132.0134.0136.2137.5139.1140.6142.0144.1145.1145.8146.8147.4148.1148.7148.9149.5150.0150.7152.4153.4153.7154.4154.8155.3155.6155.7155.6155.7156.6157.4158.4159.6160.2160.8161.6Apparelcommodities124.5124.8125.5126.3126.7127.2127.2127.8128.1128.6128. 9129.4130.2131.5132.6133.7134.6135.6136.2139.2139.1139.4140.2140.3140.5140.5140.5140.4140.4140.3141.2142.3141.6141.9142.4142.7143.3143.6143.6143.9144.6145.0145.8147.4147.7147.5147.9Gasolineandmotoroil112.2112.8112.9114.4115.2117.8118.2118.7118.2123.1128.5134.0140.7147.7157.2159.2162.2162.9164.2164.1164.0161.8161.4161.7161.0160.6160.2160.9162.8166.6173.9176.3177.9179.4179.4179.1176.2173.6170.6169.0170.5174.0176.6179.2180.4182.7184.0Fueloilandcoal118.8124.4125.4126.6128.4131.8133.1135. 6137.1144.0156.5172.3191.2197.0197.4203.6209.4214.6221.1226.3229.2230.6230.6227.8224.5223.3223.4225.6228.4231.1237.0241.8246.2249.1248.1247.5244.0242.6242.3243.0244.2247.8251.1255.7258.6259.1259.61 Includes certain groups not shown separately.Source: Department of Labor, Bureau of Labor Statistics.244

TABLE B-51.—Consumer price indexes for service groups and selected expenditure classes,seasonally adjusted, 1973-76For urban wage earners and clerical workers[1967=100, seasonally adjusted]Yearand month1973: Jan...Feb...Mar...Apr...May...June..July...Aug...Sept..Oct...Nov...Dec...1974: Jan...Feb...Mar...Apr...May...June..July...Aug...Sept..Oct...Nov...Dec...1975: Jan...Feb...Mar...Apr...May..June..July..Aug...Sept..Oct...Nov...Dec...1976: Jan...Feb...Mar...Apr...May..June..July..Aug...IT::.Nov...ServicesAllAMservices135.4136.0136.6137.1137.8138.3138.6139.4140.6142.1142.8143.6144.7145.8147.1148.2149.8151.2152.8154.3155.8157.2158.4159.7161.1162.4163.3164.3164.9166.0166.9167.6169.0170.0171.7172.8174.7176.0177.2178.0178.8179.9181.0182.0183.0184.0184.7Rent121.6122.1122.6123.1123.7124.0124.5125.0125.5125.9126.4126.9127.6128.3128.6129.1129.6130.2130.7131.2131.9132.5133.2133.7134.4135.0135.4135.8136.4136.9137.5138.1138.5139.4140.1140.7141.1142.0142.6143.1143.8144.4145.1145.6146.3147.0147.6Total i137.9138.4139.1139.6140.3140.9141.1141.9143.3145.0145.7146.5147.7148.9150.4151.6153.3154.9156.7158.4160.1161.5162.8164.3165.9167.3168.3169.4170.0171.2172.1172.9174.4175.4177.3178.5180.7182.1183.5184.3185.1186.3187.5188.5189.6190.7191.4Services less rentHouseholdservicesless rent141.8142.5143.3144.0144.7145.5145.7147.0149.2151.4152.5153.6155.3156.9159.0160.6162.8164.7167.0169.2171.3173.4174.8176.6178.5180.1181.0182.3182.9184.7185.4186.0186.9187.8189.8191.1193.1194.2195.3196.0196.9198.3199.3200.5201.3201.9201.6Transportationservices135.5135.8136.1136.2136.6136.9136.9137.2137.4137.6137.6138.1138.5139.0139.5140.0140.6141.4142.3142.7143.5144.2145.1145.9146.3147.2148.3149.4149.8150.3151.1151.9156.2157.2162.0163.1166.7168.9171.1171.5172.5173.2174.7175.5177.5179.1180.6Medicalcareservices141.2141.5142.0142.6143.1143.5143.8144.0144.9147.8148.3148.9150.0151.2152.6153.7155.6158.0160.1162.5164.2165.5167.1168.7171.0173.0174.5176.0177.3178.4180.3181.4182.9184.6184.3186.1188.4190.4192.3193.7194.8195.8197.9199.0200.2201.7204.7Selected expenditure classesFuelandutilities122.3123.1123.6124.2124.9125.6126.1127.1127.8129.8132.5136.0140.2142.2143.8145.8148.0149.4151.5153.6155.4156.8157.6158.5159.8160.7161.7163.3164.7166.9168.8170.1172.5173.8175.1176.3175.6176.1177.5177.9179.3181.7183.4185.0186.8188.6189.0Householdfurnishingsandoperation122.6123.0123.2123.6123.7124.5124.9125.2125.8126.4127.2128.0129.6130.7132.9134.0136.8139.0141.3143.9146.2148.6150.6152.3153.9155.5156.0156.9157.2157.9158.2158.8159.7160.5161.2162.0164.4166.0167.1167.4167.7168.2168.9169.1169.7170.4171.2Apparelandupkeep124.2124.3125.1125.8126.3126.7126.9127.5127.8128.4128.9129.4130.3131.3132.6133.7134.6135.7136.4139.2139.3139.7140.5140.7141.0141.2141.4141.4141.5141.4142.3143.4142.8143.2143.6144.1145.0145.0145.4145.8146.5146.9147.8149.1149.5149.4150.0Transportation121.2121.9122.1122.9123.2123.7123.9123.9124.1124.8125.8127.1128.5130.5132.8134.1136.1137.8139.4140.5142.3142.6143.4144.0143.7144.9145.7146.6147.1148.6151.2152.7155.5155.9157.4158.3158.7160.1160.8161.8163.2164.6166.1167.5169.7170.7171.41 Also includes the "other services" group.Source: Department of Labor, Bureau of Labor Statistics.245

TABLE B-52.—Percent changes in consumer price indexes > major groups', 1948-76[Percent change]Year or monthAll itemsFoodCommodities lessfoodServicesDec.toDec*YeartoyearDec.toDec*YeartoyearDec.toDec*YeartoyearDec.toDec. iYeartoyear194819492.7—1.87.8-1.0-0.8-3.78.5-4.05.3-4.87.7-1.56.13 66.34 8195019511952195319545.85.9.9.6-.51.07.92.2.8.59.67.4-1.1-1.3-1.61.411.11.8-1.525.74.6.2-1.4-.17.5.9.2-1.13.65.24.64.21.93.25 34.44 33.319551956195719581959.42.93.01.81.5-.41.53.62.7.8-.93.12.82.2-.8-1.4.73.34.2-1.602 52.2.81.511.03.11.11.32.33.14.52.73.72.02 54 03.82 9196019611962196319641.5.71.21.61.21.61.01.23.1-.91.51.91.41.01.3.91.41.3-.3.61.2.4.4.3.7.82.71.91.72.31.83 32.01.92.01.9196519661967196819691.93.43.04.76.11.72.92.94.25.43.43.91.24.37.22.25.0.93.65.1.71.93.13.74.5.61.42.63.74.22.64.94.06.17.42.23.94 45.26.9197019711972197319745.53.43.48.812.25.94.33.36.211.02.24.34.720.112.25.53.04.314.514.44.82.32.55.013.24.13.82.23.410.68.24.13.66.211.38.15.63.84.49.319757.09.16.58.56.29.28.19.5Change from preceding month1975: Jan.FebMarAprMay __ _ _JuneJulyAugSeptOctNovDec1976- JanFebMarAprMayJuneJulyAugSept. . . _OctNov0.5.7.4.5.4.81.1.3.5.6.6.4.2.2.2.4.6.5.6.5.4.4.3Seasonallyadjusted0.7.5.4.5.5.71.0.4.4.6.6.54.1.2.4.6.5.5.5.4.3.30.7.4-.2-.1.41.52.4-.32.4.5.1-.4-.7.3.4.5.7.2-.40-.3Seasonallyadjusted0.5-.1-.3.2.91.21.8-.2.9.6.6-.2-1.0-.8.61.0.2.1.30.3-.20.7oooo.6.5.7.5.5.5.3.1-.3.3.6.8.6.4.6.6.4.4Seasonallyadjusted0.6.7.6.5.3.4.9.6.3.3.3.4.2.3.3.6.5.6.6.4.4.4UnadjustedUnadjustedUnadjustedUnadjustedadjustedSeasonally0.7 0.9.8.8.4.6.6.6.2.7\l.5.5.5.41.0.8.6.61.11.0.6.61.0 1.1.7.6.7.3.5.4.4.6.6.7.6.6.6.8.5.5.5.5 .41 Changes from December to December are based on unadjusted indexes.Source: Department of Labor, Bureau of Labor Statistics.246

TABLE B-53.—Wholesale price indexes by major commodity groups, 1929-76[1967=100]Farm products and processedfoods and feedsIndustrial commoditiesYear or monthTotalFarmproductsAll commoditiesProcessedfoodsandfeedsTotalTextileproductsandapparelHides,skins,leather,andrelatedproductsFuelsandrelatedproducts,andpower 1Chemicalsand alliedproductsi192949.164.148.648.959.4193334.031.437.836.347.647.4193939 840.043.342.852.351.5194019411942194319441945194619471948194940 545.150 953 353.654 662 376.582.878.794.3101.589.641.450.364 875 075.578 590.9109.4117.5101.682.988.780.644.047.350.751.552.353 058.070.876.975.3103.6108.198.945.248.452.852.752.252.961.183.384.279.951.454.656.257.859.560.164.476.990.586.252 457.063.364 164.865.270 593.795.987.619501951195219531954.-.. .19551956195719581959- .81.891.188.687.487.687.890.793.394.694.893.9106 9102.796.095.791.290.693.798.193.5106.7124.2117.2106.2104.798.296.999.5103.997.583.492.791.687.488.985.084.987.491.889.478.086.184.184.885.086.990.893.393.695.3102.7114.6103.4100.898.698.798.798.897.098.486.399.180.181.377.677.381.982.082.994.287.190.390.192.691.391.294.099.195.395.388.9101.796.597.798.998.599.1101.2102.0101.6I96019611962196319641965196619671968196994.994 594.894.594.796.699 8100.0102.5106.593.793.794.793.893.297.1103.5100.0102.4108.097.296.398.096.094.698.7105.9100.0102.5109.189.591.091.992.592.395.5101.2100.0102.2107.395.394.894.894.795.296.498.5100.0102.5106.099.597.798.698.599.299.8100.1100.0103.7106.090.891.792.790.090.394.3103.4100.0103.2108.996.197.296.796.393.795.597.8100.098.9100.9101.8100.799.197.998.399.099.4100.099.899.9197019711972 . .19731974197519761975: JanFeb....MarAprMayJuneJulyAugSeptOctNovDec110 4114 0119.1134 7160.1174.9182.9171.8171.3170.4172.1173.2173.7175 7176.7177.7178.9178.2178.7111.7113.9122.4159.1177.4184.2183.1183.8179.5174.9178.8181.2182.3188.2189.0190.4190.5186.1186.0111.0112.9125.0176.3187.7186.7191.1179.7174.6171.1177.7184.5186.2193.7193.2197.1197.3191.7193.8112 1114.5120.8148.1170.9182.6178.0186.4182.6177.3179.4179.0179.7184.6186.3186.1186.2182.6181.0110.0114.1117.9125.9153.8171.5182.3167.5168.4168.9169.7170.3170.7171.2172.2173.1174.7175.4176.1107.1109.0113.6123.8139.1137.9148.0137.5136.5134.3134.4135.2135.9136.8137.6138.4141.3143.2144.0110.3114.1131.3143.1145.1148.5167.4142.1141.7143.2147.5147.7148.7149.3149.3151.3152.4154.4154.6106.2115.2118.6134.3208. 3245.1265.5232.2232.3233.0. 236. 5238.8243.0246.6252.4254.9256.5257.0258.0102.2104.1104.2110.0146.8181.3187.0176.0178.1181.8182.4182.1181.2181.4182.1182.2182.3182.9183.41976: JanFebMar.AprMayJune.179.3179.3179.6181.3181 8183.1184.6182.0180.3183.7184.9187.5192.8191.0187.2192.9192 6196.5179.4176.4175.8178.0179.9181.8177.3178.0178.9180.0180 4181.3145.1146.3146.7147.4147.0148.1157.5159.9162.0165.4169.6167.4257.3255.7255.7256.9257.2260.3184.2184.9185.6187.1186.9187.1JulyAug .Sept...OctNov.. .Dec_184.3183.7184.7185.2185.6187.1188.1181.7182.7179.4178.4183.9196.9189.3191.8186.6183.6191.6182.6176.8177.1174.9174.8179.0182.6183. 6184.7186.3187.0187.4149.0149.2149.0149.3149.8149.5169.8171.3173.6170.8169.7171.5265.0269.1270.9277.0281.8278.8187.0187.7188.5188.4188.7188.4See next page for continuation of table and for footnotes.247

19291933193919401941194219431944194519461947194819491950195119521953195419551956195719581959TABLE B—53.~—Wholesale price indexes by major commodity groups,Year or month1960 ...196119621963 . . .19641965196619671968196919701971 . .197219731974197519761975:Jan .FebMarAprMay__JuneJuly.AugSeptOctNovDec1976: JanFebMarAprMay .JuneJulyAugSeptOctNovDec.Rubberandplasticproducts59.440.261.257.161.571.673.672.770.570.870.572.870.585.9105.495.589.190.4102.4103.8103.4103.3102.9103.199.296.396.895.595.997.8100.0103.4105.3108.3109.1109.3112.4136.2150.2159.2149.6150.0149.7149.4148.9148.6150.1150.0150.8151.5151.8151.9152.4154.2155.5156.7157.1157.2158.2161.0163.6164.5164.8164.6Lumberandwoodproducts25.019.024.827.432.735.637.740.641.247.273.484.077.789.397.294 494.392.697.198.593.592.498.895.391.091.693.595.495.9100.2100.0113.3125.3113.6127.3144.3177 2183.6176.9205.6164.7169.3169.6174.9183.0181.0179.6179.7179.9179.1178.3183.1190.5196.0202.3203.3203.3199.8203.7207.5212.7213.6214.3219.9Pulp,paper,andalliedproducts72.575.772.474.388.085.785.585.587.893.695.496.497.398.195.296.395.695.496.298.8100.0101.1104.0108.2110.1113.4122.1151.7170.4179.4169.8169.8170.0169.7169.8169.8170.0170.0170.3170.9171.3173.1174.8175.8176.9178.5179.2179.5180.5181.0181.6181.4181.7182.0[1967=100]Industrial commodities—ContinuedMetalsandmetalproducts40.230.737.637.838.539.139.039.039.644.354.962.563.066.373.873.976.376.982.189.291.090.492.392.491.991.291.393.896.498.8100.0102.6108.5116.6118.7123.5132.8171.9185.6195.8185.5186.3186.1185.7185.1184.5183.4184.3185.5187.2187.0187.1187.7189.2190.6192.9194.0196.4198.7199.0200.0199.9199.9200.841.341.442.142.842.442.142.246.453.758.261.063.170.570.672.273.475.781.887.689.491.392.091.992.092.292.893.996.8100.0103.2106.5111.4115.5117.9121.7139.4161.4170.9156.6157.7158.8159.7160.4161.0161.7162.2163.1164.1165.3165.8167.0167.7168.2168.9169.4170.2171.0171.4172.9174.2174.7175.5MachineryandequipmentFurnitureandhouseholddurables55.844.652.653.857.261.861.463.163.267.177.081.682.984.791.890.191.992.993.395.898.399.199.399.098.497.797.097.496.998.0100.0102.8104.9107.5110.0111.4115.2127.9139.7145.5138.8139.1138.5138.5138.6139.0139.2139.8140.1141.1141.5142.0143.1143.4143.9144.4144.8145.3145.7146.1146.5147.0147.4147.8Nonmetallicmineralproducts51.247.249.149.150.252.352.453.555.759.366.371.673.575.480.180.183.385.187.591.394.895.897.097.297.697.697.197.397.598.4100.0103.7107.7112.9122.4126.1130.2153.2174.0186.0168.5170 3170.8173.0173.1173.3174.7175.8176.1177.1177.7178.0181.1181.3182.5185.2185.6186.0186.9187.7188.2189.1189.1189.51929-76—ContinuedTransportationequipment:Motorvehiclesandequipment241 934 839 140 443 247.247 247.548 356 064.170 875.775 379.484 083.683.886 391.295.198.1100.398.898.698.697.898.398.598.6100.0102.8104.8108.7114.9118.0119.2129.2144.6153.8140.2141.5143.0143.0142.9143.1143.1143.5143.9150.0150.6150.9151.3151.3151.7151.9151.6151.6151.7152.8153.5159.0159.1159.5* Prices for most items in this grouping are lagged and refer to 1 or 2 months earlier than the index month.3 Index for total transportation equipment is not shown but is available beginning December 1968.Source: Department of Labor, Bureau of Labor Statistics.248Miscellaneousproducts73 576 578.079 283.983 485.686.486.587.690.292.092.293.093.393.794.595.295.997.7100.0102.2105.2109.9112.9114.6119.7133.1147.7153.7145.5146.4146.8147.2147.5147.5147.7147 A148.2147.6148.6151.1151.8152.]152.6152. i152.7154 .t153.8153. E153. £154.:156.:157. C

TABLE B-54.— Wholesale price indexes by stage of processing and by special groupings, 1947-76[1967=100]Year or monthAllcommoditiesCrude materialsfor further processingTotal101.2110.996.0104.6120.1110.3101.9101.097.197.699.8102.099.497.096.597.595.494.599.3105.7100.0101.6108.4112.3115.1127.6174.0196.1196.9205.1189.3185.8182.4189.4196.7197.1203.0204.1207.5206.8199.8201.3201.2199.5199.1205.3205.7210.2211.8205.9206.4204.0204.5207.9Foodstuffsandfeedstuffs111.7120.8100.3107.6124.5117.2104.9104.995.193.197.2103.096.295.193.895.792.990.897.1105.9100.0101.3109.3112.0114.2127.5180.0189.4191.8190.2182.4177.1172.9181.7190.9192.1202.1201.9204.92C4.6195.4195.1193.2191.6188.3194.5194.1197.8196.3188.6189.0182.2178.8187.4Non,foodmaterialsexceptfuel90.6100.791.6104.7120.7104.6100.198.2103.8107.6106.2102.2105.8101.4102.5102.0100.7102.4104.5106.7100.0102.1106.9109.8110.7121.9161.5205.4188.3210.3184.1184.7184.4186.2188.1187.6183.8189.6194.2192.7190.6193.8199.8196.3200.5207.0208.7214.3222.8216.4217.2213.1213.3213.7FuelIntermediate materials, supplies, and components »TotalMaterials and components formanufacturingTotalMaterialsForfoodmanufacturingFornondurablemanufacturingFordurablemanufacturingComponentsMaterialsandcomponentsfor construction19471948...19491950195119521953195419551956195719581959196019611962196319641965196619671968196919701971197219731974197519761975: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...76.582.878.781.891.188.687.487.687.890.793.394.694.894.994.594.894.594.796.699.8100.0102.5106.5110.4114.0119.1134.7160.1174.9182.9171.8171.3170.4172.1173.2173.7175.7176.7177.7178.9178.2178.7179.3179.3179.6181.3181.8183.1184.3183.7184.7185.2185.6187.166.678.778.377.979.479.982.779.078.884.489.290.391.992.892.692.193.292.893.596.3100.0102.3106.6122.6139.0148.7164.5219.4271.5314.7266.7265.2256.6266.3276.4274.1278.0273.2275.6274.8270.0281.3279.3278.5286.2291.6293.3301.8306.0315.8316.0356.7390.4361.272.478.375.278.688.185.586.086.588.192.094.194.395.695.695.094.995.295.596.899.2100.0102.3105.8109.9114.1118.7131.6162.9180.0189.2179.1178.8178.1179.0178.4178.4179.3180.9181.0182.2182.3182.6183.7184.5185.6186.8187.5188.9190.4190.8192.4192.6193.0193.972.177.874.578.188.584.886.286.388.492.694.895.296.596.595.394.794.995.997.499.3100.0102.2105.8110.0112.8117.0127.7162.2178.7185.4180.1179.7178.0177.9177.0176.3177.4178.8178.6180.0180.1179.9180.6181.4182.2183.6184.2185.1186.6186.9188.0188.3188.6189.194.096.983.386.796.692.993.092.289.389.791.393.490.091.194.092.096.695.297.6101.9100.0101.5107.1112.9116.5119.9146.0209.2209.4180.6245.1236.4220.0213.7200.6194.1204.0210.7204.1200.0195.3189.2186.3183.0183.7182.9183.6182.1186.8178.0176.5174.4174.7175.595.2100.891.996.5111.7100.699.898.298.6100.1101.4100.4102.1102.199.999.398.499.1100.0100.8100.0101.3102.4103.8105.3109.4121.2155.2174.7183.5172.2172.4171.9172.7173.5173.3174.0175.2175.9177.4178.7179.5180.3181.0181.7183.2183.4183.5184.4184.6185.1184.8185.1184.754.461.463.166.774.174.377.679.383.388.591.92.094.294.393.092.993.094.896.898.6100.0103.3109.1114.7118.2123.8133.7171.7188.4202.2187.1186.9186.9187.6187.7187.3187.1187.6188.1191.4191.2191.4192.5194.6195.9198.0199.4202.0204.2205.4207.3208.3208.5209.958.363.064.266.675.675.777.177.580.988.391.892.593.693.192.291.591.592.393.897.1100.0102.3105.5111.1114.8117.6121.4139.9158.3165.4155.4157.3157.2157.3157.4157.9158.1158.6159.0159.6160.5160.7161.5162.0162.4163.0163.4164.0164.6166.4168.0169.2169.5170.266.073.173.277.084.383.785.185.588.993.594.094.096.695.994.694.294.595.496.298.8100.0104.9110.8112.6119.7126.2136.7161.6176.4187.9171.9173.7173.9175.2177.0177.0176.9177.2177.6178.4178.5179.8181.7182.9184.6185.5186.0186.5188.2189.6191.5192.1192,4193.6See next page for continuation of table and for footnotes.249

TABLE B-54.—Wholesale price indexes by stage of processing and by special groupings t 1947-76—Continued[1967=1001Finished goodsSpecial groupingsYear or monthTotalTotalConsumer finished goodsFoodsOthernondurablegoodsDurablegoodsProducerfinishedgoodsCrudematerials2Intermediatematerials,supplies,andcomponents3ConsumerfinishedgoodsexcludingfoodsManufacturedgoodsTotalDurable1947194819491950195119521953195419551956195719581959I960 .19611962196319641965196619671968196919701971 .197219731974197519761975- JanFebMarAprMayJuneJulyAugSeptOctNovDec1976: JanFebMar.AprMayJune...JulyAugSeptOctNovDec74.079.977.679.086 586.085.185.385.587.991.193.293.093.793.794.093.794.195.798.8100.0102.9106.6110.3113.7117.2127.9147.5163.4170.2159.3159.3158.9160.0161.2162.5164.5164.9166.2168.0168.0168.5168.7168.2167.9169.0169.3169.8170.5170.0170.7172.2172.4174.180.586.582.583.991 890.789.289.188.589.892.494.493.694.594 394.694.194.396.199.4100.0102.7106.6109.9112.9116.6129.2149.3163.6168.9159.8159.4158.5159.7161.1162.6165.0165.3166.7168.3168.1168.5168.3167.4166.8168.0168.4168.8169.5168.6169.2169.9170.1172.082.890.483.184.795.294.389.488.786.586.389.394.590.192.191.792.591.491.995.4101.6100.0103.7110.0113.5115.3121.7146.4166.9181.0180.2177.0175.5172.6174.9177.7180.3184.8183.9186.5187.3185.5185.6183.7180. 2178.6182.1183.2182.1182.2177.9178.1176.8176.0180.980.785.882.383.690.087.888.688.989.491.193.292.694.094.794.794.895.194.895.997.8100.0102.2105.0108.3111.7113.6120.5146.8163.0173.2158.2158.8158.9159.5160.4161.6163.2165.1166.1167.2168.0168.9169.5170.2169.9170.2170.1171.7173.5174.9176.0176.7177.5178.074.679.781.882.788.288.989.690.391.294.397.198.499.699.298.898.397.898.297.998.5100.0102.2104.0106.9110.8113.2115.8126.3138.2144.3135.9136.3136.9137.0137.0137.3137.4137.4137.7141.1141.8142.2142.9142.9143.1142.9142.9143.5143.5143.5144.1147.1147.4147.855.469.463.464.971.272.473.674.576.782.487.589.891.591.791.892.292.493.394.496.8100.0103.5106.9112.0116.6119.5123.5141.0162.5173.2157.4158.3159.7160.7161.2161.7162.4163.0164.0166.5167.4168.0169.5169.9170.5171.1171.3172.0172.6173.1174.2177.4177.8178.979.292.584.093.6102.993.192.488.096.6102.3100.996.9102.398.397.295.694.397.1100.9104.5100.0102.0110.6118.9122.7131.1155.2219.1225.1250.0219.4221.0218.4222.7225.8226.3223.4225.8231.5228.6226.5231.2233.9231.8237.9246.0246.2248.6254.2254.9253.0261.5269.6262.370.076.174.277.787 084.385.385.788.392.695.094.896.496.895.595.395.095.696.998.9100.0102.6106.1109.9114.3118.9128.1159.5178.6189.4175.0175.9176.4177.3177.7177.8178.3179.3179.9181.4182.0182.6183.7184.8185.9187.3187.8188. 7190.0191.2192.6193.1193.5194.179.084.082.283.589 588 389.189.490.192.394 694.795.996.396 296 096.095.996.698.1100.0102.1104.6107.7111.2113.5118.6138.6153.1161.7149.4149.8150.2150.6151.1152.0152.9154.1154.8156.8157.6158.3158.9159.4159.3159.3159.3160.5161.5162.3163.2164.9165.5165.9iIncludes, in addition to subgroups shown, processed fuels and lubricants, containers, and supplies.> Excludes crude foodstuffs and feedstuffs, plant and animal fibers, oilseeds, and leaf tobacco.» Excludes intermediate materials for food manufacturing and manufactured animal feeds.72 378.275.578.487 085 185.085.786.690.092 893.894.694.894.494.594.394.896.399.1100.0102.6106.3110.2113.9117.9129.2154.1171.1178.9168.2168.0167.8168.7169.5170.1171.4172.3173.0174.5174.4174.7175.3175.6176.0177.0177.6178.7179.7179.7180.8181.5181.9183.259 465.467.369.676 376 778 479.482 287.590 992 294.094.193 693 593.594.695.897.9100.0103.5107.7112.0117.0121.1127.4148.6165.6175.5162.0163.2163.7164.4164.9165.1165.2165.7166.2168.2168.8169.4170.7171.4172.3173.1173.6174.6175.6176.4177.7179.7180.0181.0Note.—For a listing of the commodities included in each sector, see monthly report, "Wholesale Prices and PriceIndexes," January-February 1967.Source: Department of Labor, Bureau of Labor Statistics.250

TABLE B-55.—Wholesale price indexes for selected groupings, seasonally adjusted^ 1973-76[1967 = 100, seasonally adjusted]Year andmonth1973:JanFebMarAprMayJuneJulyAugSeptOctNovDec1974:JanFebMarAprMayJuneJulyAugSeptOctNovDec1975: JanFebMarAprMayJuneJulyAugSeptOctNovDec1976: JanFebMarAprMayJuneJulyAugSeptOctNovDecFarm products andprocessed foodsTotal136.4141.1148.5148.6155.8163.2154.5183.1172.9168 3167.0169.2176.9178.8175.7170.3168.7161.7170.7182.2178.7186.1190.9187.3182.7177.8174.5179.7183.0182.0185.4187.8189.8191.7188.9187.8183.8180.3179.9184.9186.8187.5185.7180.3182.1180.4180.8185.6md feed:Farmproducts144.1148.6159.3161.0170.6180.6169.8212.0199.9191 2188.3189.6201.9202.3195.5186.4181.4167.3178.0188.4182.6189.9191.7186.1178.8171.7169.7178.1186.0184.5189.9192.7196.9199.9196.1197.2192.6187.7185.9193.8194.9195.4193.4187.7191.2188.9188.0194.9Processedfoodsandfeeds131.5136.3141.5140.7146.4152.1144.7164.7155.7153.7153.4156.2160.9163.9163.1160.1160.6158.2166.0178.2176.2183.7190.4188.1185.1181.6177.5180.7181.0180.4182.5184.8185.3186.6184.3181.8178.3175.5175.9179.3181.6182.4180.8175.6176.4175.1176.2179.7Crudematerialsi139.8141.2141.4144.6147.7151.6154.3156.5162.0166.5174.9182.5189.7201.3210.7221.7213.3215.6229.8230.2231.0231.5229.6224.8221.4219.2217.1219.6222.5224.1224.5226.5232.9231.4227.4235.4236.0230.0236.5242.6242.6246.1255.5255.7254.5264.7270.7267.1Intermediatematerials,supplies,andcomponents3121.9123.0124.9125.9127.1128.0127.7128.7129.7131 1133.2136.2138.9141.2146.1150.3155.2158.8163.4168.6170.1172.3174.0174.9176.4176.8176.8176.8176.5176.9177.1178.2179.4181.6183.3184.6185.2185.7186.3186.7186.5187.8188.7190.1192.0193.3194.9196.3Producerfinishedgoods120.3121.1121.7122.4123.2123.5123.6124.0124.4124.9125.6126.6128.1129.3131.0132.6136.0138.8141.7145.3148.3151.6153.8155.2157.1158.4159.9160.9161.3161.8162.6163.1164.3166.3167.1167.9169.1170.0170.7171.3171.4172.1172.9173.2174.5177.0177.4178.7Special groupingsConsumer finished goodsTotal120.8122.1125.0126.4127 3128.7128.3133.9133.5133 5134.7136.0139.4142.3143.1144.9146.4145.6149.1151.7153.5156.3159.7159.5159.2158.5157.7160.0161.6162.9164.2164.9167.1168.7169.2169.4167.9166.7166.0168.4168.9169.0168.6167.9169.5170.1171.3173.0Foods130.6132.2138.7141.3142 9145.8144.3158.0156.3154 8155.5156.6161.1164.6162.8163.9163.8158.2163.3167.1168.8172.1179.4177.3175.1173.2170.6175.9179.6181.7183.6183.2186.6187.9187.6187.0182.0178.1176.6183.4185.3183.6180.4176.4177.7177.0178.4182.7Othernondurablegoods115.7117.4118.0118.6119.1119.6120.0120.5121.2123 0125.0127.2130.7134.1137.7140.9143.9147.0149.9152.4154.4156.2157.1157.8158.8159.0158.7159.2159.9160.8162.4164.4166.3167.9169.0170.1170.2170.4169.7169.9169.6170.8172.6174.2176.2177.4178.6179.3Durablegoods113.3113.7114.4115.2115.7116.0116.1116.5116.7116.4117.0117.5119.2120.1120.9122.0123.7125.1126.8127.7129.4132.6133.8134.9135.5136.2136.9137.0137.0137.3137.4137.8138.8140.7141.8141.9142.5142.8143.1142.9142.9143.5143.5143.9145.3146.7147.4147.5ManufacturedgoodsTotal121.6123.6125.4126.5128.0129.8128.5132.7131.5132.3133.6135.8138.7141.0143.5146.3149.2151.2155.6161.0162.1165.4167.0167.9168.4168.3167.6169.0169.3169.8170.5171.4172.7174.7175.3175.8175.5176.0175.8177.4177.4178.3178.8178.8180.4181.7182.8184.3Durablegoods122.8123.8125.4126.4127.3127.3127.1127.6128.2129.1130.6132.4134.3135.3138.2141.0145.2147.7151.1154.2156.4158.8160.2161.3162.7163.5164.0164.2164.2164.3164.5165.0166.0168.4169.5170.6171.4171.7172.6172.9172.9173.7174.9175.7177.5179.9180.7182.31 Excludes crude foodstuffs and feedstuffs, plant and animal fibers, oilseeds, and leaf tobacco.2 Excludes intermediate materials for food manufacturing and manufactured animal feeds.Source: Department of Labor, Bureau of Labor Statistics.251

TABLE B-56.—Percent changes in wholesale price indexes, major groups\ 1948-76(Percent change]Year or monthAllcommoditiesIndustrialcommoditiesFarm productsand processedfoods and feedsTotalConsumer finished goodsFoodsAll except foodsDec.toDec. 1YeartoyearDec.toDec 1YeartoyearDec.toDec 1YeartoyearDec.toDec.'YeartoyearDec.toDec 1YeartoyearDec.toDec. 1Yeartoyear19481949195019511952195319541 5-6.114.71.2-3.4.5-.68.2-5.03.911.4-2.7-1.4.25 0-5.014.0.4-1.41.4.28.6-2.13.610.4-2.3.8.2-6.8-8.917.03.5-8.2-2.3-2.67.6-11.74.813.8-3.9-6.5-.31.2-5.610.22.7-3.1-.1-.67.5-4.61.79.4-1.2-1.7-.1-2.4-7.413.35.3-5.9-2.2-1.99 2-8.11.912.4g-5.2-.84 C-4.58 2.9-1.11 6.36 3-2 11 67.2-1.39.31955 . . ..1956195719581959196019611962196319641.64.52.0.5.5-.20- 1.4.23.32.91.4.2.1-.4.3- 3.24.34.21.1.91.2-.6-.1'5.62.24.52.8.31.80- 50_ 1.5-6.46.04.2 2-4." 43.9-.6.6-2.10-4.7-.73.44.7-4.7.201.1-1.0-.6-.13.13.0.2-.72.1-.8.1-.4.2-.71.52.92.2-.81.0-.2.3-.5.2-2.93.65.3.4-3.75.2-1.8.5-1.3.4-2.5-.23.55.8-4.72.2-.4.9-1.2.51.72.51.7.2.8.4-.3-.11.182.42 5.11.3.4-.20-.1196519661S67196819693 41.71 02.84.82 03.322.53.91 42.21 92.73.91.32.21 52.53.49.5.2-1.83.57.54.26.6-3.42.45.54.01.61.?3.14.91.93.4.62.73.89.11.4-.44.88.23.86.5-1.63.76.1.91.72 12.02.971.61 92.12.4197019711972197319742 24.16 315.420.93 73.34 513.118.93 63.43 410.725.63 83.73 36.822.2-1 46.014 426.711.03.42.07.530.011.51.43.54.313.617.13.12.73.310.815.6-2.55.98.022.513.03.21.65.620.314.03 91.82.27.420.53 03.22 14.516.9197519764 24.79 24.66 06.411 56.3-.3-1.13.8-.66.22.19.63.25.5-2.58.4-.46.74.810.55.61975: JanFebMarAprMayJuneJulyAugSeptOctNovDec1976: JanFebMarApr....MayJuneJulyAugSept....OctNovDecUnadjustedSeasonallyadjusted-0.2-.7-.5!6.0.8.99.743 1.1 13-.2-.42.8.3.4.3-.1.9.6.6.80.2l'.O.6.31.2.66.3o o.9.3.7.7-.3.5.3.2Unadjusted0.8.5.3.5.4.2.3.6 5944.7.45.6.2.5.7.5.6.9.4.9Seasonallyadjusted0.8'.2.2.2.4.71.2 76.4.13.3.1.5.7.7.91.0.8.2Change from preceding month-2.5-2.7-1.93.01.8-.51.91.31.11.0-1.5-.6-2.1-1.9-.22.81.0.4-1.0-2.91.0-.92'. 70.7-.3-.6.8.9.91.5.2.81.0-.1.2-!5-. 4.7.2.2.4-.5.4.4.11.11 Changes from December to December are based on unadjusted indexes.Source: Department of Labor, Bureau of Labor Statistics.252-0.2-.4-.51.51.0.8.8.41.31.0.3.1-.9-.7-.41.4.3.1-.2-.41.0.4.71.00.6-.8-1.71.31.61.52.5-.51.4.4-1.0.1-1.0-1.9-.92.0.6-.6.1-2.4.1-.7-.52.8-1.2-1.1-1.53.12.11.21.0.7-.2-.3-2.7-2.1-.83.91.0-.9-1.7-2.2-'.4.82.4Seasonallyadjusted0.7 0.5.3 .2.3 .1.3 .2.3 .3.6 .5.6 .7.8 .9.5 1.01.3 1.0.8.4 .4.1.2-.2-. 10.6.6 .7.5 .6.6 1.11.0 .7.4 .7.2 .2Unadjusted-1.4-2.3-2.62.21.3.63.2.4.7.1-2 3-.1-.8-1.4-.91.9K4.3-3.4.6-1.8-.6.3 3.1SeasonallyadjustedUnadjustedSeasonallyadjustedUnadjustedSeasonallyadjustedUnadjusted.4.3-.100.8

MONEY STOCK, CREDIT, AND FINANCETABLE B-57.—Money stock measures, 1947-76[Averages of daily figures; billions of dollars, seasonally adjusted, except as noted]Overall measuresComponents and related itemsYear andmonthM!Currencyplusdemanddeposits)M 2(M, plustimedepositsat commercialbanksother thanarge CDs)M 3(IV! 2 plusdepositsat nonbankthriftinstitutions)CurrencylDeposits at commercial banksDemand2Time and savings 3TotalLargeCDs

TABLE B-58.—Commercial bank loans and investments, 1930-76[Billions of dollars]End of yearor month iTotal loansand investments2Total JLoansCommercialandindustrialInvestmentsU.S. GovernmentsecuritiesOthersecuritiesLoans plusloans sold tobank affiliates »1930:June1933: June193919401941194219431944194519461947194848.930.440.743.950.767.485.1105.5124.0114.0116.3114.234.516.317.218.821.719.219.121.626.131.138.142.4Seasonally adjusted5.07.516.317.821.841.459.877.690.674.869.262.69.46.57.17.47.26.86.16.37.38.19.09.2194819491950195119521953195419551956195719581959 319601961196219631964 .19651966196719681969 *1970197119721973_197419751976 p1976: Jan p.Feb vMar vApr vMay pJune *» _ _July pAug pSept pOct pNov pDec p113.0118.7124.7130.2139.1143.1153.1157.6161 6166.4181.2188.7197 4212 8231 2250 2272.3300 1«316.1352 0390 2401.7435.5485.7558.0633.48 690.4721.1767.5723.3726.7731.2734.5737.6738.8743.1748.7752.5760.3766.3767.541.542.051.156.562.866.269.180.688 191.595.6110.5116 7123.6137 3153 7172.9198 2«213.9231 3258 2279.4292.0e 320.9378.9449.08 500.2496.9521.6497.3497.8499.7500.5500.6500.7504.7507.6511.4519.3521.8521.639.442 143.947 652.158.469.578.686.295 9105.7110.0116.17 130.2156.48 183.3176.0176.2176.6175.1«>171.4170.5170.7170.2171.0171.0172.0174.8176.7176.262.366.461.160.462.262.267.660.357.256.965.157.759.965.364.761.560.757.153.559.460.751.257.860.662.654.550.479.496.581.084.488.290.093.094.092.795.094.093.594.396.59.210.312.413.414.214.716.416.816.317.920.520.520.823.929.235.038.744.8«48.761.371.371.185.7«104.2116.5129.98 139.8144.8149.4145.0144.5143.3144.0144.0144.1145.7146.1147.1147.5150.2149.4283.3294.7«323.7381.5453.38 » 505.0501.3525.4501.6502.3503.9504.7505.0505.2509.2511.6515.3523.1525.6525.41 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 bank loans only beginning January 1959.1 Beginning January 1959, loans and investments are reported gross, without valuation reserves deducted, rather thannet of valuation reserves, as in earlier periods.< Effective June 1966, balances accumulated for payment of personal loans (about $1.1 billion) are excluded from loansat all commercial banks, and certain certificates of CCC and Export-Import Bank totaling about $1 billion are included inother 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.« Beginning June 1971, Farmers Home Administration insured notes totaling about $0.7 billion are classified as othersecurities rather than as loans.7 Beginning June 1972, commercial and industrial loans were reduced by about $0.4 billion due to loan ^classificationsat one large bank.8 Beginning June 1974, the merger of a large mutual savings bank and a nonmember commercial bank increased totalloans and investments by $0.6 billion, loans by $0.5 billion, and other securities by $0.1 billion.Beginning November 1974, the liquidation of one large bank reduced total loans and investments by $1.5 billion, totalloans by $1 0 billion, commercial and industrial loans by $0.6 billion, and other securities by J0.5 billion. In addition, commercialand industrial loans were increased by $0.1 billion due to loan ^classifications at one large bank.9 Beginning August 1974, reflects new cefinition of affiliates included and different group of reporting banks. Amount oftotal loans sold was reduced by $0.1 billion.*° Loan reclassifications reduced these loans by $1.2 billion as of March 1976.Source: Board of Governors of the Federal Reserve System.254

TABLE B-59.—Private liquid asset holdings, nonfinancial investors, 1959—76[Averages of daily figures; billions of dollars, seasonally adjusted]YearandmonthTotalliquidassetsTotalCurrency and depositsCurrencyiDemanddepositslTime depositsCommercialbanks iNonbankthriftinstitutions2U.S. TreasurysecuritiesSavingsbonds 3Shorttermmarketablesecurities4Negotiablecertificatesof depositsOtherprivatemoneymarketinstruments81959: Dec.1960: Dec.1961: Dec__1962: Dec._1963: Dec__1964: Dec.1965: Dec.1966: Dec.1967: Dec.1968: Dec._1969: Dec.1970: Dec.1971: Dec_1972: Dec.1973: Dec.1974: Dec.372.9386.2410.3441.8479.1515.2559.2587.1638.6697.2723.2770.9857.4972.01,083.61,175.2290.6305.7326.3352.2382.3414.6451.1474.3521.0565.3582.8632.5721.0817.4887.4944.628.929.029.630.632.534.336.338.340.443.446.149.152.656.961.567.8104.2104.6106.3106.5109.7114.3119.3121.7130.3140.9145.0151.8161.5176.5183.3186.664.769.977.088.898.6108.8125.1136.9156.2174.3176.8198.9233.6264.4294.4321.192.9102.2113.5126.4141.5157.3170.4177.3194.0206.7214.9232.7273.4319.6348.0369.246.145.746.546.948.149.049.650.251.251.851.752.054.357.660.463.335.332.131.933.435.033.035.837.834.840.953.242.031.734.543.247.12.75.39.011.615.114.619.322.59.123.030.239.858.179.80.92.83.14.04.86.97.510.312.416.626.421.420.222.734.640.41975: Dec__1,301.81,053.373.7190.6360.3428.667.365.772.942.71975: Jan..Feb..Mar..Apr..May..June.1,183.5 949.41,191.5 956.11, 199. 5 965.01, 208. 3 973.51,218.2 985.61, 233.1 1, 000. 568.268.769.469.570.271.0185.2184.7185. 6186.3187.9190.2323.8326.9329.3331.7335.9341.5372.2375.9380.7386.0391.6397.863.663.964.264.564.865.248.048.749.049.650.752.282.682.179.778.575.173.639.940.641.742.142.041.6July..Aug_.Sept.Oct..Nov..Dec.1,245.41,254.01,262.61,274.91,291.51,301.81,012.21,021.41, 028. 81, 036. 81, 047. 51, 053. 371.371.972.072.673.473.7190.8191.7192.0191. 2192.5190.6345.9347.8349.6353.0357.1360.3404.1410.0415.2420.0424.4428.665.665.966.266.666.967.354.657. 158.260. b64.065.771.969.069.170.671.672.941.240.640.240.441.542.71976: Jan..Feb..Mar.Apr..May..June-1,311.3 1, 064. 51, 322. 3 1, 078.11,331.3 1, 087. 61, 345. 3 ',101.61,355.0 ,112.21, 366. 5 ,118.974.275.075.776.777.377.6191.0191.8192.0194.5196.0195.0365.8372.5375.9381.1384.6387.4433.5438.8444.0449.3454.3458.967.668.068.368.669.069.466.566.867.868.569.170.069.566.164.162.358.961.143.143.343.644.445.847.2July...Aug...Sept..Oct...Nov p.1, 380.91, 388. 71, 398. 31,414.21, 427.1,131.2, 144. 0,156.4,171.8, 183. 378.178.679.179.880.3195.9196.7195.7198.2197.5392.7397.1402.7408.0414.0464.5471.6478.9485. 8491.569.770.370.871.171.572.071.469.669.068.860.054.953.453.754.048.048.248.348.749.51 Money stock components (see Table B-57) after deducting foreign holdings and holdings by domestic financial institutions.The three columns add to M2 held by domestic nonfinancial sectors.2 As published in money stock statistics.3 Series E and H savings bonds, other savings bonds, and savings notes held by individuajs.4 Short-term marketable U.S. Treasury securities excluding official, foreign, and financial institution holdings.6 Certificates over $100,000 at weekly reporting banks, except foreign holdings.6 Commercial paper, bankers' acceptances, Federal funds, security repurchase agre< [reements, and money market mutualfund shares held outside banks and other financial institutions.Source: Board of Governors of the Federal Reserve System.255

TABLE B-60.—Total funds raised in credit markets by nonfinancial sectors, 1968-76[Billions of dollars]Item 1968 1969 1970 1971 1972 1973 1974 1975Total funds raisedU.S. Government.Public debt securitiesAgency issues and mortgages.Foreign-Corporate equities.Debt instruments. _Private domestic nonfinancial sectors-Corporate equities.Debt instruments...Debt capital instruments..State and local government obligationsCorporate bondsMortgagesHome.Multi-family residentialCommercialFarmOther debt instruments..Consumer creditBank loans n.e.c. ...Open-market paper.OtherBy borrowing sector: Total.State and local governments.Households..Nonfinancial businessFarmNonfarm noncorporate...CorporateTotal funds advanced to nonfinancial sectorsFinanced directly or indirectly by:Private domestic nonfinancial sectorsDepositsDemand deposits and currency..Time and savings accountsAt commercial banks..At savings institutionsCredit market instruments, netOther sources :U.S. Government securitiesPrivate credit market instrumentsCorporate equitiesLess security debtForeign funds.At banks..DirectChange in U.S. Government cashbalanceU.S. Government loansPrivate insurance and pension reservesOther98.313.610.53.12.8.22.781.9-.282.151.89.512.929.417.33.46.62.230.210.013.81.55.081.99.832.140.02.85.331.998.361.648.514.833.720.713.013.28.611.9-6.5.85.12.62.5-1.25.218.98.693.5-3.7-1.3-2.43.7.593.53.490.152.59.912.030.618.14.95.71.837.610.415.51.89.993.510.733.848.93.17.538.493.546.95.17.3-2.2-10.68.441.817.527.2-4.5-1.611.09.61.3.53.119.712.4100.711.912.9-1.02.7.12.75.780.460.211.219.829.214.46.97.120.15.96.72.65.086.111.325.349.42.35.741.5100.764.064.28.955.338.716.6-.2-7.16.8-.8-.92.8-8.110.92.82.821.96.4151.024.726.0-1.35.2.05.2121.111.4109.786.817.518.850.528.69.79.82.422.811.66.5-.45.1121.117.842.161.24.510.346.4151.087.092.813.779.139.539.6-5.8-10.810.9-3.72.123.3-3.927.23.22.824.410.3176.915.214.31.04.0-.44.4157.710.9146.8102.815.412.275.242.612.716.43.644.018.618.1.86.5157.715.264.877.75.813.158.8176.9120.1105.321.683.738.345.414.84.219.5-4.54.316.15.310.8-.31.826.113.0197.68.37.9.46.2-.26.4183.17.9175.3106.716.39.281.246.410.418.95.568.621.734.82.59.6183.114.873.594.89.712.372.9197.6134.890.314.176.247.828.444.519.427.8-6.9-4.210.56.93.6-1.72.830.620.5188.812.012.0-.015.3-.215.5161.64.1157.5101.219.619.761.934.67.015.15.156.39.826.26.813.5161.618.645.297.87.96.783.1188.8123.375.78.367.445.022.447.617.930.1-1.2-.826.314.511.7-4.633.2210.485.285.8-.613.012! 8112.29.9102.3101.317.327.256.840.810! 95.21.08.5-14.5-2.29.1112.214.949.747.69.41.237.1210.4146.596.711.984.825.759.249.823.030.7-1.82.210.3-.410.72.915.140.0-4.4See footnotes at end of table.256

TABLE B- 60.—Total funds raised in credit markets by nonfinancial sectors, 1968—76—Continued[Billions of dollars]Item1976 unadjustedquarterly flowsIII1976 seasonallyadjusted annual ratesIIITotal funds raised50.863.562.2233.6250.3258.8U.S. Government24.19.418.073.474.278.9ForeignPublic debt securitiesAgency issues and mortgagesCorporate equitiesDebt instrumentsr24.1-.03.7.13.623.09.4-.04.6.14.649.617.3.23.6.13.640.673.4-.016.6.416.2143.674.4-.214.7.214.5161.478.1.818.017] 8161.8Private domestic nonfinancial sectorsCorporate equitiesDebt instrumentsDebt capital instrumentsState and local government obligationsCorporate bondsMortgagesHomeMulti-familyCommercialFarmOther debt instrumentsConsumer creditBank loans n.e.cOpen-market paperOtherBy borrowing sector: Total3.219.923.21.86.514.911.3L91.5-3.3-1.1-8.51.64.723.03.546.133.17.35.020.915.4.23.41.912.96.82.21.62.349.61.539.130.54.73.921.816.6.73.11.58.76.5-.2-.42.740.612.6131.0105.38.125.871.453.61.310.36.125.718.1-16.47.516.5143.614.0147.4118.328.615.574.255.212! 75.829.120.6-9.08.88.6161.46.1155.7118.618.018.182.461.92.511.56.537.219.27.3-3.914.6161.8State and local governmentsHouseholdsNonfinancial businessFarmNonfarm noncorporateCorporate2.89.211.02.6-.48.95.520.623.54.62.216.75.023.112.63.21.77.712.071.160.510.74.445.421.474.665.511.36.048.118.987.056.011.86.238.0Total funds advanced to nonfinancial sectors50.863.562.2233.6250.3258.8Financed directly or indirectly by:Private domestic nonfinancial sectors30.639.528.5153.7156.0152.2Deposits16.327.414.0109.4107.7Demand deposits and currencyTime and savings accounts.At commercial banks.At savings institutionsCredit market instruments, net-12.729.07.421.614.47.619.84.415.412.1-7.821.77.314.514.617.991.417.474.044.37.673.215.357.975.3-3.2111.040.370.744.4U.S. Government securitiesPrivate credit market instrumentsCorporate equitiesLess security debt9.06.0-.4.33.110.3.41.79.86.8-1.3.722.230.9-7.71.236.941.23.86.726.928.1-7.92.7Other sources:Foreign fundsAt banksDirect2.6-2.45.05.02.03.03.7 g4'. 515.2-7.923.219.97.812.18.9-2.010.9Change in U.S. Government cash balanceU.S. Government loansPrivate insurance and pension reservesOther-.72.812.03.66.9.210.91.21.43.311.014.3.212.047.94.721.4—.243.79.53.312.143.938.5Source: Board of Governors of the Federal Reserve System,257

TABLE B-61.—Federal Reserve Bank credit and member bank reserves, 1929-76Year and month1929: Dec1933: Dec1939: Dec1940: Dec1941: Dec1942: Dec1943: Dec1944: Dec1945: Dec1946- Dec1947: Dec1948: Dec1949: Dec1950: Dec1951: Dec1952: Dec1953: Dec.1954: Dec1955: Dec1956: Dec. .1957: Dec1958: Dec1959: Dec ....1960: Dec .1961- Dec1962: Dec1963: Dec1964- Dec1965: Dec1966: Dec1967- Dec1968: Dec . . .1969- Dec1970- Dec1971: Dec1972: Dec1973: Dec1974: Dec1975: Dec1976: Dec v1975: JanFebMarAprMayJuneJulyAug .SeptOctNovDec1976: JanFeb ...MarAprMayJuneJulyAugSept...OctNovDec pTotal1,6432,6692,6122 3052,4046,03511 91419,61224, 74424 74622,85823,97819,01221,60625,44627 29927,10726,31726,85327,15626,18628,41229,43529,06031,21733, 21836,61039 87343,85346,86451,26856,61064,10066,70874,25576,85185,64293,96799, 651107, 75793,00291,16890, 81993,21497,84595,11994,14492, 39595,27796,93197,81799,651100,172101, 369101,336100, 317102,951103,106104, 799105, 393105, 880107, 270106, 522107, 757[Averages of daily figures; millions of dollars)Reserve Bank credit outstanding4462,4322,5102 1882*2195 54911 16618 69323, 70823 76721 90523,00218, 28720 34523,40924 40025 63924,91724,60224 76523,98226 31227,03627,24829 09830,54633,72937 12640, 88543,76048 89152, 52957, 50061 68869,15871,09479,70186,67992,108100, 32886,03984,74484, 84787,08091,91888,91288,16686, 82989,19190,47690,93492,10892, 99894, 61094, 88093, 24395,96795, 59297,10598, 45898, 797100, 37499,507100, 328Member bankborrowingsTotal801953354902653341572241341181426571 593441246839688710557906871493043272434545572387651,0863211071,0491,298703127623901471061106027126121139619161127797658441211201231047566844132131313107911173861652813911862Seasonalother,mainlyfloatAll111120242831322113396142991141804826586547028227298426071,1191,3801,3061,0271,1541,4121,7031,4941,5431,4931,7251,9702,3682,5542,5042,5142,5472,1393,3165,5144,6994,9904,7084,6436,5857,4167,3676,5736,2775,8666,0245,8675,9365,7175,3555,6906,2646,8227,4167,0956,6836,3987,0306,8637,3947,5716,8317,0086,8306,9317,367TotalMember bank reserves2 3952,58811,47314 04912 81213,15212 74914 16816 02716 51717,26119,99016, 29117,39120,31021,18019,92019, 27919,24019, 53519,42018, 8992 18,93219,28320,11820,04020, 74621,60922, 71923,83025,26027,22128, 03129,26531,329'31,3533 35,0683 36,941* 34, 98935, 25837,49235,56534,77935,13434, 49234,97634,65534,48234,64634, 56734, 571«34, 98935, 57533,95333,96734,06334, 22833,77434,14634,14133,97934, 30534,79735, 258U.S.GovernmentsecuritiesRequired2 34711,8226,4627 4039 42210 77611 70112 88414, 53615 61716 27519,19315,48816, 36419,48420,45719,22718, 57618,64618,88318,84318, 38318,45018, 52719, 55019,46820,21021,19822,26723,43824,91526,76627, 77428,99331,16431,13434,80636, 60234,72734, 96737, 55635, 33334, 51335,01434,49334, 42834,68734, 26534,44734,41134,28134, 72735, 36633,93933, 53133,97433, 84633,65734, 07633, 84433,69234,11634,43334,967Excess4817665,0116 6463 3902 3761 0481 2841 4919009867978031 02782672369370359465257751648275656857253641145239234545525727216532193 2623 339

TABLE B—62.—Aggregate reserves and member bank deposits, 1959—76[Averages of daily figures; 1 billions of dollars, seasonally adjusted]Year andmonthTotalMember bank reserves 2NonborrowedRequiredDeposits subject to reserve requirements 3TotalTimeandsavingsPrivateDemandU.S. GovernmentTotalmemberbankdepositsplusnondeposititems *1959: Deci960: Dec1961: Dec1962: Dec1963: Dec1964: Dec18.6318.9219.7519.6620.3121.1917.6818.8419.6119.4019.9820.9218.1218.1719.1619.0819.8220.78158.2162.5175.5189.0203.2218.754.358.867.779.992.1103.799.099.1102.9103.3105.9109.14.84.64.95.75.25.9158.2162.5175.5189.0203.4220.11965: Dec1966: Dec1967: Dec.1968: Dec1969: Dec1970: Dec1971: Dec1972: Dec...1973: Dec1974: Dec1975: Dec1976: Dec *22.1823.2824.7627.0527.9329.1131.2431.4434.9836.6334.7535.0221.7422.7524.5326.3026.8128.7731.1230.3933.6935.9034.6234.9721.7622.9424.3826.6227.6528.8631.0631.1634.6836.3734.4934 72238.3246.3275.6299.7287.5320.8360.1402.3442.8486.9506.0530.1120.7128.7148.9164.5150.5178.8210.5241.7279.7322.9338.7355.5112.8113.9121.2130.4131.9135.9143.7154.4158.1160.6164.4171.34.93.75.54.95.26.25.86.25.03.43.03.2239.9250.4280.0306.8306.8332.9365.0406.6449.4495.3514.4539.21975:JanFeb . ..MarApr _ _.MayJuneJulyAugSeptOct „NovDec . _1976:JanFebMarAprMayJuneJulyAugSeptOctNovDec v. _36.3735.4934.9935.0834.7435.0734.9834.8834.9934.7934.7334.7534.3234.0534.0034.0234.1434.3434.3934.5234.3634.4934.8835.0235.9735.3434.8834.9734.6734.8534.6834.6734.5934.6034.6734.6234.2433.9733.9533.9834.0234.2134.2534.4234.3034.3934.8134.9736.2235.3034.7934.9234.5834.8734.7934.6934.8034.5834.4434.4934.0833.8333.7833.8733.9334.1234.1534.3234.1634.2734.6234.72490.1490.9493.4494.1493.7499.5498.3496.3498.4500.1505.9506.0506.2507.6507.8509.8507.8513.9514.9513.6515.3519.6525.3530.1328.2329.1329.2329.7328.6330.5330.8328.4329.8333.1336.1338.7338.9339.5339.4340.2338.3342.3344.2341.1342.6345.9350.0355.5159.3159.9161.7161.7162.6165.8164.9165.1165.6164.0165.9164.4164.7165.5165.8167.2167.2167.9168.0168.7168.9170.3170.8171.32.61.92.52.72.53.22.62.83.03.03.93.02.62.62.52.52.33.72.73.93.83.44.53.2497.7497.4499.9500.8501.2506.5505.1503.3505.5508.0514.1514.4514.1515.6516.0517.3515.3522.3523.6522.5523.5528.6534.4539.2* Except as noted in footnote 4.2 Member bank reserves series reflects actual reserve requirement percentages with no adjustment to eliminate theeffect of changes in Regulations D and M.3 Deposits subject to reserve requirements include total time and sayings deposits and net demand deposits as definedby Regulation D. Private demand deposits include all demand deposits except those due to the U.S. Government, lesscash items in process of collection and demand balances due from domestic commercial banks.* Total member bank deposits subject to reserve requirements, plus Eurodollar borrowings, loans sold to bank-relatedinstitutions (data relate to Wednesday figures), and certain other nondeposit items. This series for deposits is referred toas "the adjusted bank credit proxy."Source: Board of Governors of the Federal Reserve System.259

TABLE B-63.—Bond yields and interest rates, 1929-76[Percent per annum]Year or monthU.S. Government securities3-monthTreasurybills i3-5yearissues 2Taxablebonds 3Corporatebonds(Moody's)AaaBaaHighgrademunicipalbonds(Standard&Poor's)Averagerate onshorttermbankloansto businessselectedcitiesPrimecommercialpaper,4-6monthsDiscountrate,FederalReserveBankof NewYork*Federalfundsrate*Newhomemortgageyields(FHLBB)(«)19294.735.904.275.855 1619330.5152.664.497.764.711.732.561939.023.593.014.962.762.1.591.0019401941194219431944.014.103.326.373.375.50.731 461.341.332.462.472.482.842.772.832.732.724.754.334.283.913.612.502.102.362.061.862.12.02.22.62.4.56.53.66.69.731.001.007 1 007 1.007 1.0019451946194719481949.375.375.5941.0401.1021.181.161.321 621.432.372.192.252.442.312.622.532.612.822.663.293.053.243.473.421.671.642.012.402.212.22.12.12.52.68.75.811.031.441.497 1.007 1.001.001 341.50195019511952195319541.2181.5521.7661.931.9531 501.932 132.561.822.322.572.682.942.552.622.862.963.202.903.243.413.523.743.511.982.002.192.722.372.693.113.493.693.611.452.162.332.521.581 591.751 751.991.60195519561957195819591960196119621963196419651966196719681969 .1 7532.6583.2671.8393.4052.9282 3782.7783.1573.5493.9544.8814.3215.3396.6772 503.123.622 904.333.993 603.573.724.064.225.165.075.596.852.843.083.473.434.074.013.903.954.004.154.214.664.855.256.103.063.363.893.794.384.414.354.334.264.404.495.135.516.187.033.533.884.714.735.055.195.085.024.864.834.875.676.236.947.812.532.933.603.563.953.733.463.183.233.223.273.823.984.515.813.704.204.624.34»5.005.164.975.005.014.995.066.00»6.006.688.212.183.313.812.463.973.852.973.263.553.974.385.555.105.907.831 892.773.122.153.363.533 003.003.233.554.044.504.195.175.871.782.733.111.573.303.221.962.683.183.504.075.114.225.668.215.935.865.816.256.466.977.811970...1971 ..1972197319746.4584.3484.0717.0417.8867.375.775.856.927.816.595.745.636.306.998.047.397.217.448.579.118.568.168.249.506.515.705.275.186.098.488 6.325.828.3011.287.725.114.698.159.875.954.884.506.457.837.174.674.448.7410.518.457.747.607.958.92197519765.8384.9897.556.946.986.788.838.4310.619.756.896.498.657.526.335.356.255.505.825.059.018.99See next page for continuation of table and for footnotes.260

TABLE B-63.—Bond yields and interest rates, 1929-76—Continued[Percent per annum]Year or monthU.S. Government securities3-monthTreasurybills i3-5yearissues 2TaxablebondssCorporatebonds(Moody's)AaaBaaHighgrademunicipalbonds(Standard&Poor's)Averagerate onshorttermbankloansto businessselectedcitiesPrimecommercialpaper,4-6monthsDiscountrate,FederalReserveBankof NewYork*FederalfundsratesNewhomemortgageyields(FHLBB)1974: Jan .FebMarApr ...MayJune7.7557.0607.9868.2298.4308.1456.946.777.337.998.248.146.566.546.817.047.077.037.837.858.018.258.378.478.488.538.628.879.059.275.205.195.365.675.966.089.9111.158.667.838.429.7910 6210.96iy-iy 21}4-8 28-88 -89.658.979.3510.5111 3111.938 528.628.648 678 748.85JulyAug _ .SeptOctNovDec7.7528.7448.3637.2447.5857.1798.398.648.387.987.657.227.187.337.307.226.936.788.729.009.249.278.908.899.489.7710.1810.4810.6010.636.546.586.656.466.476.9312.4011.6411.7211.6511.239.368.818.988 -88 -88 -88 -88 -88 -7%12.9212.0111 3410.069.458.538.969 099 199 179.279 371975: JanFebMarAprMayJune6.4935.5835 5445.6945.3155.1937.296.857.007.767.497.266.686.616.737.036.996.868.838.628.678.958.908.7710.8110.6510.4810.5810.6910.626.666.306.616.836.816.769.948.167.306.336.066.155.825.797 l /-&/i6^-634634-6146y~66 -67.136.245 545.495.225.559 339 129 068 968 908.96JulyAugSeptOctNov . .Dec6.1646.4636 3836.0815.4685 5047.728.128.227.807.517.506.897.067.297.297.217.178.848.958.958.868.788.7910.5510.5910 6110. 6210.5610.566.947.027.237.227.217.068.228.296.446.706 866.485.915.976 -66 -66 -66 -66 -66 -66.106.146.245.825.225.208.898.898 949 019 019 011976-JanFebMarAprMayJune.JulyAugSept.OctNovDec4.9614.8525.0474.8785.1855.4435.2785.1535.0754.9304.8104.3547.187.187.256.997.357.407.247.046.846.506.355.966.946.926.876.736.996.926.856.796.706.656.626.398.608.558.528.408.588.628.568.458.388.328.257.9810.4110.2410.129.949.869.899.829.649.409.299.239.126.806.916.866.626.876.856.646.286.206.066.055.697.547.447.807.285.275.235.375.235.545.945.675.475.455.225.054.706 -53^by-bybV-b\4by-bVoim%ly-ly 2by~bY4.874.774.844 825.295.485.315.295.255.034.954.658 998 938 938 928.978.898 979.029.089 079.059.101 Rate on new issues within period. First issued in December 1929.2 Selected note and bond issues.s First issued in 1941. Series includes bonds which are neither due nor callable before a given number of years asfollows: April 1953 to date, 10 years; April 1952-March 1953,12 years; November 1941-March 1952, 15 years.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 effectiverate is an average of the rates on a given day weighted by the volume of transactions at these rates. Prior to that date,the daily effective rate was the rate considered most representative of the day's transactions, usually the one at whichmost transactions occurred.6 Effective rate (in the primary market) on conventional mortgages, reflecting fees and charges as well as contract rateand assumed, on the average, repayment at end of 10 years. Rates beginning January 1973 not strictly comparable withprior rates.7 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 jess.« Series revised. Not strictly comparable with earlier data.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.261

TABLE B-64,—Instalment credit extensions and liquidations,[Millions of dollars; monthly data seasonally adjusted]1971-76 lYear or monthTotalAutomobileMobilehomeHomeimprovementBankcreditcardRevolvingBankcheckcreditAllotherExtensions:1971...1972...1973...1974...1975...19762...1975: Jan..Feb._Mar..Apr..May..June..123,086140,072160,228160,008163,483185,90012,43512,93712, 59312,83713,02213,18734,77840,26646,10543,20948,10355,4393,4444,0023,6373,6123,6993,8652,6285,0366,0114,8993,4523,1013072712752802812703,1703,9154,4144,5714,3985,0383343333543363503738,37710, 39013,86317, 09820,42825, 4931,5851,5701,5851,6271,6001,6782,0262,4893,3734,2274,0244,82333032231432031330272,10777,97686,46286,00483,07992,0066,4356,4406,4286,6626,7806,700July..Aug..Sept..Oct...Nov...Dec...1976: Jan...Feb...Mar...Apr...May..June..14,08914,04814,19414,60914, 57915,22815,13215,04515, 52115,00315, 04115, 5924,1044,1434,3304,3544,4414,6424,5054,5234,6894,5834,4714,6002842682922893453132722662962472312723723713823844084214404054144133854101,6841,7431,8061,7811,8421,8391,9212,0122,1181,9852,1032,0883363423393523413963613923803944224357,3097,1817,0457,4507,2037,6187,6337,4477,6247,3827,4297,786Liquidations:July..Aug..Sept..Oct...Nov...Dec 2 ..1971197219731974197519762.1975: Jan...Feb...Mar...Apr...May..June..15, 24015,68515, 77516,05515, 76316, 275113,788124, 513140, 552151,056156,640169,46312, 58112,62112, 86012,82013, 32512, 7384,4774,7124,7694,5874,6324,82031, 30334,70540,13742,88345, 47248,3113,6223,6573,8733,7483,7773,7272822402532362612551,7512,9053,6344,0993,7933,7923083133073053163123814004344634644702,9393,2383,3813,7674,1504,2493683343493473413592,1522,1832,1652,1982,1812,2457,6799,47212, 43315,65519,20823, 7541,4381,4831,5151,5271,5291,5554014133754134104351,9012,1752,8943,6844,0104,6363343343353313433307,5467,7377,7798,1587,8158,05068,21572,01778,07280,96980,00784,7196,5116,4996,4816,5647,0196,456July..Aug...Sept..Oct...Nov...Dec—1976: Jan...Feb...Mar-Apr...May..June..12,80313.21113,20113,42913,25513, 73814, 02913,92314, 04813, 57613,56614, 2613,7193,8843,8693,8603,8353,8833,9663,9094,0263,8513,8194,0743143173063293223443643533143092863153213283343563343533313483443743143301,5911,6341,6701,6961,7621,8321,8151,8811,9261,8461,9111,9903193273203243363863723743643593784216,5396,7216,7026,8646,6676,9407,1817,0587,0746,8366,8597,132July..Aug...Sept..Oct...Nov...Dec 2..13,93714, 28214,29414,49114, 52014,6703,9224,0904,1654,0594,1554,1903192923223073203153623613693903603701,9812,0972,0002,0742,1102,1053744193583864044256,9797,0237,0817,2747,1707,2651 Excludes 30-day charge credit held by retailers, oil and gas companies, and travel and entertainment companies.2 Preliminary; December by Council of Economic Advisers.Note.—Consumer instalment credit consists of short-and intermediate-term credit extended through regular businesschannels 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 instalments. Mortgage credit is excluded.Source: Board of Governors of the Federal Reserve System (except as noted).262

TABLE B-65.—Mortgage debt outstanding by type of property and of financing, 1939-76[Billions of dollars]r^onfarm r. )ropertie;Nonfarm properties by type of mortgageEnd of yearor quarterAllpropertiesTotal1- to 4-familyhousesFarmpropertiesMultifamilypropertiesCommercialpropertiesiTotalGovernment underwritten1- to 4-family housesTotalFHAinsuredVAguaranteedConventional 2Total1- to 4-familyhouses193919401941.19421943194435.536.537.636.735.334.76.66.56.46.05.44.928.930.031.230.829.929.716.317.418.418.217.817.95.65.75.95.85.85.67.06.97.06.76.36.21.82.33.03.74.14.21.82.33.03.74.14.21.82.33.03.74.14.227.127.728.227.125.825.514.515.115.414.513.713.71945..19461947.19481949..19501951..19521953195435.541.848.956.262.772.882.391.4101.3113.74.84.95.15.35.66.16.77.27.78.230.836.943.950.957.166.775.684.293.6105.418.623.028.233.337.645.251.758.566.175.75.76.16.67.58.610.111.512.312.913.56.47.79.110.210.811.512.513.414.516.34.36.39.813.617.122.126.629.332.136.24.36.19.312.515.018.922.925.428.132.14.13.73.85.36.98.69.710.812.012.80.22.45.57.28.110.313.214.616.119.326.530.634.137.340.044.649.054.961.569.214.316.918.920.822.626.328.833.138.043.6195519561957.. . .19581959..I960.. _.1961..196219631964 .129.9144.5156.5171.8190.8207.5228.0251.4278.5305.99.09.810.411.112.112.813.915.216.818.9120.9134.6146.1160.7178.7194.7214.1236.2261.7287.088.299.0107.6117.7130.9141.9154.7169.3186.4203.414.314.915.316.818.720.323.025.829.033.618.320.723.226.129.232.436.441.146.250.042.947.851.655.159.362.365.669.473.477.238.943.947.250.153.856.459.162.265.969.214.315.516.519.723.826.729.532.335.038.324.628.430.730.430.029.729.629.930.930.978.086.894.6105.5119.4132.3148.5166.9188.2209.849.355.160.467.677.085.595.6107.1120.5134.119651966 . . ..196719681969333.3356.5381.2410 9441.421.223.125.127 429.2312.1333.4356.1383.5412.2220.5232.9247.3264.8282.837.240.343.947.352.354.560.164.871.477.181.284.188.293.4100.273.176.179.984.490.242.044.847.450.654.531.131.332.533.835.7231.0249.3267.9290 1312.0147.4156.9167.4180.4192.7197019711972 . ....19731974 ..474.2526.5603.4682.3742.530.332.235.841.346.3443.8494.3567.7641.1696.2298.1328.9372.8416.9449.960.169.882.692.999.985.695.5112.3131.3146.4109.2120.7131.1135.0140.297.3105.2113.0116.2121.359.965.768.266.265.137.339.544.750.056.2334.6373.5436.5506.0556.0200.9223.7259.8300.6328.61975...801.550.9750.7491.7100.3158.6147.0127.766.161.6603.7364.01974: 1II . _IllIV1975: 1IIIIIIV696.8717.0731.9742.5752.2768.6785.4801.542.143.845.246.347.649.250.250.9654.7673.2686.7696.2704.6719.4735.2750.7424.7436.5444.7449.9455.2467.4480.0491.795.196.998.699.9100.5100.4100.5100.3135.0139.8143.4146.4148.9151.6154.7158.6136.6137.7138.7140.2142.0142.9145.0147.0117.7118.4119.7121.3123.3123.7125.7127.766.065.565.165.165.565.865.966.151.752.954.556.257.758.059.861.6518.1535.5548.1556.0562.6576.4590.2603.7307.0318.1325.1328.6332.0343.6354.3364.01976: 1IIIII817.4839.2861.752.454.255.7765.1784.9806.0503.4519.6536.6•100.7101.0101.8161.0164.4167.5148.3150.5129.1131.266.267.162.964.1616.8634.4374.3388.4i Includes negligible amount of farm loans held by savings and loan associations.» Derived figures.Source: Board of Governors of the Federal Reserve System, estimated and compiled from data supplied by variousGovernment and private organizations.263

TABLE B-66.— Mortgage debt outstanding by holder, 1939-76[Billions of dollars]Major financial institutionsOther holdersEnd of yearor quarterotalTotalMutualsavingsbanksSavingsandloanassociationsCommercialbanks iFederalandrelatedagencies'LifeinsurancecompaniesIndividualsandothers1939.35.518.63.84.84.35.75.011.91940..1941..1942..1943..1944..36.537.636.735.334.719.520.720.720.220.24.14.64.64.64.81.91.81.61.41.34.64.94.74.54.46.06.46.76.76.74.94.74.33.63.012.012.211.711.511.51945..1946..1947..1948..1949..35.541.848.956.262.721.026.031.837.842.95.47.18.910.311.6i1.21.44.95.86.74.87.29.410.911.66.67.28.710.812.92.42.01.81.82.312.113.815.316.617.51950..1951..1952..1953.1954..72.882.391.4101.3113.751.759.566.975.185.713.715.618.422.026.18.39.911.412.915.013.714.715.916.918.616.119.321.323.326.02.83.54.14.64.818.419.320.421.723.21955..1956.1957..1958.1959..129.9144.5156.5171.8190.899.3111.2119.7131.5145.531.435.740.045.653.117.519.721.223.325.021.022.723.325.528.129.433.035.237.139.25.36.27.78.010.225.327.129.132.335.1I960..1961.1962.1963..1964.207.5228.0251.4278.5305.9157.6172.6192.5217.1241.060.168.878.890.9101.326.929.132.336.240.628.830.434.539.444.041.844.246.950.555.211.512.212.611.812.238.443.146.349.552.71965.1966.1967.1968.1969.1970.1971.1972.1973.1974.1975..333.3356. b381.2410.9441.4474.2526.5603.4682.3742.5801.5264.6280.8298.8319.9339.1355.9394.2450.0505.4542.6581.3110.3114.4121.8130.8140.2150.3174.3206.2231.7249.3278.744.647.350.553.556.157.962.067.673.274.977.249.754.459.065.770.773.382.599.3119.1132.1136.260.064.667.570.072.074.475.576.981.486.289.213.517.520.925.131.138.346.454.664.882.1101.055.258.261.465.971.279.985.998.9112.2117.8119.21974: III..III.IV.696.8717.0731.9742.5514.1528.2537.4542.6236.1243.4247.6249.373.974.274.874.9121.9127.3130.6132.182.283.284.486.267.572.077.282.1115.2116.9117.3117.81975:1II..III.IV.752.2768.6785.4801.5546.7558.1569.9581.3252.4261.3270.6278.775.275.876.577.2131.9133.0134.5136.287.288.088.389.286.391.095.9101.0119.2119.4119.5119.21976:1...II..Ill817.4839.2861.7592.1609.1626.0286.6299.6312.277.778.779.8138.0141.1144.089.889.790.0105.0107.4111.9120.3122.7123.9i Includesloans held by nondeposit trust companies, but not by bank trust departments.»I ncludes former Federal National Mortgage Association and new Government National Mortgage Association, as well asFederal Housing Administration, Veterans Administration, Public Housing Administration, Farmers Home Administration,and in earlier years Reconstruction Finance Corporation, Homeowners Loan Corporation, and Federal Farm MortgageCorporation. Also includes GNMA Pools and U.S.-sponsored agencies such as new FNMA, Federal Land Banks, andFederal Home Loan Mortgage Corporation. Other U.S. agencies (amounts small or current separate data not readilyavailable) included with "individuals and others."Source: Board of Governors of the Federal Reserve System, based on data from various Government and private organizations.264

TABLE B-67.—Net public and private debt, 1929-751[Billions of dollars]PublicPrivateIndividual and noncorporateEnd of yearTotalFedoralGovernment2Federallysponsoredcreditagencies'TotalTotalFarm 4TotalNonfarmStateandlocalgovernmentsCorporateMortgageCommercialandfinancial*Consumer1929.191.916.513.6161.888.972.912.260.731.222.47.11933168.524.316.3127.976.951.09.141.926.311.73.91939183.342.616.4124.373.550.88.842.025.09.87.219401941 .194219431944189.8211.4258 6313.2370.644.856.3101.7154.4211.916.416.115.414.513.9128.6139.0141.5144.3144.875.683.491.695.594.153.055.649.948.850.79.19.39.08.27.743.946.340.940.542.926.127.126.826.126.09.510.08.19.511.88.39.26.04.95.1194519461947 .. .19481949 .405.9396.6415 7431.3445.8252.5229.5221.7215.3217.66.7 .6.713.413.715.017.019.1140.0153.4178.3198.4208.485.393.5108.9117.8118.054.759.969.480.690.47.37.68.610.812.047.452.360.769.778.427.031.837.242.447.114.712.111.912.913.95.78.411.614.417.419501951 _.19521953 .1954486 2519.2550 2581 6605.9217.4216.9221.5226.8229.1.71.31.31.41.321.724.227.030.735.5246.4276.8300.4322.7340.0142.1162.5171.0179.5182.8104.3114.3129.4143.2157.212.313.715.216.817.592.0100.6114.2126.4139.754.861.768.976.786.415.816.217.818.420.821.522.727.531.432.5195519561957 .. .19581959 ..665 8698 4728.3769 6833.0229.6224.3223.0231.0241.42.92.42.42.53.741.144,548.653.759.6392.2427.2454.3482.4528.3212.1231.7246.7259.5283.3180.1195.5207.6222.9245.018.719.420.223.223.8161.4176.1187.4199.7221.298.7109.4118.1128.1141.024.024.424.326.528.738.842.345.045.151.51960 _. .19611962 .19631964 ..874.2930 3996.01,070.91,151.6239.8246.7253.6257.5264.03.54.05.37.27.564.970.577.083.990.4566.1609.1660.1722.3789.7302.8324.3348.2376.4409.6263.3284.8311.9345.8380.125.127.530.233.236.0238.2257.3281.7312.6344.1151.3164.5180.3198.6218.930.834.837.642.345.056.158.063.871.780.3196519661967 .. .196819691, 245. 01,339.91, 439. 61, 583. 41 737.6266.4271.8286.4291.9289.38.911.29.021.530.698.3104.7112.8122.7133.3871.4952.11,031.51,147.41, 284.4454.3506.6553.6631.5734.2417.1445.5477.9515.9550.239.342.247.951.755.2377.8403.3429.9464.2495.0236.8251.6267.0284.9303.951.155.462.268.570.089.996.2100.8110.8121.1197019711972197319741, 869.62, 050.72,275.92, 532.12, 768.6301.1325.9341.2349.1360.838.839.941.459.876.4144.8162.8176.9189.5206.41, 384.91, 522.11,716.51,933.72,124.9797.3871.3975.31,106.71, 239.0587.7650.8741.2827.0885.957.862.568.279.089.2529.8588.3673.0748.1796.6332.4372.6426.2482.8523.770.376.588.984.581.5127.2139.1157.9180.8191.519752,997.1446.378.8216.12,255.91, 306.2949.798.0851.7566.188.8196.71 Net public and private debt is a comprehensive aggregate of the indebtedness of borrowers after eliminating certaintypes of duplicating government and corporate debt.2 Net Federal Government debt is the outstanding debt held by the public, as defined in "The Budget of the UnitedStates Government, Fiscal Year 1978."3 Debt of agencies in which there is no longer any Federal proprietary interest. The obligations of the Federal LandBanks are included beginning with 1947, the debt of the Federal Home Loan Banks is included beginning with 1951, andthe debts of the Federal National Mortgage Association, Federal Intermediate Credit Banks, and Banks for Cooperativesare included beginning with 1968.< Farm mortgages andf arm production loans. Farmers' financial and consumer debt is included in the nonfarm categoriess Debt to banks (other than consumer credit), security credit, policy loans, and some single-payments loans.Source: Department of Commerce (Bureau of Economic Analysis), based on data from various Federal agencies andother sources.265

GOVERNMENT FINANCETABLE B-68.—Federal budget receipts, outlays, and debt, fiscal years 1968-78[Millions of dollars; fiscal years]DescriptionActual1968 1969 1970 1971 1972 1973BUDGET RECEIPTS AND OUTLAYS:Total receipts153,671187,784193,743188, 392208,649232, 225Federal fundsTrust fundsInterfund transactions.114,72644,716-5,771143,32152, 009-7, 547143,15859,362-8,778133,78566,193-11,586148,84672, 959-13,156161,35792,193-21,325Total outlays.178,833184,548196,588211,425232,021247,074Federal fundsTrust fundsInterfund transactions143,10541,499-5,771148,81143, 284-7, 547156,30149,065-8,778163,65159,361-11,586178,10467,073-13,156186,95181, 447-21,325Total surplus or deficit (—).-25,1613,236-2,845-23,033-23,372-14,849Federal funds..Trust funds...-28, 3793,217-5,4908,725-13,14310, 297-29, 8666,832-29, 2585,886-25, 59410,746OUTSTANDING DEBT, END OF YEAR:Gross Federal debt369,769367,144382,603409,467437,329468,426Held by Government agencies..Held by the public79,140290,62987,661279, 48397,723284,880105,140304,328113,559323, 770125, 381343,045Federal Reserve System-Others52, 230238, 39954, 095225, 38857,714227,16665,518238,81071,426252,34475,182267,863BUDGET RECEIPTS.153,671187,784193,743188, 392208,649232,225Individual income taxesCorporation income taxesSocial insurance taxes and contributions...Excise taxesEstate and gift taxesCustoms dutiesMiscellaneous receipts:Deposit of earnings by Federal ReserveSystemAllother68,72628, 66534,62214,0793,0512,0382,09140087, 24936, 67839, 91815, 2223,4912,3192,66224790,41232,82945,29815,7053,6442,4303,26615886, 23026,78548,57816,6143,7352,5913,53332594,73732,16653,91415,4775,4363,2873,252381103, 24636,15364,54216, 2604,9173,1883,495426BUDGET OUTLAYS.178,833184, 548196, 588211,425232,021247,074National defenseInternational affairsGeneral science, space, and technologyNatural resources, environment, and energy.AgricultureCommerce and transportation—Community and regional developmentEducation, training, employment, andsocial servicesHealthIncome securityVeterans benefits and servicesLaw enforcement and justiceGeneral governmentRevenue sharing and general purpose fiscalassistanceInterestAllowancesUndistributed offsetting receipts79,4094,6125,5224,0104,54110,6371,8917,0049,70833,6806,8826501,68431113,751-5,46080,2073,7845,0163,9015,7797,0652,2246,87111,75837,2817,6407611,64936515, 793-5, 54579,2843,5644,5084,0435,1649,0903,1667,88813,05143, 0668,6779521,94045118,312-6, 56776, 8073,0934,1804,9414,28810,3963,6329,04514,71655, 4239,7761,2992,15948819,609-8, 42777, 3563,8684,1745,5215,27910,6014,32511,69417,47163,91110,7301,6502,46653120,582-8,13775,0723,5044,0305,9474,8559,9305,52911,87418,83272,95812, 0132,1312,6827,22222,813-12,318Composition of undistributed offsetting receipts:Employer share, employee retirement..Interest received by trust fundsRents and royalties on the Outer ContinentalShelf ...-1,825-2,674-961-2,018-3,099-428-2, 444-3,936-187-2,611-4,765-1,051-2,768-5,089-279-2,927-5,436-3,956See next page for continuation of table and for footnotes.266

TABLE B-68.—Federal budget receipts, outlays, and debt, fiscal years 1968-78—Continued[Millions of dollars; fiscal years)DescriptionActualEstimate1974 1975 1976ransitionquarter1977 1978BUDGET RECEIPTS AND OUTLAYS:Total receipts264,932280,997300, 00581, 773354,045393,017Federal fundsTrust fundsInterfund transactions.181,219104,846-21,133187, 505118,590-25, 098201, 099133, 695-34, 78954, 08532,071-4, 383237, 405153, 558-36, 918258,926170, 515-36, 425Total outlays269,620326,105366, 46694, 746411,243439, 967Federal fundsTrust fundsInterfund transactions.199,92090,833-21,133240, 031111,171-25,098269, 969131,286-34, 78965,10634, 023-4, 383303,136145, 026-36,918319, 335157, 057-36, 425Total surplus or deficit (—).-4,688-45,108-66, 461-12, 973-57,198-46, 950Federal funds.Trust funds...OUTSTANDING DEBT, END OF YEAR:-18,70114,013-52, 5267,419-68, 8702,410-11,021-1,952-65, 7308,532-60, 40913, 459Gross Federal debt486,247544,131631,866646, 379716,725784, 973Held by Government agencies.Held by the public140,194346,053147, 225396,906151, 566480,300148,052498,327156, 398560,327169,146615,827Federal Reserve System.Others...80,649265,40484,993311,91394,714385, 58696, 702401,625BUDGET RECEIPTS.264,932280,997300, 00581, 773354, 045393, 017Individual income taxesCorporation income taxes.._Social insurance taxes and contributions..Excise taxesEstate and gift taxesCustoms duties..Miscellaneous receipts:Deposit of earnings by Federal ReserveSystem.Allother118,95238,62076,78016,8445,0353,3344,845524122,38640, 62186, 44116, 5514,6113,6765,777934131, 60341, 40992, 71416,9635,2164,0745,4512,57538, 8018,46025, 7604,4731,4551,2121,500112153, 09756, 604108, 88317, 9265,9074,7136,000915171,21758,910126, 06818, 5135,8065,2626,400841BUDGET OUTLAYS.269,620326,105366,46694, 746411,243439,967National defenseInternational affairsGeneral science, space, and technologyNatural resources, environment, and energy.Agriculture.Commerce and transportation_.Community and regional developmentEducation, training, employment, andsocial servicesHealthIncome security_Veterans benef ts and services_.Law enforcement and justiceGeneral government•Revenue sharing and general purpose fiscalassistanceInterestAllowancesUndistributed offsetting receipts78,5694,8213,9776,5712,23013,0£64,91111,55822,07484,43113,3862,4623,3276,74628,072-16,65186, 5855,8623,9899,5371,66016,0104,43115,24827,647108, 60516, 5972,9423,0897,00530,974-14,07589, 9965,0674,37011,2822,50217, 2485,30018,16733, 448127, 4C618, 4323,3202,9277,11934, 589-14, 70422, 5181,9971,1613,3245844,7001,5305,0138,72032, 7963,9628598782,0247,246-2, 567100,0757,1504,43417,0502,89916,1C67,69521,11439, 251138,11818, 3883,7123,7318,92637,987-15, 393112,2627,2814,72519, 7472,33319, 2527,86819, 35843, 205143, 89218, 2793,7893,9308,08939, 7352,651-16,429Composition of undistributed offsettingreceipts:Employer share, employee retirement.Interest received by trust fundsRents and royalties on the Outer ContinentalShelf.-3,319-6,583-6,748-3,980-7,667-4, 242-7,800-2,428 j -2,662-985-270-1,311-4, 592-8,201-2, 600-4,670-8,659-3,100Note.—Under provisions of the Congressional Budget Act of 1974, the fiscal year for the Federal Governmentshifted beginning with fiscal year 1977. Through fiscal year 1976, the fiscal year runs from July 1 throughJune 30; starting in October 1976 (fiscal year 1977), the fiscal year runs from October 1 through September 30.The 3-month period from July 1, 1976 through September 30, 1976 is a separate fiscal period known as thetransition quarter.Sources: Department of the Treasury and Office of Management and Budget.267

TABLE B-69.—Federal budget receipts and outlays, fiscal years 1929-78[Millions of dollars]Fiscal yearReceiptsOutlaysSurplus ordeficit (-)19293, 8623,12773419331,9974,598-2,60219394,9798,841-3,8621940 . . ..1941194219431944194519461947194819496 3618,62114, 35023,64944, 27645,21639, 32738, 39441,77439, 4379 45613, 63435,11478, 53391,28092,69055,18334,53229, 77338, 834-3,095-5,013-20, 764-54, 884-47, 004-47,474-15,8563,86212,0016031950195119521953195439,48551,64666,20469, 57469,71942,59745, 54667,72176,10770, 890-3,1126,100-1,517-6,533-1,1701955195619571958195965 46974,54779 99079,63679, 24968 50970,46076 74182, 57592,104-3,0414,0873,249-2,939-12,855196019611962 . . ..1963196492 49294,38999,676106,560112,66292 22397, 795106,813111,311118,584269-3, 406-7,137-4,751-5,9221965 . ..196619671968196919701971197219731974116 833130,856149,552153,671187,784193,743188 392208, 649232 225264,932118 430134,652158,254178,833184, 548196,588211 425232,021247 074269,620-1,596-3,796-8, 702-25,1613,236-2,845-23,033-23, 372-14, 849-4, 68819751976Transition quarter ...1977 i._1978 i280 997300, 00581,773354, 045393, 017326 105366, 46694,746411,243 !439, 967-45,108-66, 461-12,973-57,198-46, 950i Estimate.Note.—Under provisions of the Congressional Budget Act of 1974, the fiscal year for the Federal Government shiftedbeginning with fiscal year 1977. Through fiscal year 1976, the fiscal year runs from July 1 through June 30; starting inOctober 1976 (fiscal year 1977), the fiscal year runs from October 1 through September 30. The 3-month period fromJuly 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.Certain interfund transactions are excluded from receipts and outlays beginning 1932. For years prior to 1932 the amountsof such transactions are not significant.Refunds of receipts are excluded from receipts and outlays.Sources: Department of the Treasury and Office of Management and Budget.268

TABLE B-70.—Relation of the Federal budget to the Federal sector of the national income andproduct accounts, fiscal years, 1976-78[Billions of dollars; fiscal years]Receipts and expenditures 1976TransitionquarterEstimate1977 1978RECEIPTSTotal budget receipts..Government contribution for employee retirement (grossing)..Other netting and grossingAdjustment to accrualsOther300.06.02.36.0-.881.81.6.62.3-.2354.06.82.7-1.8-1.1393.07.53.03.2-1.0Federal sector, national income and product accounts, receipts.313.686.2360.7405.7EXPENDITURESTotal budget outlays366.594.7411.2440.0Lending and financial transactionsGovernment contribution for employee retirement (grossing)..Other netting and grossingDefense timing adjustmentBonuses on Outer Continental Shelf land leases._Other-4.86.02.32.62.1-1.7-1.31.6.6.81.1-.9-3.26.82.72.01.9-1.5-3.87.53.01.02.3-2.8Federal sector, national income and product accounts, expenditures373.096.7419.9447.1Note.-See Note, Table B-69.See Special Analysis A, "Special Analyses, Budget of the United States Government, Fiscal Year 1978" for descriptionof these categories.Sources: Department of Commerce (Bureau of Economic Analysis), Department of the Treasury, and Office of Managementand Budget.269

TABLE B-71.—Receipts and expenditures of the government sector of the national income and productaccounts, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Total governmentFederal GovernmentState and localgovernmentCalendar year or quarterReceiptsExpendituresSurplusordeficitnationalincomeandproductaccountsReceiptsExpendituresSurplusordeficit(-),nationalincomeandproductaccountsReceiptsExpendituresSurplusordeficit(-),nationalincomeandproductaccounts192911.310.31.03.82.61.27.67.8-0.219339.310.7-1.42.74.0-1.37.27.2-. 1193915.417.6-2.26.78.9-2.29.69.6.01940194119421943.19441945194619471948194917.725.032.649.251.253.251.056.958.955.918.428.864.093.3103.092.745 642.550 559.3-.7-3.8-31.4-44.1-51.8-39.55.414.48.4-3.48.615.422.939.341.042.539.143.243.238.710.020.556.185.895.584.635.629.834.941.3-1.3-5.1-33.1-46.6-54.5-42.13.513.48.3-2.610.010.410.610.911.111.613.015.417.719.59.39.18.88.48.59.011.114.417.620.2.61.31.82.52.72.61.91.0 .119501951195219531954 .1955195619571958195969.085.290.194.689.9101.1109.7116.2115.0129.461 079.293 9101.697.098 0104.5115 3127.6131.08.06.1-3.8-6.9-7.13.15.2.9-12.6-1.650.064.367.370.063.772.678.081.978.789.840.857.871.177.169.868.171.979 688.991.09.26.5-3.7-7.1-6.04.46.12.3-10.3-1.121.323.425.427.429.031.735.038.542.046.422.523.925.527.330.232.935.939.844.346.9-1.2-.4-.0.1-1.1-1.3-.9-1.4-2.4-.41960 .. .196119621963..196419651966196719681969139.5144.8156.7168.5174.0188.3212.3228.2263.4296.3136.4149 1160.5167.8176 3187.8213 6242.4268.9285 63.1-4.3-3.8.7-2.3.5-1.3-14.2-5.510.796.198.1106.2114.4114.9124.3141.8150.5174.7197.093.1101.9110.4114.2118.2123.8143.6163.7180.6188.43.0-3.9-4.2-3.3.5-1.8-13.2-5.88.549.954.058.563.269.575.184.893.6107.2119.749.854.458.062.868.575.184.394.7106.9117.6.1-.4.5.51.0-.0.5-1.1.32.11970197119721973 ..197419751976 v302.6322.2367.4411.2454.6466.4530.8311.9340 5370.9404.9458.8530.8575.3-9.4-18.3-3.56.3-4.2-64.4-44.5192.1198.6227.5258.3288.2286.5330.6204.2220.6244.7265.0299.7357.8388.9-12.1-22.0-17.3-6.7-11.5-71.2-58.3134.9152.6177.4193.5210.2234.3260.5132.2148.9163.7180.5203.0227.5246.62.83.713.713.07.36.913.91974: 1||IIIIV436.1450.3468.1463.8431.4450.2469.1484.64.7.2-1.0-20.8276.7285.8297.5292.9280.7293.4306.5318.2-4.1-7.6-9.0-25.3201.9208.0214.5216.6193.2200.2206.5212.08.77.88.04.51975: 1IIIllIV459.6431.6480.7493.7504.7524.5538.7555.2-45.0-92.9-58.1-61.5287.2254.4297.7306.7337.0354.3363.7376.0-49.8-99.9-66.0-69.4222.2230.4239.7245.0217.5223.4231.8237.24.76.97.97.91976: 1 ____IIIIIIVP509.3522.6535.6560.9567.4580.3592 5-51.6-44.9-44.7316.5324.6333.8380.3378.7391.1405.6-63.8-54.1-57.4251.6254.3262.0239.5245.0249.3252.412.29.212.7Note.—Federal grants-in-aid to State and local governments are reflected in Federal expenditures and State and localreceipts and expenditures. Total government receipts and expenditures have been adjusted to eliminate this duplication.Source: Department of Commerce, Bureau of Economic Analysis.270

TABLE E-72.—Receipts and expenditures of the Federal Government sector of the national incomeand product accounts, 1949-78[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year or quarterFiscal year:1951195219531954195519561957195819591960196119621963. ..1964196519661967196819691970197119721973.1974197519761977219782Calendar year:19491950195119521953 ....19541955195619571958 . ..1959196019611962196319641965196619671968 ...19691970 ...197119721973197419751976*1975" 1IIIIIIV1976: 1IIIIIIV*____Total61.165.269.465.867.476.381.078.185.494.895.0104.0110.0115.6120.0132.7146.0160.0190.1194.9192.5213.5240.5271.9283.2313.6360.7405.738.750.064.367.370.063.772.678 081.978.789 896.198.1106.2114.4114 9124.3141.8150.5174.7197.0192.1198.6227.5258.3288.2286.5330.6287.2254.4297.7306.7316.5324.6333.823.228.831.430.329.733.636.736.338.242.543.647.349.650.751.457.564.471.490.093.687.500.307.322.627.337.258.677.516.118.126.131.032.229.031.435.237.436.839.943.644.748.651.548.653.961.767.579.694.892.289.9108.2114 6131.2125.7145.3137.699.7130.5135.1137.7141.9147.2154.5Receipts21.719.419.717.318.921.520.817.921.422.320.022.723.325.727.130.830.333.237.033.032.034.241.043.841.651.060.665.59.617.221.718.619.516.921.120.920 418.022.521.421.522.524.626 128.931.430.036.336.230.833.536.643 045.642.655.934.838.747.449.453.154.856.29.59.710.710.410.010.811.711.612.013.213.314.215.015.616.915.515.817.118.619.220.019.920.721.422.124.524.626.18.08.99.410.310.99.710.711.211.811.512.513.413.614.615.316.216.515.616.318.019.019 320.420.021 221.723.923.521.923.225.225.522.823.323.824.16.77.37.67.88.710.311.712.313.916.718.119.922.123.624.528.935.538.444.549.252.959.171.584.192.2100.9116.9136.65.05.97.17.47.48.29.410.612.312.414.917.618.320.523.124.025.033.136.740.847.049.754.962.879.489.894.3105.892.892.994.796.6102.9104.6106.6109.3Total i44.766.075.974.367.270.076.082.891.291.398.1106.2111.7117.2118.5132.7154.9172.2184.7195.6212.7232.9256.2278.9329.5373.0419.9447.141.340.857.871.177.169.868.171.979.688.991.093.1101.9110.4114.2118.2123.8143.6163.7180.6188.4204.2220.6244.7265 0299.7357.8388.9337.0354.3363.7376.0380.3378.7391.1405.6PersonaltaxandnontaxreceiptsCorporateprofitstaxaccrualsIndirectbus;-nesstaxandnontaxaccrualsContributionsforsocialinsurancePurchasesofgoodsandservices25.747.256.453.944.345.548.151.154.852.955.861.063.765.964.672.486.095.098.097.094.8100.9101.7104.8119.0127.2144.8160.020.418.738.352.457.547.944.545.950.053.953.953.757.463.764.665.267.378.890.998.097.595.696.2102.1102.2111.6124.4133.4120.3122.4124.6130.4129.2131.2134.5138.9ExpendituresTransferpaymentsTopersons8.18.59.210.512.112.814.417.819.920.623.625.126.527.428.431.837.242.748.755.067.776.187.1101.7131.0153.6167.7175.98.710.88.58.89.411.512.413 415 719.620.121.625.025.627.027.930.333.540.146.050.661.372.780.593 2114.3145.8159.0135.7146.6149.2151.8157.2155.6159.8163.33.12.62.11.72.11.81.91.71 81.82.12.12.12.22.22.32.22.12.22.02 32.82.73.03.13.13.33.55.13.63.12.12.01.82.01 91 81.81 81.92.12.22.22.22.22.32.22.12.12.22.62.72.63.23.13.23.03.12.93.23.13.13.43.2ToforeignersGrantsin-aidto Stateandlocalgovernments2.42.52.82.93.03.23.74.76.26.96.97.68.39.810.912.714.817.819.222.626 832.640.441.648.357.568.069.62.22.32.52 62.82.93.13.34.25.66.86.57.28.09.110.411.114.415.918.620.324.429.037.540 643.954.460.249.853.256.858.058.856.360.165.5Netinterestpaid4.44 54.54.64.64.85 35.45 66.86.46.47.17.78.28.79.610.512.113.614 214.115.919.821-92 3.82 3.83 3.01.3/ i 41.4\ 51.61 fi4.65 15 55.26 26.86.26.87.38 08.49.29.811.412.914 314.014.618 220.923.527.522.222.623.625.626.627.427.728.41 08.9.81.21 72 62.42 52 43 34.14.04.14.34 85.24.14.65.46 86.49.17.95 75.87.38.1.61 0.98i!o1.52 42 42^82 12.64.04.23.94 54.65.54.74 55.26 36.27.88 25.26.55.66.06.46.77.15.45.25.66.3SubsidieslesscurrentsurplusofgovernmententerprisesSurplusordeficit(-),nationalincomeandproductaccounts16 4— 8-6.5-8.5.26 35 0-4.7—5 83 4-3 1-2.2-1.7-1.51.4.0-8.9-12.25.4-.6—20 2-19.5-15.7-7.1-46 3-59.4-59.2-41.4-2.69 26.5-3 7-7.1-6.04.46 12 3-10.3-1 13.0-3.9-4.2—3! 3.5-1.8-13.2-5.88.5-12.1-22.0-17.3-6.7-11.5-71.2-58.349 8-99.9-66.0-69.4-63.8-54.1-57.4iWage accruals less disbursements have been subtracted from total. These "were (in billions of dollars at seasonallyadjusted annual rates) .0 in each of the quarters of 1975 and 1976.2 Estimates.Sources: Department of Commerce (Bureau of Economic Analysis) and Office of Management and Budget.271

TABLE B-73.—Receipts and expenditures of the State and local government sector of the nationalincome and product accounts, 1946-76[Billions of dollar >; quarterly data at seasonally adjusted annual rates]Calendaryear orquarterTotalPersonaltaxandnontaxeceiptsReceiptsCorporateprofitstaxaccrualsIndirectbusinesstaxandnontaxaccrualsTotal»ExpendituresNetinterestpaidContributionsforsocialinsuranceFederalgrantsin-aidPurchasesofgoodsandservicesTransferpaymentstopersonsSubsidieslesscurrentsurplusof governmententerprisesSurplusordeficitnationalincomeandproductaccounts1946194719481949 .19501951 .195219531954 .19551956 .195719581959 . -196019611962196319641965196619671968196919701971 .19721973197419751976*1974: 1IIIIIIV.1975: 1IIIllIV1976: 1IIIIIIVP13.015.417.719.521.323.425.427.429.031.735.038.542.046.449.954.058.563.269.575.184.893.6107.2119.7134.9152.6177.4193.5210.2234.3260.5201.9208.0214.5216.6222.2230.4239.7245.0251.6254.3262.01.51.72.12.42.52.83.03.23.53.94.55.05.46.16.77.48.28.810.010.912.814.617.420.623.126.433.036.139.243.148.337.338.340.241.141.742.543.544.746.147.648.650.80.5.6.7.6.8.9.8.8.81.01.01.01.01.21.21.31.51.71.82.02.22.53.13.43.74.25.05.76.86.78.86.66.97.56.35.46.17.57.78.38.78.99.310.712.213.314.615.917.418.819.921.623.825.727.229.332.034.437.039.442.646.149.754.060.867.474.783.191.099.0106.7114.7126.2102.5105.9109.1109.2110.7113.3116.3118.7122.0124.9127.2130.70.6.7.8.91.11.41.61.72.02.12.32.62.83.13.43.73.94.24.75.05.76.77.27.99.09.910.812.113.715.417.013.013.413.914.314.715.215.716.016.416.817.217.51.11.72.02.22.32.52.62.82.93.13.34.25.66.86.57.28.09.110.411.114.415.918.620.324.429.037.540.643.954.460.242.543.443.845.749.853.256.858.058.856.360.165.511.114.417.620.222.523.925.527.330.232.935.939.844.346.949.854.458.062.868.575.184.394.7106.9117.6132.2148.9163.7180.5203.0227.5246.6193.2200.2206.5212.0217.5223.4231.8237.2239.5245.0249.3252.49.912.815.318.019.821.823.225.027.830.633.537.141.143.746.550.854.359.064.671.179.889.3100.7110.4123.2137.5151.0167.3191.6214.5232.3181.9189.1195.1200.4205.3210.9218.6223.4225.5230.9235.0238.01.72.33.03.03.63.13.33.53.63.83.94.34.85.15.45.86.06.46.97.38.19.410.612.114.617.218.920.320.323.125.219.320.020.721.322.122.723.524.224.625.025.425.90.2.1.1.1.1.0.0.0.1.1.1.1.1.1.1.1.1.1-.1-.3-.7-.9-1.2-1.6-2.0-1.8-2.1-2.9-4.6-5.7-6.6-3.9-4.5-4.8-5.2-5.3-5.6-5.8-6.0-6.2-6.4-6.6-7.00 7-.8 8991 0-1.11 2-1.31 5-1.6-1.7—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—4.4-4.4-4.5-4.4-4.2-4.4-4.5-4.5-4.6-4.5-4.5-4.4-4.4-4.4-4.4-4.41 91.071 2 4-.0-1.11 3 9-1 42 4 41-.4 551.0— 0 51 i32 12 83.713 713 07.36 913.98 77.88.04.54 76.97.97.912.29.212.71 Wage accruals less disbursements have been subtracted from total. These were (in billions of dollars, at seasonallyadjusted annual rates) .0 in each of the quarters of 1974,1975, and 1976.Source: Department of Commerce, Bureau of Economic Analysis.272

TABLE B-74.—State and local government revenues and expenditures, selected fiscal years, 1927-75(Millions of dollars]General revenues by source »General expenditures by function 3Fiscal year 1Total»ropertytaxesSalesandgrossreceiptstaxesIndividualincometaxesCorporationnetincometaxesRevenuefromederalloversmentAllother'TotalEducationHighwaysPublicwelfareAllother

TABLE B-75.—Interest-bearing public debt by kind of obligation, 1967-76(Millions of dollars)End of yearor monthTotalinterestbearingpublicdebtTotalMarketableBillsTreasurynotesTreasurybonds iTotalU.S.savingsbondsNon marketableForeigngovernmentseries 2Governmentaccountseries 3Other «Fiscal year:1967...1968...1969....1970...1971...1972...1973...1974...1975..1976...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.322,286344, 401351, 729369,026396, 289425, 360456,353473,238532,122619, 254493,128498,661508, 581515,752527, 030532,122537, 211546, 722552,604561,063565, 791575, 657581, 861592,874599, 224600,927608,077619, 254623, 580632,291633,560635,062643, 643652, 4575210,672226, 592226,107232, 599245,473257, 202262,971266,575315,606392,581286,133289, 827299, 989307, 202314,886315, 606323, 701331, 080338,94F350, 906355, 879363,191369, 316378, 773385,296386,444388,021392,581397, 719404, 314407, 663408, 590415,399421, 27658, 53564, 44068, 35676,15486,67794, 648100,061105,019128, 569161,198121,044122,995123, 972126,907131, 541128,569133,445138, 086142, 803147, 053151.139157, 483159,645162,088163.140161,764161, 840161,198161, 399161,433161, 505161,545161,711163, 99249,10871,07378, 94693, 489104, 807113,419117,840128,419150, 257191, 758131, 790132,683141,915144,997146, 505150, 257153,556155, 239158, 488166, 255166,051167,077171,110177,576183,143185,757186, 473191,758197, 204202,979206,319207, 275212, 986216, 66997,41891,07978,80562,95653,98949,13545, 07133,13736, 77939,62633,29834,14934,10335, 29836, 83936, 77936, 70137,75537, 65537, 59838, 68938, 63138, 56239,11039,01438, 92239, 70839, 62639,11539,90239, 83939, 76940, 70240, 615111,614117,808125,623136, 426150,816168,158193,382206, 663216,516226, 673206,995208, 834208, 592208, 550212,144216,516213,510215,642213,658210,157209,911212, 466212, 544214,100213, 928214,484220,056226, 673225,861227, 977225, 897226,472228, 243231,18151,21351,71251,71151,28153,00355,92159, 41861,92165, 48269, 73363, 72564, 03664,37164, 73065, 09465, 48265, 87266.17666, 47366, 81267.17767, 46467, 82668,17068, 56768, 96869,39469, 73370, 42871,07970,75271,11371, 50671,8531,5143,7414,0704,7559,27018,98528, 52425,01123, 216 124,17321, 500 130, 55722, 96223, 29823, 96923, 59623, 50323,21622, 20321, 55121,46821,22021, 28321, 56521,60121, 68921,66921,61221,51521,50021,35720,96720,81422, 29022, 48722, 29956,15559, 52666, 79076, 32382, 78489, 598101,738115,442116,870118,057116,812116,781120, 060124,173[21,710124, 084[21,865[18,220L17,486[19,385L19,041[20,105L19,438L19,453L24, 570[30, 557[28,912[30, 59128, 640,27,162.27, 405.29, 7442,7312,8283,0514,0685,7593,6543,7014,2893,6444,8833,4383,4423,4403,4433,4873,6443,7263,8303,8503,9043,9644,0524,0764,1384,2544,4494,5774,8835,1645,3405,6905,9066,8457,2851 Includes Treasury bonds and minor amounts of Panama Canal and postal savings bonds.2 Nonmarketable certificates of indebtedness, notes, and bonds in the Treasury foreign series and foreign-currencyseriesissues.3 Includes Treasury deposit funds and some special issues formerly included in "Other".4 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.5 Includes $5,610 million in certificates not shown separately.Source: Department of the Treasury.274

End of year ormonthTABLE B-76.—Estimated ownership of public debt securities^ 1967-76Total 2HeldGovernmentaccounts[Par values; 1 billions of dollars)Held byFederalReserveBanksTotalsTotal public debt securitiesCommercialbanks *Held by private investorsMutualsavingsbanksand insurancecompaniesCorporations5Stateand localgovernments«Individuals7Miscellaneousinvestors3 8Fiscal year:196719681969197019711972. .19731974322.9345.4352.9370.1397.3426.4457.3474.271.876.184.895.2102.9111.5123.4138.246.752.254.157.765.571.475.080.5204.4217.0214.0217.2228.9243.6258.9255.655.559.755.352.661.060.958.853.213.212.511.610.410.310.29.68.511.012.011.18.57.49.39.810.823.625.126.429.025.926.928.828.370.474.277.381.875.473.275.980.730.733.432.335.049.163.276.074.219751976533.2620.4145.3149.684.794.4303.2376.469.091.810.615.613.225.029.639.587.196.493.6108.01975: JanFeb..MarAprMay.June494.1499.7509 7516.7528.2533.2139.0139.8138.5138.0140.9145.381.381.181.487.885.684.7273.8278.9289.8290.9301.7303.254.656.561.864.167.769.08.99.09.510.010.510.611.311.412.012.513.713.230.030.529.729.829.829.685.385.385.786.186.687.183.886.291.188.593.493.6July...Aug . .Sept..OctNov . .Dec...538.2547.7553.6562.0566.8576.6142.5144.8142.3138.9137 7139.381.982.587.087.285.187.9313.8320.4324.4336.0343.9349.471.874.878.379.382.285.111.111.411.712.113.213.816.216.015.017.520.020.231.331.232.233.833.933.887.688.789.690.691.091.495.898.497.7102.7103.6105.11976: JanFebMar . . .Apr....MayJune584.4593.9600.5602.0610.7620.4139.3139.8139.1139.1143.7149.689.889.089.891.890.594.4355.3365.0371.7371.0376.4376.486.087.291.991.791.691.814.715.015.515.415.715.621.223.223.023.826.025.034.636.437.837.737.639.591.793.994.594.795.996.4107.2109.5108.9107.6109.7108.0JulyAugSeptOct...NovDec p624.5633.3634.7637.6644.6653.5147.6148.0146.1144.6144.9145.090.794.096.495.791.797.0386.2391.3392.2397.3408.1411.594.092.593.394.899.816.417.016.917.417.627.027.825.724.724.237.238.739.141.542.197.199.799.7100.0100.7114.7115.5117.5118. £123.7* 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 MonetaryFund to conform with the Budget presentation. This adjustment applies to the 1967-76 data in this table.3 For comparability with 1975-76 published data, published data for 1967-74 have been adjusted to exclude notes ofthe 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-58, which are based on book values and relate only to banks within the United States.8 Exclusive of banks and insurance companies.• Includes trust, sinking, and investment funds of State and local governments and their agencies, and of Territoriesand 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 goveinment-sponsoied agencies, and investments of foreign balances and internationalaccounts in this country.Source: Department of the Treasury.275

TABLE B-77.—Average length and maturity distribution of marketable interest-bearingpublic debt held by private investors, 1967—76End of year or monthAmountoutstandingWithin1 yearIto5yearsMaturity class5 to 10years10 to 20years20 yearsand overAverage lengthMillions of dollarsYearsMonthsFiscal year:1967..1968..1969..150,321159, 671156, 00856, 56166, 74669,31153, 58452, 29550,18221,05721,85018, 0786,1536,1106,09712,96812, 67012,3371970...1971...1972..1973...1974..157, 910161, 863165, 978167, 869164,86276, 44374, 80379, 50984, 04187,15057, 03558, 55757,15754,13950,1038,28614, 50316, 03316, 38514,1977,8766,3576,3588,7419,9308,2727,6456,9224,5643,481631111975...1976...210, 382279, 782115,677150,29665, 85290, 57815, 38524, 1698,8578,0874,6116,6521975:Jan...Feb...Mar-.Apr_.May..June-July..Aug..Sept.Oct..Nov..Dec.183,411189, 375198, 298198, 857209,149210, 382221, 630228, 446232, 246243, 786251,159255, 860101,258105, 341108, 627108, 820115,374115,677123,466129, 571130, 641136, 249145, 336150,11655, 80356, 76561,08661, 67064, 51065, 85269,31869, 17672, 22378,16474,51774, 65713, 48713,19015, 33014, 20915, 63015, 38515, 42715,61115,51415, 54116,77116, 6898,6659,8349,17710,1818,9028,8578,8138,7388,6478,6378,5898,5244,1984,2454,0793,9784,7334,6114,6065,3505,2225,1965,9465,876966776651976: Jan...Feb..Mar..Apr..May..June.July..Aug..Sept.Oct...Nov..Dec.259, 831270, 625276, 434275, 520278, 929279, 782289, 044293, 627294, 595296,211307, 309307, 843152,077151,875154,258153, 441153,464150,294156,595153,304153, 302155, 179158, 422157, 46975,17982, 48486, 21486, 19886, 24290, 57891,04293, 39694, 84591,795101,684103, 74718,31021,70721,53821,59724, 33624,16926, 69431,52331,24733, 92231, 34931,0198,4668,4178,3508,2428,1728,0878,0597,9867,9397,8977,5117,3995,8006,1426,0746,0426,7166,6546,6547,4187, 2627,4198,3458,20956557761099109Note.—All issues classified to final maturity.Source: Department of the Treasury.276

CORPORATE PROFITS AND FINANCETABLE B-78.—Corporate profits with inventory valuation and capital consumption adjustments,1946-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year or quarterCorporateprofits withinventoryvaluationand capitalconsumptionadjustmentsCorporateprofitstax liabilityProfits after tax with inventory valuationand capital consumption adjustmentsTotalDividendsUndistributedprofits withinventoryvaluationand capitalconsumptionadjustments19461947 .1948194916 622.229.126.99.111.312.410.27 510.916.716.75 66.37.07.22 04 69.79.51950195119521953195433.738.135 435.534.617.922.619.420.317.615.715.516.015.217.08.88.58.58.89.16.97.07 56.47.91955195619571958195944.642.942.137.548.222.022.021.419.023.622.620.920 618.524.610.311.111.511.312.212.29.89 17.212.4I960196119621963 .196446.646.954 959.667.022.722.824.026.228.023.924.130 933.439.012.913.314 415.517.311.010.816 517 921.71965196619671968..1969 . .77.182.579.385.881.430.933.732.539.439.746.248.946 846.441.819.119.420 121.922.627 129.426 724.419.219701971197219731974 ..67.977.292.199.184.834.537.741.548.752.433 439.550.550.432.422.923.024.627.830.810 516.525.922.61.719751976*91.6118.749.264.742.453.932.135.110 318.81974: 1IIIIIIV95.787.881.774.150.553.057.648.645.234.824.125.529.930.731.331.115.34.1-7.2-5.61975: 1 .IIIIV69.086.6105.3105.640.244.854.857.228.841.850.448.431.731.932.632.2-2.99.917.916.21976: 1IIIII ...115.1116.4122.061.463.565.153.752.956.833.134.435.420.618.521.4Source: Department of Commerce, Bureau of Economic Analysis.277224-250 O - 77 - 19

TABLE B-79.—Corporate profits by industry, 1929-76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year orquarter1929 ..1933 .1939 ._1940194119421943.1944...19451946 .1947194819491950195119521953 .1954195519561957195819591960196119621963196419651966196719681969197019711972197319741975 .. -1976 v1974: 1 IL.__IIIIV1975: 1 IL.._III...IV....1976: 1 ll_-_-III...Corporate profits with inventory valuation adjustment and without capital consumption adjustmentTotal10.5-1.26.39.815.220.324.423.819 219.325.633.030.837.642.739.839.537 846.745.945.440.851.248.948.753.757.664.273.378.675.682.177.966.476.989.697.287.8103.1134 295.989.785.280.477.797.9117.9119.1129.6131.8137.6Domestic industriesTotal10.2-1.26.19.615.020.124.123.518.918.924.932.229.936.741.538.738.436.445.144.143.539.149.447.046.351.154.961.070.175.972.678.974.262.672.484.790.476.797.0126 881.480.875.169.572.191.7111.4112.7121.9125.0130.5Financial 1Total1.3.3.81.01.11.21.31.61.72.11.72.63.13.13.64.04.54.64.85.05.25.76.87.27.07.36.86.97.58.59.010.411.312.614.115.416.214.112.914 314.814.014.613.113.912.512.112.914.013.814.4FederalReservebanks0.0.0.0.0.0.0.0.1.1.1.1.2.2.2.3.4.4.3.3.5.6.6.71.0.8.91.01.11.41.72.02.53.13.63.33.44.55.75.76 05.45.75.96.05.85.75.45.86.15.95.9Other1.3.3.8.91.01.21.31.61.62.01.62.32.93.03.33.74.14.34.54.54.65.16.06.26.36.45.85.86.26.87.07.98.29.010.812.111.78.47.28 39.48.38.77.18.16.86.77.17.97.98.5Total8.9-1.55.38.614.018.922.821.917.316.823.229.626.833.537.934.733.931.840.339.138.333.542.639.839.343.848.154.162.567.463.668.562.950.158.269.374.162.684.1112 566.666.860.556.358.279.299.399.8107.9111.2116.0NonfinanciaManufacturing*5.2-.43.35.59.511.813.813.29.79.013.617.616.220.924.621.722.019.926.024.724.019.426.223.923.026.028.731.938.341.637.941.236.827.132.440.644.136.946.466.339.439.037.731.629.743.557.055.361.266.467.2Wholesaleandretailtrade1.0-.5.71.21.42.23.03.23.33.84.65.54.55.05.04.83.83.85.04.54.44.65.94.94.95.75.97.47.98.08.910.110.19.411.713.314.712.420.915.114.49.410.614.519.624.425.029.026.628.8LTransportation,communication,andservices31.8.01.01.32.03.44.43.92.71.82.23.03.04.04.64.95.04.75.65.95.85.97.07.47.88.49.39.911.011.810.710.710.28.28.39.08.36.07.95.76.46.35.75.07.39.59.78.69.510.7Other0.9-.7.3.61.11.51.61.61.52.12.93.63.13.63.73.33.13.43.64.14.03.63.53.53.63.84.24.95.36.06.16.55.85.35.86.47.07.29.06.37.07.28.39.08.98.49.79.18.89.3Restof theworld0.2.0.2.2.2.2.2.3.2.4.7.8.81.01.21.11.11.41.61.81.91.71.81.92.32.62.63.13.32.83.03.23.73.84.6A A6.811.26.27.:14.69.C10.1ll.C5.J6.C6.E6.47JS.Il.'tSee footnotes at end of table.278

TABLE R-79.—Corporate profits by industry, 1929-76— Continued[Billions of dollars; quarterly data at seasonally adjusted annual rates]Corporate profits before deduction of capital consumption allowances, with inventory valuation adjustmentDomestic industriesYear orquarterTotalTotalTotalFinancialFederalReservebanksLOtherTotalManufacturing2Nonfinancia!WholesaleandretailtradeTransportation,communication,andservices3OtherRestof theworld1929...14.714.41.40.01.413.07.11.32.91.70.21933...19392.610.12.69.9.4.9.0.0.4.92.29.01.34.9-.21.01.12.0.01.1.0.2194019411942..194319441945...1946..1947194819491950195119521953195419551956195719581959196019611962 . .196319641965196619671968. . .1969197019711972197319741975...1976 p1974: 1II....III...IV....1975: 1II....III...IV....1976: 1IL...III...13.619.525.429.729.925.524.031.440.038.746.553.051.352.752.864.164.966.362.974.874.175.384.290.098.7110.8119.3119.7130.2130.9123.0137.8157.4170.9169.4192.6231.5174.4170.2168.2164.8164.1185.8208.4211.9223.9228.0235.913.419.325.229.529.625.323.630.739.237.945.551.850.251.651.462.663.164.461.273.072.272.981.587.495.6107.5116.5116.7127.0127.2119.2133.3152.6164.1158.2186.4224.1159.8161.3158.1153.8158.5179.5201.9205.6216.2221.2228.71.11.21.31.41.71.72.21.82.73.33.33.84.24.84.95.25.45.76.17.37.87.78.07.67.98.59.610.211.813.014.516.318.019.517.917.319.318.317.718.517.118.116.816.617.618.818.719.5.0.0.0.0.1.1.1.1.2.2.4.4g.5.6.6.71.0.8.91.01.21.41.72.02.53.13.63.43.44.55.75.76.05.45.75.96.05.85.75.45.86.16.05.91.11.21.31.41.61.62.11.72.53.03.13.53.94.44.64.84.95.05.56.56.86.97.16.66.77.27.98.29.39.911.013.014.714.912.211.613.313.012.012.511.212.311.111.211.812.712.813.612.318.123.928.127.923.621.428.936.534.642.248.046.046.846.557.457.758.755.065.764.465.373.679.887.799.0106.9106.5115.1114.2104.7116.9134.6144.6140.3169.1204.8141.5143.6139.6136.7140.5162.8185.3188.0197.4202.5209.27.211.414.216.616.513.011.216.320.819.824.929.126.928.327.134.333.633.929.837.135.535.240.243.948.055.960.558.763.961.553.159.869.975.070.983.1105.972.372.672.466.365.479.694.293.499.7105.5107.21.51.72.63.33.53.64.25.26.25.46.06.26.15.15.26.76.36.56.68.07.37.48.48.710.411.111.512.714.314.914.717.520.222.120.730.023.022.617.819.323.328.633.734.538.636.438.92.33.14.85.85.54.63.03.64.74.86.17.17.68.18.29.810.310.510.912.513.314.015.416.817.919.621.321.021.922.421.423.226.327.427.331.326.027.327.827.927.630.233.134.133.334.836.41.41.92.22.42.42.32.93.84.84.65.25.65.45.35.96.67.47.87.68.08.48.89.610.411.412.313.614.115.015.415.516.418.320.221.524.720.221.121.623.224.124.424.326.025.825.726.7.2.2.2.3.2.4.7.8.81.0?.14.6.8.9.71.81.92.32.62.63.13.32.83.03.23.73.84.64.86.811.26.27.314.69.010.111.05.56.36.56.47.76.87.21 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.3 Services consists of electric, gas, and sanitary services.Note.—The industry classification is en a ccrrpsny basis and is based en the 1867 Standard Industrial Classificationbeginning with 1948 and en the 1942 Standard Industrial Classification prior to 1948.Source: Department of Commerce, Bureau of Economic Analysis.279

TABLE B—80.—-Corporate profits of manufacturing industries, 1929—76[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year orquarter1929193319391940194119421943194419451946194719481949195019511952195319541955195619571958195919601961196219631964196519661967196819691970197119721973197419751976 v1974: 1—II..III.IV..1975: 1...II..III.IV..1976: 1...II..III.Corporate profits with inventory valuation adjustment and without capital consumption adjustmentTotalmanufacturing5.2-.43 35 59.511 813 813.29.79.013.617.fi16.220.924.6?1 72?.O19.926.024.724.019.426.223,923.026.028 731.938.341.637.941.?36.8?7.132.440.644.136 946.466.339,439.037.731.629.743.557.055.361.266.467.2Total2.6.01.72.43.14.65.75.95.26.67.810.08.18.911.49.910.19.411.811.910.710.012.711.911.711.91?.814.415.818.017.318.817.716.817.318.120.125.129.237.523.826.927.022.621.328.732.634.337.535.637.6Nondurable goodsFoodandkindredproducts1.91.61.61.41.71.81.62.21.81.82.12.62.12.32.32.72.82.63.33.13.22.93.53.32.82.22.65.82.84.21.81.65.06.06.36.07.36.18.0Chemicalsandalliedproducts1.71.82.32.82.32.22.23.02.82.82.53.43.13.13.23.63.94.54.84.25.04.63.94.25.05.84.95.75.65.34.83.93.55.36.87.38.38.28.5Petroleumandcoalproducts2.81.92.32.72.32.82.73.03.32.62.12.52.52.22.12.12.42.83.23.83.63.33.63.63.54.910.19.37.410.013.59.77.510.19.210.411.210.410.1Other3.72.82.74.43.63.32.93.64.13.63.34.24.24.04.34.55.35.86.76.27.06.95.86.26.87.27.58.48.07.47.07.45.37.310.410.610.810.810.9Durable goodsTotal2.6-.41.73.16.47.28.17.44.52.45.87.58.112.013.211.711.910.514.312.813.39.313.512.011.314.115.917.522.623. 520.622.419.210.315.122.524.011.917.228.815.6l?.l10.79.08.414.824.321.123.730.729.6Primarymetalindustries1.61.52.33.11.92.51.72.93.03.01.92.32.11.51.61.92.43.13.62.72.01.4.9.51.62.04.93.62.74.56.75.95.92.92.72.73.34.53.5Fabricatedmetalproducts0.8.71.11.31.0.9.91.01.01.1.91.0.91.01.11.21.41.92.32.32.21.91.21.32.12.61.53.11.81.7.51.81.83.14.13.53.64.34.1Machinery,exceptelectrical1.21.31.62.32.31.91.71.72.12.01.42.11.81.82.32.43.13.84.44.04.13.62.72.73.94.51.74.63.62.0.01.03.04.35.85.25.95.96.5Electricalequipmentandsupplies0.7.81.2.3.5.4.2.1.2.51.31.71.31.31.51.51.62.63.02.92.82.21.11.83.02.6.41.21.6.7-.3-.3.41.31.71.41.82.52.6Motorvehiclesandequipment1.42.13.12.42.42.62.14.12.22.6.92.93.02.54.04.94.76.15.13.95.54.81.44.95.95.8.2.9-.1-.71.6.0-3.4.23.92.84.66.15.5Other1.91.7?.62.8? /?.72.93.53.?3.1?.f3.4?.93.13.63.?4.35.05.24.85.f5.23.03.86.C6.63.?3.85.94.02.2.7.73.26.15.44.El.i7.3See footnotes at end of table.280

TABLE B-80.—Corporate profits of manufacturing industries, 1929-76—Continued[Billions of dollars; quarterly data at seasonally adjusted annual rates]Year orquarter192919331939.. .1940.194119421943194419451946194719481949195019511952195319541955195619571958195919601961196219631964196519661967196819691970 .197119721973197419751976 P1974:1...II...III..IV..1975:1...II...ML.IV..1976:1...II...III..Corporate profits before deduction of capital consumption allowances, with inventory valuation adjustmentTotalmanufacturing7.11.34.97.211 414.216.616.513.011.216.320.819.824.929.126.928.327.134.333.633.929.837.135.535.240.243.948.055.960.558.763.961.553.159.869.975.070.983.172.372.672.466.365.479.694.293.499.7105.5107.2Total3.61.12.63.44 15.97.17.57.07.99.311.810.111.113.912.713.213.116.016.515.715.418.417.818.019.120.522.624.4?7.?27.129.329.229.030.43?.?35.140.946.339. 342.442.839.137.745. 550.152.155.553.856.1Nondurable goodsFoodandkindredproducts2.22.02.12.02.32.32.32.92.52.63.03.63.23.43.64.04.24.04.94.74.94.85.65.55.14.85.38.85.56.94.64.47.98.99.39.010.39.211.1Chemicalsandalliedproducts2.02.12.73.22.82.83.03.93.83.83.64.64.44.54.85.35.76.56.86.37.37.16.67.18.29.08.39.48.88.88.37.57.19.010.511.112.212.212.6Petroleumandcoalproducts3.42.63.13.63.23.94.14.64.94.44.04.54.54.34.44.75.15.86.37.27.37.17.67.98.09.715.114.712.414.618.315.112.515.414.816.116.916.216.0Other4.23.43.35.14.44.13.84.65.24.94.75.75.85.76.26.57.58.19.28.99.910.29.29.910.811.612.113.412.6l?.l11.712.110.212.115.515.916.016.216.3Total3.4.22.33.87.28.49.59.06.03.36.99.09.713.715.314.215.014.118.317.218.214.418.717.717.221.123.325.531.433.331.634.632.324.129.437.639.930.036.833.030.229.627.227.734.244.141.344.251.751.1Primarymetalindustries1.91.92.83.62.63.52.94.24.34.53.23.63.42.93.33.74.35.15.75.04.54.03.53.14.14.68.26.95.77.710.09.29.46.16.16.06.67.96.9Durable goodsFabricatedmetalproducts1.0.91.31.51.21.21.21.31.41.51.31.51.41.51.81.82.02.73.03.23.23.02.32.43.23.82.84.63.13.11.93.23.34.55.65.05.15.95.7Machineryexceptelectrical1.51.61.92.62.72.32.22.32.82.72.22.92.72.83.43.54.35.25.85.76.05.75.25.46.87.65.08.36.95.33.64.36.58.09.69.09.910.010.7Electricalequipmentandupplies0.8.91.41.51.71.61.51.51.62.01.82.21.81.92.12.32.33.44.04.04.13.72.93.85.14.93.14.04.23.32.42.43.24.04.54.24.75.55.6Motorvehiclesandequipment1.62.33.32.72.73.02.54.62.93.31.63.74.03.55.26.36.38.07.56.48.17.53.87.38.48.33.24.32.82.54.72.6-.13.57.26.68.39.99.4Other2.22.23.03.33.33.43.74.44.24.34.34.84.44.65.35.86.27.27.47.48.78.56.57.59.910.67.78.810.38.36.9b.45.48.011.110. b9.612. b12.7Source: Department of Commerce, Bureau of Economic Analysis.281

TABLE B1-81.—Sales, profits, and stockholders' eqmtv, all manufacturing corporations, 1947-761976: 1 284.1 24.4 14.8II 307.5 29.3 18.0Ill 301.6 26.1 16.01Ml manufacturingcorporationsYear orProfitsquarterSalestaxes i taxes(net) BeforeincomeAfterincome1947150.7 16.6 10.11948165.6 18.4 11.51949154.9 14.4 9.01950181.9 23.2 12.91951245.0 27.4 11.91952250.2 22.9 10.71953265.9 24.4 11.31954248.5 20.9 11.21955.278.4 28.6 15.11956307.3 29.8 16.21957320.0 28.2 15.41958305.3 22.7 12.71959338.0 29.7 16.31960345 7 27 5 15.21961356.4 27.5 15.31962389.9 31.9 17.71963 . . .. 412.7 34.9 19.51964443.1 39 6 23.21965492.2 46.5 27.51966554.2 51.8 30.91967 . . 575.4 47.8 29.01968631.9 55.4 32.11969694. 6 58.1 33.21970708 8 48 1 28 61971751.4 53.2 31.31972849.5 63.2 36.51973 1,017.2 81.4 48.11973: IVNew series: 8197419751973: IV275.11, 060.61, 065.2236.621.492.179.920.613.058.749.113.21974:1 242.0 21.2 13.5II 269.4 25.9 16.3Ill 272.1 25.0 15.5IV 277.0 20.1 13.41975: | 247.1 15.4 9.3II 265.8 20.2 12.4Ill 271.0 21.7 13.2IV 281.3 22.6 14.2Stockholders'equity 265.172.277.683.398.3103.7108.2113.1120.1131.6141.1147.4157.1165.4172.6181.4189.7199.8211.7230.3247.6265.9289.9306.8320.9343.4374.1386.4395.0423.4368.0379.0389.9402.7408.4410.7420.2427.4435.5445.3458.9467.7[Billions of dollars]Sales(net)66.675.370.386.8116.8122.0137.9122.8142.1159.5166.0148.6169.4173.9175.2195.5209.0226.3257.0291.7300.6335.5366.5363.1382.5435.8527.3140.1529.0521.1122.7120.3136.8134.8137.1121.3132.4131.0136.3138.4154.4146.9Durable goods industriesProfitsBeforeincometaxes 17.68.97.512.915.412.914.011.416.516.515.811.415.814.013.616.718.521.226.229.225.730.631.523.026.533.643.610.841.135.310.19.512.610.58.67.09.39.110.011.214.812.2Afterincometaxes4.55.44.56.76.15.55.85.68.18.37.95.88.17.06.98.69.511.614.516.414.616.516.912.914.518.424.86.324.721.46.25.77.66.25.24.15.75.56.26.79.07.4Stockholders'equity 231.134.137.039.947.249.852.454.958.865.270.572.877.982.384.989.193.398.5105.4115.2125.0135.6147.6155.1160.6171.4188.7194.7196.0208.1185.8189.4194.1199.9200.8201.7207.3209.7213.7217.6224.3228.0Sales(net)84.190.484.695.1128.1128.0128.0125.7136.3147.8154.1156.7168.5171.8181.2194.4203.6216.8235.2262.4274.8296.4328.1345.7368.9413.7489.9135.0531.6544.1113.9171.7132.6137.3140.0125.8133.3140.0145.0145.7153.1154.7Nondurable goodsindustriesProfitsBeforeincometaxes 19.09.57.010.312.110.010.49.612.113.212.411.313.913.513.915.116.418.320.322.622.024.826.625.226.729.637.810.651.044.610.511.713.314.511.58.410.912.712.613.214.513.9Afterincometaxes5 66.24.66.15.75.25.55.67.07.87.56.98.38 28.59.210.011 613.014.614.415.516.415.716.718.023.36.734.127.77.07.88.79.48.25.26.87.78.18.19.18.6Stockholders'equity 234 038.140.643.551 153.955.758.261.366 470.674.679 283 187.792.396.3101 3106.3115.1122.6130.3142.3151.7160.3172.0185.4191.7199.0215.3182.1189.6195.8202.8207.6209.0212.9217.6221.8227.7234.6239.71 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 ha/e been dedicted.2 Annual data are average equity for the year (using four end-of-quarter figures).3 See "Quarterly Financial Report for Manufacturing Corporations, First Quarter 1974," Federal Trade Commission.Note.—Data are not necessarily comparable from one period to another due to changes in accounting prccedures,industry classifications, sampling prccedures, etc. For explanatory notes concerning ccrr pilaticn cf the series, see "QuarterlyFinancial Report for Manufacturing Corporations," Federal Trade Ccrrrrissicn.Source: Federal Trade Commission.282

TABLE B-82.—Relation of profits after taxes to stockholders' equity and to sales, all manufacturingcorporations, 1947—76Year or quarterRatio of profits afterincome taxes (annual rate)to stockholders' equity—percent 1AllmanufacturingcorporationsDurablegoodsindustriesNondurablegoodsindustriesAllmanufacturingcorporationsProfits after income taxesper dollar of sales—centsDurablegoodsindustriesNondurablegoodsindustries1947194819491950195119521953195419551956195719581959 . .196019611962196319641965196619671968196919701971197219731973: IVNew series: *197419751973- IV1974: 1||IIIIV1975: 1IIIllIV_. _ _1976: 1 _._II ..Ill15.616.011.615.412.110.310.59.912.612.310.98.610.49.28.99.810.311.613.013.411.712.111.59.39.710.612.813.414.911.614.314.316.715.413.29.011.812.413.113.315.713.714.415.712.116.913.011 111.110.313 812.811.38.010.48.58 19.610.111.713.814.211.712.211.48.39.010.813.112.912.610.313.312.115 612.310.48.110.910.511.612.316.012.916.616.211.214.111.29 79.99.611.411.810.69.210.49.89 69.910.411.51 Annual ratios based on average equity for the year (using four end-of-quarter figures). Quarterly ratios based on equityat end of quarter only.3 See "Quarterly Financial Report for Manufacturing Corporations, First Quarter 1974," Federal Trade Commission.Note.—Based on data in millions of dollars.See also Note, Table B-81.Source: Federal Trade Commission.12.212.711.811.911.510.310.310.512.614.017.112.915.316.417.818.515.810.012.814.114.514.315.514.46.77.05.87.14.84.34.34.55.45.34.84.24.84.44.34.54.75.25.65.65.05.14.84.04.14.34.74.75.54.65.65.66.05.74.83.74.74.95.15.25.95.36.77.16.47.75.34.54.24.65.75.24.83.94.84.03.94.44.55.15.75.64.84.94.63.53.84.24.74.54.74.15.04.85.54.63.83.44.34.24.54.85.85.0I6.76 85.46.54.54 14 34.45 15 34.94.44.94.84 74.74.95.45.55.65.35.25.04.54.54.44.85.06.45.16.16.46.66.85.94.15.15.55.65.65.S5.6283

TABLE B-83.—Relation of profits after taxes to stockholders' equity and to sales, all manufacturingcorporations, by industry group, 1975-76Ratio of profits after incometaxes (annual rate) to stockholders'equity—percent 1Profits after income taxes perdollar of sales—centsIndustry1975197619751976IIIIV1IIIIIIIIIV1IIIIIAll manufacturing corporations12.413.113.315.713.74.95.15.25.95.3Durable goods industries.._10.511.612.316.012.94.24.54.85.85.0Stone, clay, and glass productsPrimary metal industries14.86.510.87.54.87.115.510.716.18.16.03.44.64.02.33.56.24.86.23.9Iron and steelNonferrous metals8.73.110.03.68.15.311.39.58.77.04.12.04.82.23.83.14.84.73.93.7Fabricated metal productsMachinery, except electricalElectrical and electronic equipment-Transportation equipment.14.813.28.37.512.614.510.511.615.014.910.216.817.716.213.520.715.815.511.910.54.76.33.02.54.06.83.73.64.87.23.75.15.37.54.65.84.97.74.23.5Motor vehicles and equipment.Aircraft, guided missiles, andparts5.512.112.510.918.812.323.114.09.113.02.13.34.32.96.03.46.93.63.33.7Instruments and related products..Other durable manufacturing products15.110.914.210.412.210.116.317.516.315.28.43.47.73.36.93.28.65.08.64.4Nondurable goods industries14.114.514.315.514.45.55.65.65.95.6Food and kindred productsTobacco manufacturesTextile mill productsPaper and allied productsPrinting and publishingChemicals and allied products17.218.47.812.613.415.514.615.310.414.715.715.213.315.210.014.512.316.616.316.010.116.316.317.216.816.96.613.616.315.33.711.12.55.54.97.63.28.03.06.25.47.63.18.23.06.14.48.03.79.02.96.75.68.13.89.22.05.75.47.5Industrial chemicals and syntheticsDrugs13.718.115.515.616.218.816.318.213.518.77.012.47.810.77.812.37.612.76.712.6Petroleum and coal productsRubber and miscellaneous plasticsproductsOther nondurable manufacturingproducts13.39.414.514.611.016.514.710.613.714.813.413.614.07.614.58.03.53.18.64.03.38.73.93.09.04.52.98.32.83.11 Ratios based on equity at end of quarter.Source: Federal Trade Commission.284

TABLE B—84.—Sources and uses of funds, nonfarm nonfinancial corporate business, 1946—76[Billions of dollars]SourcesUsesPeriodTotalnternaPTotalExternalCredit market fundsTotalLongerm2OtherTotalShorttermsPurchaseofphysicalassets *IncreaseinfinancialassetsDiscrepancy(sourceslessuses)194619471948. .194918.426.728.419.77.812.618.819.310.614.19.7.46.88.36.43.03.55.36.64.83.33.0-.2-1.83.75.83.3-2.724.623.627.720.826.015.222.717.3-1.48.45.03.5-6.23.1.8-1.21950 .1951 _.195219531954 .41.835.928.927.328.217.819.721.221.123.524.016.27.86.24.78.010.69.25.75.54.16.47.86.15.73.94.21.4-.3-.315.95.6-1.4.5-.846.339.328.827.726.529.931.924.225.421.616.47.44.62.34.9-4.5-3.4.2-.41.719551956 .195719581959 . _51.443.841 841.155.428.828.730.429.635.022.615.111.411.520.49.512.611.810.312.75.77.39.910.38.33.85.41.9-.04.413.02.5-.41.27.748.340.738.738.451.931.836.734.527.637.716.54.04.210.814.23.13.13.12.63.619601961 _196219631964 _.47 654.158.965 972.634.735.341.644.550.112.918.817.321.422.511.912.112.412.415.07.510.59.58.38.94.51.62.94.16.11.06.74.99.07.440 650.154.958 964.238.036.943.844 850.82.713.211.114 213.47.04.04.06.98.419651966 ..196719681969 .90.896.993.3114.5118.656.160.561.362.361.734.736.432.052.256.920.425.628.931.938.49.216.021.018.920.811.29.67.913.017.714.410.93.120.318.582.188.689.4106 4113.461 976.072.677 685.020 212.616.828 828.48.78.33.98 15.219701971197219731974105.1129.0154.0181.7183.058.968.680.883.877.646.260.473.297.8105.441.546.458.872.983.132.641.641.437.439.68.94.717.335.543.54.814.014.425.022.296 1115.1137.5165 5169.980 686.2101.0124 4134.615 428.836.541 135.39.013.916.416.113.11975145.5103.442.137.149.8-12.85.0130.995.735.214.5Seasonally adjusted annual rates1975- 1 IIIllIV1976- 1IIIII83.5130.7171.0196.7200.9200.1198.583.5101.5113.6114.9120.6121.3128.10.029.257.481.880.378.870.435.032.131.150.045.448.138.052.954.437.954.048.643.037.7-18.0-22.2-6.8-4.0-35.0-2.926.331.734.830.6.2 32.4-3.15.068.6115.3157.9182.2190.9195.4189.289.880.9106.8105.5129.3140.5143.7-21.234.451.176.761.654.945.514.915.413.214.69.94.69.31 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.* Plant and equipment, residential structures, inventory investment, and mineral rights.Source: Board of Governors of the Federal Reserve System.285

TABLE B-85.—Current assets and liabilities of U.S. corporations, 1939-76[Billions of dollars]Current assetsCurrent liabilitiesEnd of yearor quarter193919401941194219431944194519461947 .1948194919501951195219531954195519561957195819591960196119611962196319641965196619671968 ... .1969197019711972 .... ..1973197419751975: 1.IIIIIIV... .1976: 1.II.IllTotal54.560.372.983.693.897.297.4108.1123.6133.0133.1161.5179.1186.2190.6194.6224.0237.9244.7255.3277.3289.0306.8254.7269.7288.2305.6336.0364.0386.2426.5473.6492.3529.6573.5643.3712.2731.6698.4703.2716.5731.6753.5775.4791.8Cashonhandandinbanks*10.813.113.917.621.621.621.722.825.025.326.528.130.030.831.133.434.634.834.937.436.337.241.134.837.139.840.542.841.945.548.247.950.253.357.561.662.768.160.663.765.668.168.470.871.1U.S.Governmentsecuritiesa2.22.04.010.116.420.921.115.314.114.816.819.720.719.921.519.223.519.118.618.822.820.120.016.516.816.715.814.413.010.311.510.67.711.09.311.011.719.412.112.714.319.421.723.323.9ReceivablesfromU.S.Government30.1.64.05.04.72.73* 1.342 .4421 12.72.82.62.42.32.62.82.82.93.13.43.43.73.63.43.94.55.15.14.84.23.53.43.53.53.63.23.33.33.63.63.74.322.123.927.423.321.921.823.230.0.055.758.864.665.971.286.695.199.4106.9117.7126.1135.894.599.5106.9116.5130.2142.1150.2168.8192.2201.9217.6240.0266.1289.7294.6281.9284.8294.7294.6307.3318.1324.2NotesandaccountsreceivableInventoriesTotalAll corporations«18.019.825.627.327.626.826.337.644.648.945.355.164.965.867.265.372.880.482.281.988.491.895.21.41.51.41.33.4> 4,7.6.641.72.12.42.43.14.25.96.77.59.110.611.430.032.840.747.351.651.745.851.961.564.460.779.892.696.198.999.7121.0130.5133.1136.6153.1160.4171.2Nonfmancial corporation: ,795.0100.5106.8113.1126.6142.8153.1166.0186.4193.3200.4215.2246.7288.0285.8285.2281.4279.6285.8288.8295.6302.110.512.114.416.318.119.722.026.931.635.043.848.154.456.660.055.457.359.060.063.663.966.3123.7132.4145.5156.6178.8199.4211.3244.1287.8304.9326.0352.2401.0450.6457.5438.0434.2444.7457.5465.9475.9484.1Othercurrentassets*Advancesandprepayments,U.S.Government30.6.82.02.21.8.9.1373931.41.32.32.22.42.32.42.31.71.71.81.81.82.02.52.73.14.45.86.47.36.64.94.04.35.26.45.35.86.26.46.46.87.0.6.3.521.922.625.624.024.125.024.831.547.953.657.057.359.373.881.584.388.799.3105.0112.882.686.794.5102.2118.4133.1141.3162.4191.9204.7215.6230.4261.6287.5281.6271.2270.1273.4281.6280.5287.0284.7NotesandaccountspayableFederalincometaxliabilities1.22.57.112.616.615.510.48.510.711.59.316.721.318.118.715.519.317.615.412.915.013.514.113.314.315.716.218.317.413.214.312.610.013.115.118.123.220.721.817.719.420.723.922.024.9Othercurrentliabilities56.97.17.28.78.79.49.711.813.213.514.014.916.518.720.722.525.729.031.133.337.040.142.526.029.432.835.539.044.551.061.076.083.692.4102.6117.0134.8148.8139.8140.6145.6148.8155.0160.1167.5Networkingcapital24.527.532.336.342.145.651.656.262.168.672.481 686.590.191.894.9103.0107.4111.6118.7124.2128.6135.6131.0137.3142.7149.0157.2164.6174.9182.4185. 7187.4203.6221.3242.3261.5274.1260.4269.0271.8274.1287.6299.4307.7» Includes time certificates of deposit.i Includes Federal agency issues.3 Receivables from and payables to the U.S. Government do not include amounts offset against each other on corporations'booksor amounts arisingfrom subcontracting which are not directly due from or to the U.S. Government. Whereverpossible, adjustments have been made to include U.S. Government advances offset against inventories on corporations'books.* Includes marketable investments (other than Government securities and time certificates of deposit) as well as sundrycurrent assets.s Includes commercial paper outstanding, the portion of long-term debt due in less than 1 year, and miscellaneouscurrent liabilities not elsewhere classified.e Excludes banks, savings and loan associations, and insurance companies.7 Excludes banks, sayings and loan associations, insurance companies, investment companies, finance companies(personal and commercial), real estate companies, and security and commodity brokers, dealers, and exchanges.Note.—Year-end data through 1971 are based on "Statistics of Income" (Department of the Treasury), covering virtuallyall corporations in the United States. "Statistics of Income" data may not be strictly comparable from year to year becauseof changes in the tax laws, basis for filing returns, and processing of data for compilation purposes. All other figures shownare estimates based on data compiled from many different sources, including data on corporations registered with theSecurities and Exchange Commission.Source: Securities and Exchange Commission.286

TABLE B-86.—State and municipal and corporate securities offered, 1934-76[Millions of dollars]Corporate securities offered for cashYear or quarterState andmunicipalsecuritiesofferedfor cash(principalamounts)Type of corporate securityTotalcorporateofferingsCommonstockPreferredstockBondsandnotesIndustry of corporate issuerManufacturing!Electric,gasandwater 3Transportation»CommunicationOther1934....1939....9391,1283972,16419873721,979676041331,2711761861031940....1941....1942....1943194419451946....1947....1948....1949....1,2389565244356617951,1572,3242,6902,9072,6772,6671,0621,1703,2026,0116,9006,5777,0786,05210811034561633978917796147361831671121243697581,1277624924252,3862,3899179902,6704,8554,8825,0365,9734,8909928485395101,0612,0263,7012,7422,2261,4141,2031,3574724771,4222,3192,1583,2572,1872,320324366481616091,454711286755800902571159964211092113292931,0089461950....1951....1952....1953....19543,5323,1894,4015,5586,9696,3627,7419,5349,5168111,2121,3691,3261,2136318385644898164,9205,6917,6017,0837,4881,2003,1224,0392,2542,2682,6492,4552,6753,0293,7138134949925957783996127608827201,3001,0581,0682,1382,037195519561957195819595,9775,4466,9587,4497,68110,24010,93912,88411,5589,7482,1852,3012,5161,3342,0276356364115715317,4208,0029,9579,6537,1902,9943,6474,2343,5152,0732,4642,5293,9383,8043,258893724824824967,132,419,462,4247172,7572,6192,4261,9912,733I960....1961....1962196319647,2308,3608,55810,10710, 54410,15413,16510, 70512,21113,9571,6643,2941,3141,0112,6794094504223434128,0819,4208,96910,85610,8652,1524,0773,2493,5143,0462,8513,0322,8252,6772,760718694567957982,050,8341,3031,1052,1893,3833,5272,7613,9574,9801965....1966....1967.....19681969.....19701971197219731974197511,14811,08914,28816,37411,46017,76224, 37023, 07022,95322,82429, 32614,78217,38524,01421,26125,99737,45143, 21939, 70431, 68437, 73752, 5271,4731,9011,9273,8857,6407,0379,50210, 7077,6433,9867,4027245808816366911,3903,6823,3703,3412,2543,45912,58514,90421, 20616, 74017,66629,02330,03525, 62720, 70031, 49741,6665,4147,05611,0696,9586,34610,64711,6256,4004,83510, 41018, 6492,9343,6664,9355,2936,71511,00911, 74611,31410, 27012, 83515, 8937021,4941,6391,5641,7791,2531,1668598111,0042,6369452,0031,9751,7752,1725,2915,8154,8354,8673,9284,4634,7873,1674,3965,6718,9859,25212,86716, 29710, 8999,55910,8841975: I..II.IllIV.6,5267,7968,2366,76815,11815,3019,23212,8761,4312,6761,4191,8766629246351,23813, 02511,7007,1799,7626,0516,6982,4203,4804,7364,4073,3263,424855072911,7531,3811,1906781,2142,8652,4982,5163,0041976: I..II.III8,2748,6147,85413, 74413,85210, 7892,7882,4031,42376472043910,19110, 7298,9294,4963,7012,9724,0453,1393,3151,0876051,1937651,8763773,3514,5292,9331 Prior to 1948, also includes extractive, radiobroadcasting, airline companies, commercial, and miscellaneous companyissues.2 Prior to 1948, also includes telephone, street railway, and bus company issues.3 Prior to 1948, includes railroad issues only.Note.—Covers substantially all new issues of State, rrunicipal. and corporate securities offered for cash sale in the UnitedStates in amounts over $100,COO 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 1971.Sources: Securities and Exchange Commission, "The Commercial and Financial Chronicle," and "The Bond Buyer."287

TABLE B-87.—Common stock prices and yields, 1949-76Common stock prices *Common stock yields(percent)«PeriodNew York Stock Exchange indexes(December 31,1965=50)2UtilityFinanceCompositeIndustrialTransportationDow-Jonesindustrialaverage 3Standard& Poor'scompositeindex0941-43=lO)*Dividendpriceratio«Earningspriceratio '1949195019511952195319541955195619571958195919601961196219631964196519661967196819699 0210.8713 0813.8113.6716.1921.5424.4023 6724 5630.7330.0135.3733 4937.5143.7647 3946.1550.7755.3754.6746.1851.9758.0057.4450.2653.5150.5846.9645.4145.4344.1942.8044.4549.8265.8570.49179.48216.31257.64270.76275.97333.94442.72493.01475.71491.66632.12618.04691. 55639.76714.81834.05910.88873.60879.12906.00876.7215.2318.4022.3424.5024.7329.6940 4946.6244.3846.2457.3855.8566.2762.3869.8781.3788.1785.2691.9398.7097.846.596 576.135.805 804.954 084 G94.353.973.233.472.983 373.173.013 003.403.203.073.2415.4813 9911.829.4710 268 577 957 557.896.235.785.904.625 825.505.325.596.635.735.676.081970 .. . .19711972197319741975197645.7254.2260.2957.4243.8445.7354 4648.0357.9265.7363.0848.0850.5260 4432.1444.3550.1737.7431.8931.1039.5737.2439.5338.4837.6929.7931.5036.9760.0070.3878.3570.1249.6747.1452.94753.20884.76950.71923.88759.37802.49974.9283.2298.29109.20107.4382.8586.16102.013.833.142.843.064.474.313.776.455.415.507.1211.599.041975- JanFebMarAprMayJuneJulyAugSeptOctNovDec1976" JanFebMar. .AprMayJune38 5642.4844.3544 9147 7649.2249 5445 7144.9746.8747 6446.7851 3153.7354.0154 2853 8754.2341 2946.0048.6349.7453 2254.6154 9650 7150.0552.2652.9151.8957 0059.7960.3060 6260 2260.7028.1230.2131.6231.7032.2832.3832.9030 0829.4630.7932.0931.6135.7838.5339.1738.6639.7140.4129.5531.3131.0430.0131.0232.7932.9831 0230.6531.8732.9932.7535.2336.1235.4335.6935.4035.1644.8547.5947.8347.3550.0652.2052.5146 5543.3844.3645.1043.8648.8352.0652.6152.7150.9951.82659.09724.89765.06790.93836. 56845.70856.28815. 51818.28831.26845. 51840.80929.34971. 70988. 55992. 51988.82985.5972.5680.1083.7884.7290.1092.4092.4985 7184.6788.5790.0788.7096.86100.64101.08101.93101.16101.775.074.614.424.344.084.024.024.364.394.224.074.143.803.673.653.663.763.7510.108.309.138.648.298.76JulyAugSeptOctNovDec55 6855.1856.2954 4354 1756.3462 1161.1462.3560 0759 4561.5442.1240.6340.3638.3739.2841.7736.4937.5638.7738.3338 8540.6154.0654.2254.5252.7453.2557.45993.20981.63994.37951.95944. 58976.86104.20103.29105.45101.89101.19104. 663.643.743.713.854.043.939.02* 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.« Standard and Poor's series, based on 500 stocks in the composite index.e Aggregate cash dividends (based on latest known annual rate) divided by aggregate market value based on Wednesdayclosing prices. Monthly data are averages of weekly figures; annual data are averages of monthly figures.7 Ratio of quarterly earnings (seasonally adjusted annual rate) to price index for last day of quarter. Annual ratios areaverages 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.288

TABLE B-88.—Business formation and business failures, 1929-76Business failures *Year or monthIndexof netbusinessformation(1967=100)Newbusinessrations(numhnr\Der>nessfailureTotalNumber of failuresLiability sizeclassUnder$100,000$100,000andoverTotalAmount of currentliabilities (millionsof dollars)Liability sizeclassUnder$100,000$100, 000andover192919333 . ...1939 3 . . ..194019411942194319441945194619471948194919501951195219531954195519561957195819591960. .1961...196219631964196519661967 . . . .19681969197019711972197319741975112.687.893.193.398.294.491.399.195.290.489.596.892.488.390.793.397.298.698.2100.0109.8116.2108.0111.0117.9117.9112.4108.9132,916112,89796,34685,64093,09283,77892,946102, 706117,411139,915141,163137,112150,781193,067182,713181,535182,057186,404197, 724203,897200,010206,569233,635274,267264,209287, 577316,601329,358319,149326, 345103.9100.369.663.054.444.616.46.54.25.214.320.434.434.330.728.733.242.041.648.051.755.951.857.064.460.856.353.253.351.649.038.637.343.841.738.336.438.442.622,90919,85914,76813,61911,8489,4053,2211,2228091,1293,4745,2509,2469,1628,0587,6118,86211,08610,96912,68613, 73914,96414,05315,44517,07515, 78214,37413, 50113,51413,06112,3649,6369,15410,74810,3269,5669,3459,91511, 43222,16518, 88014,54113,40011,6859,2823,1551,1767591,0033,1034,8538,7088,7467 f 6267,0818,07510,22610,11311,61512, 54713,49912,70713,65015,00613,77212,19211,34611,34010,83310,1447,8297,1928,0197,6117,0406,6276,7337,5047449792272191631236646501263713975384164325307878608561,0711,1921,4651,3461,7952,0692,0102,1822,1552,1742,2282,2201,8071,9622,7292,7152,5262,7183,1823,928483.3457.5182.5166.7136.1100.845.331.730.267.3204.6234.6308.1248.3259.5283.3394.2462.6449.4562.7615.3728.3692.8938.61,090.11,213.61,352.61,329.21,321.71,385.71,265.2941.01,142.11,887.81,916.92,000.22,298.63,053.14, 380.2261.5215.5132.9119.9100.780.330.214.511.415.763.793.9161.4151.2131.6131.9167.5211.4206.4239.8267.1297.6278.9327.2370.1346.5321.0313.6321.7321.5297.9241.1231.3269.3271.3258.8235.6256.9298.6221.8242.049.746.835.420.515.117.118.851.6140.9140.7146.797.1128.0151.4226.6251.2243.0322.9348.2430.7413.9611.4720.0867.11,031.61,015.61,000.01,064.1967.3699.9910.81,618.41,645.61,741.52,063.02,796.34,081.6Seasonally adjusted1975: JanFebMarAprMayJuneJulyAugSept -.OctNovDec1976: JanFeb ...MarAprMayJuneJulyAugSeptOct .Nov_102.9101.7103.0103.4104.8110.7113.7112.6113.1112.0112.5116.0115.4114.5116.3115.7114.9118.6117.8117 8118.3120.024, 40624,29824,92226, 50626,63426, 23128,57128, 63229,00029,46928, 79529, 70429, 60428,97330,91029, 87628,63731, 60030,11432,74632, 36832,88733,57446.844.946.349.143.436.541.941.442.244.937.035.436.938.236.335.435.032.731.235.734.934.71,0809631,1451,2021,045805904891853987801756886867965888835775689798714745677627774756728572553608559645521484530572618587546498458498454496403336371446317233351283294342280111356295347301289111231300260249391.1384.8343.3372.1357.8175.9242.0222.4205.54 1,295.4252.9136.9257.1211.8247.7206.4233.3373.6305.6264.0250.3183.625.525.030.229.929.222.521.723.122.725.422.420.922.023.926.023.123.320.319.121.518.420.4365.7359.8313.2342.2328.6153.4220.4199.3182.81,270.0230.4115.9235.1187.8221.6183.3210.0353.3286.5242.4231.9163.2* 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.3 Failure rate per 10,000 listed enterprises.»Series revised; not strictly comparable with earlier data.«Excluding W. T. Grant, current liabilities were $264.9 billion.Sources: Department of Commerce (Bureau of Economic Analysis) and Dun & Bradstreet, Inc.289

192919331939Year orquarter19401941 . ..1942194319441945 . . .19461947194819491950195119521953 . ...195419551956195719581959.19601961196219631964 .19651966196719681969 . .1970 . ..19711972.1973197419751976*1974: 1 ..II...IllIV. . .1975: 1II.. ....IllIV1976: 1IIIIIFromallsourcesAGRICULTURETABLE B-89.—Income of farm people and farmers, 1929-76Personal incomereceived by totalfarm population7.47.610.114.116.516.617.220.021.123.819.520.322.722.019.718.317.517.617.519 217.518.419.019.720.019.822.623.822.924.126.927.428.734.448.645.145.544.0Fromfarmsources 1[Quarterly data at seasonally adjusted annual rates]4.84.86.810.112.112.212.815.515.818.013.314.116.115.313.312.411.311 110.812 510.411.111.411 411.010.012 012.611.111.312.913.013.416.829.023.522.820.0Fromnonfarmsources 22.62.83.33.94.44.44.44.65.35.86.26.36.56.76.45.96.26 66.66.77.17.27.68 39.09.710.611.211.712.813.914.415.317.619.521.522.724.0Realized grossTotal *Billions of dollars13.97.110.611.113.918.823.424 425.829.534.134.731.632.337.136.835.133.733.334 434.238 137.938.540.241 742.743.145 550.649.951.756.358.660.670.195.5100.298.2106.897.597 099.588.499.6105.299 6101.5111 1103.311.35.37.98.411.115.619.620.521.724.829.630.227.828.532.932.531.029.829.530 429.733 533.634.235.236 537.537.339.443.442.844.248.250.552.961.287.192.689.699.490.089.391.780.091.196.590.892.4101 893.8Income received from farming7.74.46.36.97.810.011.612.313.114.517.018.818.019.522.322.821.521.822.222.723.725.827.227.428.630.331.631.833.736.538.239.542.144.447.452.365.672.475.572.671.572.772.873.476.176.875.779.082.581.5Net to farmoperatorsCashreceiptsfrommarketingsProductionexpensesExcludingnetinventorychange6.32.74.34.26.18.811.812.112.815.017.115.913.612.814.814.013.611.911.111 710.512 310.711.111.611 411.111.311.914.011.712.214.214.113.217.829.927.822.734.226.024.326.715.023.528.423.922.528.621.8Includingnetinventorychange 46.22.64.44 56.59.911.711 712 315.115.417.712.813.615.915.013.012.411.311 311.113 210.711.512.012 111.810.512.914.012.312.314.314.214.618.733.326.525.632.725.224.323.818.524.830.029.122.525.620.8Net income perfarm includingnet inventorychangeCurrentdollarsDollars9453796857061,0311,5881,9271 9502,0632,5432,6153,0442,2332,4172,9362,8782,6042,5792,4292,4932,5363,1112,6152,9073,1263,2673,2953,0353,8434,2863,9034,0134,7664,7905,0306,50411,7279,3719,10011,5508,9008,5908,4106,5908,83010,68010,3608,1009,2107,4901967dollars *1,9691,1151,8511 8582,5783,4523,7063 6113 6194 0373,5343,9032,9773,1803,5373,4263,1003,0702,8922 9332,8823 4962,9383,2303,4733 5903,5823,2634,0454,3733,9033,8594,3724,2024,2635,2888,8176,2065,4828,0805,9305,5805,3204,0705,3806,3206,0604,7105,3004,2301 Net income to farm operators including net inventory change, 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 Consists of income received by farm residents from nonfarm sources, such as wages and salaries from nonfarm employment,nonfarm business and professional income, rents from nonfarm real estate, dividends, interest, royalties,unemployment compensation, and social security payments.3 Cash receipts from marketings, Government payments, and nonmoney and other farm income furnished by farms(excluding net inventory change).* Includes net value of physical change in inventory of crops and livestock valued at average prices for the year.1 Income in current dollars divided by the index of prices paid ty farmers for family living items on a 1967 base.Source: Department of Agriculture.290

TABLE B-90.— Farm production indexes, 1929-76[1967=100]Year1929....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 p..Farmoutputi545158606370697170726976747476798080838381878991929296959895100102102101111110112108111111Total*625664676876727573777384797778828180838281898993929296939995100103104101112113120110122118Feedgrains48445152566458626065507263645963616468687480848778798675888910095998911611211593113117Hayandforage7162687675828079817774747378817981818682898985909093939498971009910099105104109104108100Foodgrains5236485260635467707285817065648376676366629173878074778688881001069891107102112120141138Crop:Vegetables736572747579868284938186838580808482859188908990969494909697100104101101100101102103100100Fruitsandnuts7072918893928092841009587929394919393939789969993979795951009810098116109116104130124131139Cotton204178162173148176157168124119163205220137208208208226188202183150157170195204211232205130100148137139145187175158112133Tobacco7870977464727199101118107101100103119114105114112111858891991051181191139496100879197868888101111105Oilcrops11925272940413635343947454647464749536058696468777881819597100114116117121131155127151128Livestock and products 2Total»545759616471777473717068727578798082848583858988919295989597100100101105108108105106100103Meatanimals525859606372817370686766697479797881868380828885899095989296100101102108112110108110101102Dairyproducts768082858992919395949390939392929798991011011011001011041051041051041011009998100101102989898101Poultryandeggs323235363945525254505049545759606164636970747676828284879096100981001061071091061061021091 Farm output measures the annual volume of net farm production available for eventual human use through sales fromfarms or consumption in farm households.3 Gross production.* Includes certain items not shown separately.Source: Department of Agriculture.291

TABLE B-91.—Farm population, employment, and productivity, 1929-76Farm population(April l)iFarm employment(thousands)»Farm outputYearNumber(thousands)As percentoftotalpopulation»TotalFamilyworkersHiredworkersPerunit oftotalinputCropPer hour of farm work productionperLivestockacre 4Total CropsandproductsIndex, 1967=1001929..1933..1939..1940..1941..1942..1943..1944..30, 58032, 39330, 84030, 54730,11828,91426,18624, 81525.125.823.523.122.621.419.217.912,76312,73911,33810,97910,66910, 50410, 44610, 2199,3609,8748,6118,3008,0177,9498,0107,9883,4032,8652,7272,6792,6522,5552,4362,2315455606264696869161619202224242411616202123252425262527272830313156506062637064681945..1946..1947..1948..1949..24,42025, 40325, 82924, 38324,19417.518.017.916.616.210,00010, 29510,38210,3639,9647,8818,1068,1158,0267,7122,1192,1892,2672,3372,252697270757226282831322729293333313233343567716775701950..1951..1952..1953..1954..1955..1956..1957..1958..1959..I960..1961..1962..1963..1964..1965..1966..1967..1968..1969..1970..1971..1972.1973.1974.23,04821, 89021,74819, 87419,01919, 07818,71217,65617,12816, 59215,63514,80314,31313,36712,95412,36311,59510, 87510,45410, 3079,7129,4259,6109,4729,26415.214.213.912.511.711.511.110.39.89.48.78.17.77.16.86.45.95.55.25.14.74.64.64.54.49,9269,5469,1498,8648,6518,3817,8527,6007,5037,3427,0576,9196,7006,5186,1105,6105,2144,9034,7494,5964,5234,4364,3734,3374,3897,5977,3107,0056,7756,5706,3455,9005,6605,5215,3905,1725,0294,8734,7384,5064,1283,8543,6503,5353,4193,3483,2753,2283,1693,0752,3292,2362,1442,0892,0812,0361,9521,9401,9821,9521,8851,8901,8271,7801,6041,4821,3601,2531,2131,1761,1751,1611,1461,1681,31473737576778081828989929394989710297100101102101110109110107343538404245485157606568717781899210010611011212612913313236353940424548536161666972777990941001061081101201241281183739404243464950545962667177838693100105112121130138144156697073727174767786858992959795100971001051061041121151151031975 ...1976 P..8,8648,3004.23.94,3574,3763,0342,9971,3241,379113110141140131130160161114109Farm population as defined by Department of Agriculture and Department of Commerce, i.e., civilian populationliving on farms, regardless of occupation.'Total population of United States as of July 1 including Armed Forces overseas.* Includes persons doing farmwork on all farms. These data, published by the Department of Agriculture, StatisticalReporting 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 Cc nsus).292

TABLE B-92.—Indexesof prices received and prices paid by farmers and selected farmresource prices, 1929—76[1967=100, except as notedjPrices received by farmersPrices paid by farmersSelected resource prices1929193319391940194119421943194419451946194719481949Year or month19501951 . .19521953195419551956195719581959I96019611962196319641965196619671968196919701971197219731974197519761975* Jan 15Feb 15Mar 15Apr 15May 15 . .June 15"July 15Augl5Sept 15Octl5Nov 15Dec 151976 1 Jan 15Feb 15Mar 15Apr 15May 15June 15July 15Augl5Sept 15Oct 15Nov 15Dec 15Allfarmproducts592838404964777983941101151001031211151029893929410096959698979598106100102107110113125179192186186182176172178183186191194199195184186186187186189191196195187187178173179Crops6031364048648388901021171131001031181191C710810310410099989910110310710610310610010097100108114175224201198216204195201198198203212210203189188191193195193198211215201204195187191Livestockandroducts582539405062727177881051159910212211197908582899993929193898694106100104117118118136183165172177153151152158171176181180189189181184183183178186185184179175172165162169Allitems,nterest,taxes,andwagerates473236363944505356617076737582848181818184868788889091929499100103108112120125144166181194175174174179180183183184186184184184190191192193193195196195195194193195Familylivingitems483437384046525457637478757683848484848588898990909192939598100104109114118123133151166176161162163163164166168169169170171171172172173174174175177177178179180181Productionitems51344243455257606167788783869595898987879092939293949594961001001001041081131211461661821961761731731811831861841861891861841861911931941971961991991981971951941969296100104111116122128137161195185199204209211220224TractorsandselfpropelledmachineryFertilizer1031021009487889194102167217185231200182177Averagehourlywagerate,allhiredfarmworkers 1$0 73.'68.69.7781.82.8182.86.8892.95.97.991.011 051.081.141 231.331.441.551.641.731.842.002.252.432.472.422.292.632.752.662.532.80Averagefarmrealestatevalueperacre 2 271619191921232629323639411 Without room or board; on or about the first of January, April, July, and October.2 Average for 48 States. Annual data are for March 1 of each year through 1975 and for February 1 for 1976. Monthlydata are for first of month.Source: Department of Agriculture.2934046515251535558616668697377828693100107113117122132150187214244214230244269224-250 O - 77 - 20

TABLI. B-93.—Selected measures of farm resources and inputs, 1929-761929Year1933 ... .193919401941194219431944 ..19451946 . . .194719481949195019511952195319541955195619571958195919601961196219631964196519661967196819691970197119721973197419751976 vCropsharvested(millionsofacres) i365340331341344348357362354352355356360345344349348346340324324324324324302295298298298294306300290293305293321330336336Totalhoursoffarmwork(billions)23.222.620.720.520.020.620.320.218.818.117.216.816.215.115.214.514.013.312.812.011.110.510.39.89.49.08.78.27.36.96.76.46.26.05.95.75.65.55.35.3Total999397989810110310410110010010110310210510510410310310299991009998989898969810010110010010110110110199101Farmlabor329320294292288295291289271260246239231217217207200192185174162155151145139133128122109103100979390898585838181Index numbers of inputs (1967=100)Mechanicalpowerandmachinery103 3997 32102 40104 42102 44100 5299 5598 5899 59103 58103 64104 73105 80105 85106 91105 95105 97105 97105 98103 99102 98101 98102 99100 98100 95101 95100 94101 94100 95100 97100 10099 10198 10197 10096 10094 9994 10394 10294 10494 103FarmrealestateAgriculturalchemicals210612131415172020212426283033363738404141445050545966727786100106110110119125130136126136Feed,seed,andlivestockpurchases33027404145 47515153525455606266686770717473788282868889919297100101103108108109106105101104TaxesandinterestMiscellaneous71 6773 6470 7670 7771 7871 7575 7877 8178 7979 8079 8177 8680 9080 8680 9282 9184 9183 8885 9285 8884 9285 9790 10191 10392 10393 10695 10797 11197 10799 103100 100102 106102 105102 108100 107102 114100 11097 10195 9295 96* Acreage harvested (excluding duplication) plus acreages in fruits, tree nuts,and farm gardens.2 Fertilizer, lime, and pesticides.3 Feed, seed, and livestock purchases from nonfarm sources.Source: Department of Agriculture.294

TABLE B-94.—Comparative balance sheet of the farming sector, 1929-77(Billions of dollars]AssetsClaimsOther physical assetsFinancial assetsBeginning ofyearTotalRealestateLivestockJCrops 2MachineryandmotorvehiclesHouseholdequipmentandfurnishingsDepositsandcurrencyU.S.savingsbondsTotalRealestatedebtOtherdebt1 nvestmentin cooperativesProprietors'equities192948.06.63.29.8193330.83.02.58.51939.34.15.13.26.819401941.1942.. .19431944.1945.1946.194719481949.19501951.1952....19531954.19551956.1957_ ....19581959.52.955.062.973.784.694.2103.5116.4127.9134.9132.5151.5167.0164.3161.2165.1169.6177.9185.8202.133.634.437.541.648.253.961.068.573.776.675.386.695.196.595.098.2102.9110.4115.9124.45.15.37.19.69.79.09.711.913.314.412.917.119.514.811.711.210.611.013.917.73.13.34.04.95.46.55.45.37.410.112.214.116.717.418.418.619.320.220.221.82.73.03.85.16.16.76.37.19.08.67.67.98.89.09.29.68.48.37.69.34.24.24.95.05.35.66.17.78.59.18.69.710.39.99.910.010.510.09.99.83.23.54.25.46.67.99.410.29.99.69.19.19.49.49.49.49.59.49.510.00.2.4.51.12.23.44.24.24.44.64.74.74.74.64.75 25.15.15.20.8.9.91.01.11.21.41.51.71.92.12.32.52.72.93.13.23.53.73.952.955.062.973.784.694.2103.5116.4127.9134.9132.5151.5167.0164.3161.2165.1169.6177.9185.8202.16.66.56.46.05.44.94.84.95.15.35.66.16.77.27.78.29.09.810.411.13.43.94.14.03.53.43.23.64.26.16.87.08.08.99.29.49.89.510.012.542 944 652.463 775.785 995.5107.9118 6123.5120.1138.4152.3148.2144.3147.5150.8158.6165.4178.519601961.1962.19631964204.0204.8213.3222.0229.8130.6132.2138.4144.3152.615.315.616.417.315.922.722.222.523.523.97.78.08.89.39.89.68.99.19.08.89.28.78.89.29.24.74.64.54.44.24.24.54.85.05.4204.0204.8213.3222.0229.812.012.813.815.116.812.813.414.716.317.6179 2178.6184.8190.6195.419651966. .196719681969238.0254.7267.6281.0295.3161.5172.8182.3192.5201.414.517.619.018.820.224.826.027.429.831.39.29.710.09.610.68.68.68.59.19.79.610.010.310.911.54.24.13.93.83.85.65.96.26.56.8238.0254.7267.6281.0295.318.921.223.125.127.417.919.521.022.323.1201.2214.0223.5233.6244.81970.19711972.1973.1974197519761977*306.2317.7343.3387.8476.3520.6585.4634.0206.9215.0231.5260.6325.3371.1422.3460.323.523.727.334.142.424.629.532.334.436.639.344.356.565.9140.310.910.711.814.522.123.319.89.810.311.212.713.615.316.211.912.413.214.014.915.015.63.73.63.74.04.24.34.433.47.27.68.08.69.510.511.7306.2317.7343.3387.8476.3520.6585.4634.029.230.332.235.841.346.350.956.723.824.126.929.632.835.539.744.9253.2?63. 3284.2322.4402.2438.8494.8532.41 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 Corporationloans. The latter on January 1,1977 totaled approximately $0.5 billion.Note.—Beginning 1960, data include Alaska and Hawaii.Source: Department of Agriculture.295

INTERNATIONAL STATISTICSTABLE B-95.—U. S. international transactions, 1946-76[Millions of dollars; quarterly data seasonally adjusted, except as noted]YearorquarterExportsMerchandise 12ImportsNetbalanceMilitary transactionsDirectexpendituresSalesNetbal-Net investmentincomePrivatesU.S.GovmentNettravelandtransportationreceiptsOtherservices,netsBalanceongoodsandservicesi«Remittances,pensions,andotherunilateraltransfers^Balanceoncurrentaccount1946.1947..1948..1949.1950..1951..1952..1953..1954.,1955.1956.1957.1958.1959.I960..1961.1962.1963.1964..1965.1966.1967.1968.1969.1970.1971.1972.1973.1974.1974:1975:IV...IV..1976:ll.T"III p.11,76416,09713, 26512,21310,20314, 24313,44912,41212, 92914,42417, 55619, 56216, 41416,45819,65020,10820, 78122,27225, 50126,46129,31030,6f.633, 62636,4148 42,4fa9 8-39,86643, 319 -45, 57949, 381 -55,79771,410 -70,49998,310 -103,67922,46024, 21225,03626,60227, 01825,85126, 56227,65726,83628, 42829, 581-5,067-5,973-7, 557-6, 874-9,081-11,176-10,838-10,975-10,353-11,527-12,8C3-13, 291-12,952-15,310-14,758-14,537-16,260-17,048-18,700-21,510-25,493-26, 866-32,991-35,8071975... 107,088 -98,058-22,605-25, 700-27,374-28,000-25, 570-22, 568-24,483-25,437-28, 510-29,771-32, 6146,69710,1245,7085,3391,1223,0672,6111,4372,5762,8974,7536,2713,4621,1484,8925,5714,5215,2246,8014,9513,8173,8006356078 2,603-2,260-6, 416911-5,3699,030 -4,780-145-1,488-2,338-1,3981,4483,2832,0792,220-1,674-1, 343-3, 033-493-455-799-621-576-1,270-2,054-2,615-2,642-2,901-2, 949-3, 216-3,435-3,107-3,087-2, 998-3,105-2,961-2,880-2, 952-3, 764-4,378-4,535-4, 856-4,855-4,819-4, 784-4,629-5,035-1,153-1,298-1,265-1,319-1,317-1,185-1,093-1,185-1,150-1,215-1,2211,1521,3921,5281,5011,9261,1632,3422,9526386837818509158079781,1971,1451,0731,587-493-455-799-621-576-1,270-2,054-2, 423-2,460-2,701-2, 788-2, 841-3,135-2,805-2,753-2, 596-2,448-2, 304-2,133-2,122-2, 935-3,226-3,143-3, 328-3,355-2,893-3, 621-2,287-2,083-883-515-615-484-469-402-378-11512-1463665548079759891,1461,3171,2671,2831,5941,7752,0542,1742,0082,1472,2702,8323,1773,2273,9264,1433,5433,8653,9413,4714,0562,7963,1733,4362,1092,3492,4872,4853,0663,1953,480650857378151140166213180404168681710513498265541631563,631 -112 -2,0235,659 -956 -2,3156,208 -3,0288,188 -U -3,08613,461-3,010-3,1079,430 -3,234 -2,503-3,423-772-759-816-887-985-818-805-815-787-735-768733946374230-12029883-238-269-297-361-189-633-821-964-978-1,152-1,309-1,146-1,280-1,331-1,750-1,548-1,763-680-793-771-863-687-498-568-750-754-396-4853101451752082422543093073052994474824865735795948099601,0411,3871,3651,6121,6301,8332,1902,5092,7893,1883,9194,6668759131.C211,1101,1251,1461,1871,2051,2121,1611,3097,80711,6176,5186,2181,8923,8172,3565321,9592,1534,1455,9012,35b3104,0405,5295,0425,8978,4997,1054,5144,3401,5789772,938-256-5,9543,9053,58616,3162,81954-2159292,6085,0844,2654,3571,0581,736869-2,922-2,625-4,525-5,638-4,017-3,515-2, 531-2,481-2,280-2,498-2,423-2,345-2,361-2,448 -2,138-2,308-2,524-2,638-2,754-2,781-2,854-2,932-3,125-2,951-2,994-3,294-3,701-3,848-3,883-7,184-4,6204,8858,9921,993580-2,125302-175-1,949-321-3451,7223,5561,7323,0052,4043,1435,7184,2511,5821,215-1,374-2,017-356-3,957-9,80222-3, 59811,697-2,977 -158-1,850 -1,796-1,261 -1,476-1,098 -169-1,179-1,146-1,044-1,2511,4293,9383,2213,106-1,118 -60-920 816-1,925 -1,0561 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 areexcluded from net 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 foreigninvestment in the national income and product accounts, although the two may differ because of revisions, special handlingof certain items, etc.(Footnotes continued on following page.)296

TABLE B-95.—U.S. international transactions, 1946-76—Continued[Millions of dollars; quarterly data seasonally adjusted, except as noted]Year orquarterU.S. assets abroad, net[increase/capital outflow (—)|TotalU.S.officialreserveassets «OtherU.S.GovernmentassetsU.S.privateassetsForeign assets in the U.S., net[increase/capital inflow (-l-)lTotalForeign officialassetsTotalOtherforeignassetsAssetsofforeignofficialreserveagenciesAllocationsofspecialdrawingrights(SDR)StatisticaldiscrepancyTotal(sum oftheitemswithsignreversed)Ofwhich:SeasonaladjustmentdiscrepancyU.S.officialreserveassets,net(unadjusted,end ofperiod)*81946194719481949 . ..19501951 ...195219531954...19551956 ...195719581959I9601961196219631964196519661967196819691970197119721973197419751974: l.._.II...III..IV...1975:1.... -8, 001II... -7, 943III.. -4,411IV... -11,2381976:1....II...Illi'.IV*.-2,833-4,484-2,979-5, 764-8,128-4,176-5, 530-8, 025-8, 572-8,823-6, 032-9, 596-10, 245-16,434-33,392-31,593-7,915-10,013-5,210-10,252-10,007-9,875-8,901-623-3,315-1,736-2661,758-33-4151,256480182-869-1,1652,2921,0352,1456061,5333771711,22256852-880-1,1872, 4772,34832209-1,434-607-210-358-1, 003137-325-29-34289-773-1,578-407-1,100-910-1,085-1,662-1,680-1,605-1,543-2, 423-2, 274-2, 200-1,589-1,884-1,568-2, 645"36591, 389267-354-937-899 -6, 777-840 -7, 074-111 -3, 297-952 -10, 375-684-1,008-1,454-3,878-4,180-3,426-4,479-6,618-3, 793-4, 554-5,653-5, 418-5, 436-6,920-10,060-8, 708-13,998-32,323-9, 094-9,922-3,854-9, 453-8, 550-7, 288-7,0402,1202,4671,6972,9813,3173823,3206,9389,43912,2705,92322, 44521,12718,51932,433-3,463 -27, 523 15, 3265,90611,0497,6127,8672,8373,9072,7085,8745,3967,33C8,4711,4737651,2701,9861,661132-6743,450-776-1,3016,90726,89510, 7056,29910,9816,899-1, 0724,6483,1494,2563,4022,331-1,6062,7713,9424,1053,0131,2587411,1181,5581,36367-7873,367-761-1,5527,36227, 40510, 3225,14510,2575,166-1,1384,4902,7314,1742,9581,913-1,9772,2722,4603,3081,2586471,7014279951,6562493,9943,48810, 21513, 571-984-4, 45010, 42212, 22021,4528,4276,9776,4014,4623,611-5651,5764,3133,1031,4543,2255,458-1,019-988-1,122-360-907-457628-128507-1, 430867 -402717 -9, 609710 -1,790-2,1074,5574,5702,167761-9252,5543,73598-1,5172,2581,191-235-2,4981,5421,328-39-2, 5611,2754,671 1,3491,729 -761,485 -2,82920,70624,02125,75826,02424,26524,29924,71423,45822,97822, 79723,66624,83222, 54021, 50419,35918, 75317,22016, 84316,67215, 45014,88214,83015,71016, 96414, 48712,16713,15114, 37815,88316, 22614, 58814, 94615,893. 15,88316, 25616, 24216, 29116, 22616,94118,47718, 94518, 7475 Consists of gold, special drawing rights, convertible currencies, and the U.S. reserve position in the InternationalMonetary Fund (IMF).0 Includes increases (in millions) as follows: for 1969, $67 resulting from revaluation of the German mark in October1969; for 1971, $28 in dollar value of foreign currencies revalued to reflect market exchange rates as of December 31,1971; for 1972, $1,016 resulting from change in par value of the dollar on May 8,1972; and for 1973, $1,436 resulting fromchange in par value of the dollar on October 18,1973.Beginning July 1974, valuation of SDR and reserve position in the IMF based on a weighted average of exchange ratesfor the currencies of 16 member countries. On a pre-July 1974 basis, reserve assets for December 31, 1974 are $15,812million; for December 31,1975, $16,366 million; and for December 31,1976, $18,895 million.7 Not available separately.8 Data beginning 1970 not strictly comparable with earlier data.9 Includes extraordinary U.S. Government transactions with India.Note.—Quarterly data for changes in U.S. official reserve assets, U.S. private assets abroad, and foreign assets in theU.S. are not seasonally adjusted.Sources: Department of Commerce (Bureau of Economic Analysis) and Department of the Treasury.297

TABLE B-96.—U.S. merchandise exports and imports by commodity groups, 1958-76(Millions of dollars; monthly data seasonally adjusted]Merchandise exports 1Merchandise importsMerchandise tradebalanceYear ormonthTotaldomesticandForeignexports2Total"Domestic exportsFood,beverages,and tobaccoCrudematerialsandfuels«Manufacturedgoods5TotalsGeneral imports'Food,beverages,and tobaccoCrudematerialsandfuels*Manufacturedgoods'Total,ci.f.value 7Exportslessimports,customsvalueExportslessimports,f.a.s.Exportslessimports,ci.f.F.a.s. value«Customs value1958..1959..1960.1961.1962.1953.1964.1965.1966.1967.1968.1969.1970.1971.1972.1973.1974.1974.1975.1975: Jan...Feb..Mar..Apr..May..June.July..Aug..Sept.Oct.Nov.Dec.1976: Jan..Feb.Mar.Apr.May.June..July.Aug.Sept.Oct..Nov.16,37516,42619,65920, 22620, 98622,46725,83226, 74229,49031, 03034, 06337, 33242,65943, 54949,19970,82397,9089,3748,7568,6818,6498,2228,7168,8718,9809,1049,2269,4099,2509,1038,8008,9569,3949,5789,71610, 0229,6889,8729,7289,62516,21116,24319,45919, 98220, 71722,18225,47926, 39929,05430, 64633,62636, 78842,02542,91148,39969, 73096,5452,6882,8523,167,3, 4663,7434,1884,6374,5195,1864,7104,5924,4465,058 6,692 29, 344 39, 951 6,230 6,542 25,9075,076 6,441 30,443 45, 563 6,404 7,268 30,4146,569 7,091 33,740 55, 583 7,379 8,838 . 37, 767.2,938 10, 735 44, 731 69,476 9, 235 [3,446 13,44645,001.5,233 15,802 63,523 [00,997 10,701 31,842 56,20297, 908 96, 545 5,233 5, 802 63, 523 .00,25110,709 32,064 55,223107,130 105,641 6,793 15,197 70,951 96,116 9,923 32,596 51,0801,7231,5301,3751,3641,1451,1821,2951,3791,3581,5101,4931,4091,5101,3371,3051,5211,4271,4391,5631,6151,4371,5981,2573,0522,9963,9423,8643,3563,7754,3374,273 .7,4334,404 .. ... 19,2184, 726 20, 8444,865 " — 23,8185,006 26, 7851,5771,3101,3241,1871,1931,1471,2581,3221,1991,1981,3301,2221,2231,1381,1651,2841,3771,33:1,3741,2501,5011,5031,501.1, 5471,179.2, 583.2, 784.3,668.4,297.6, 5295,7505,6805,5515,7275,5866,0386,0756,0006,0496,3046,1896,2915,9716,0356,0886,1916,4436,5576,6696,5676,50;6,2666,57813,39215,69015,07314, 76116, 46417,20718, 74921, 42725, 61826,88933,22636,0439,6337,9277,4677,9597,2637,1037,8327,8778,1968,1698,2018,5229,1768,9419,6079,5969,18210,09410, 84910, 44610,65110,42410, 5313,5503,5803,3923,4553,6743,8634,0224,0134,5904,7015,3655,3084,1644,6154,4184,3344,6914,7555,029F.a.s. value 87847958267857408568197771,0208558678258728891,0538969321,0621,0689829949431,0125,3117,1176,8636,5377,6498,070|9,1065,440 11,2445,718 14,4465,367 15, 7566,031 20,6246,391 23,0113,6252,4951,8872,9522,4891,9782,7062,7163,0052,9122,8962,8523,2332,9132,8853,4922,7593,4093,8813,7583,7243,7603,9094,7434,3514,3954,1613,8943,9904,1294,1784,0524,2884,3624,5824,7144,7825,1835,3075,1965| 3385,7225,5135,6255,5445,68728,74535,32038,24142,42948,34258,86273,573107,996107,996103,38910,3758,5018,0398,5477,8147,6518,4138,4788,8208,7948,8289,1619,59310, 30110,3029,87310, 88911,65011,21911, 44811,16611,2822,9837364,5865,4654,5225,2607,0835,3153,8724 1418371,2892,708-2,014-6, 3841,348-3,f "-3,C10, 228-2977911,1266158761,5299831,0548439811,134671-132-213-734-302282-516-917-848-888-762-1,000-2, 34311,014-2598291,2156909581,6131,0391,1039081,0561,208728-73-141-651-202396-377-827-758-779-696-9062,283-1,257-909230-4,793-9,663-2,752-10,088-10,0883,741-1,0012556421024081,06445850228443258189-776-793-1,345-908-295-1,173-1,628-1,531-1, 577-1,438-1,6571 Beginning 1860, data have been adjusted for comparability with the revised commodity classifications effective in 1965.2 Total excludes Department of Defense shipments of grant-aid military supplies and equipment under the MilitaryAssistance Program.3 Total includes commodities and transactions not classified according to kind.4 Includes fats and oils.s Includes machinery, transportation equipment, chemicals, metals, and other manufactures. Export data for theseitems include military grant-aid shipments.0 Total arrivals of imported goods other than intransit shipments.7 Ci.f. (cost, insurance, and freight) import value at first port of entry into United States. Data for 1967-73 are estimates.8 F.a.s. (free alongside ship) value basis at U.S. por + of exportation for exports and at foreign port of exportation forimports.Note.—Data are as reported by the Bureau of the Census adjusted to include silver ore and bullion reported separatelyprior to 1969. Export statistics coyer all merchandise shipped from the U.S. customs area, except supplies for the U.S.Armed Forces. Exports include shipments under Agency for International Development and Food for Peace programs aswell as other private relief shipments.Source: Department of Commerce (Bureau of the Census and Bureau of International Economic Policy and Research).298

TABLE B-97.— U.S. merchandise exports and imports by area t 1970-76[Millions of dollars]Area 1970 1971 1972 1973 1974 19751976Jan.-Nov.Exports (domestic and foreign and special categoryshipments)Developed countries.Canada iWestern Europe 2JapanAustralia, New Zealand, and Republic ofSouth AfricaDeveloping countries s.Petroleum exporting countries.Other countriesOther Western Hemisphere.Near East.East and South AsiaDeveloping AfricaSocialist areas in Europe and Asia.Unidentified countriesi43,22430,8779,07914, 4634,6521,68312,9932,65910, 3346,5321,4234,02994035444,13030, 33510, 36514,1784,0551,73713,4102,93210,4786,4851,8164,0471,00939,952General imports.45, 563Socialist areas in Europe and Asia-227 229Unidentified countries 4 24 41Developed countries.29,259 33, 744Canada11,092 12,691Western Europe 211,169 12,658Japan5,875 7,259Australia, New Zealand, and Republic ofSouth Africa1,123 1,136Developing countries 3 .Petroleum exporting countries.Other countries10,4422,5167,92911,5493,0608,489Other Western Hemisphere.5,836 6,038Near East.371 593East and South Asia3,397 3,941Developing Africa8G0 93038449, 759 71, 339 98, 507 107, 592 104, 264354 593 1,007 887 97551 40 15 11 534, 319 47, 209 63,021 64, 780 64, 00612,415 15,104 19, 936 21,744 22, 06015, 3614,96321, 359 28,637 29,945 29,12510,679 9,563 9,2451,5808,3133,769 3,52914, 5562,43232,695 39, 2153,57736, 5163,375 20,9638,14011,181 4,54012, 567 13,11124,55516,42326,648 23,4057,275 9,929 15,809 17, 099 15,3191,954 3,041 5,557 8,946 9,0274,373 6,600 9,196 10,093 9,370898 1,334 2,044 2,964 2,717883 2,491 2,239 3,092 3,369677 552 505 37455, 583 69, 476 100,251 96,116 109, 24040, 822 48, 530 59,786 55,966 60, 82014,927 17,715 21,929 21,729 23, 80115, 423 19, 286 23, 521 20, 737 20, 6859,064 9,676 12,338 11,268 14, 0921,408 1,853 2,000 2,232 2,24214, 356 20,313 39,443 39,252 47,4403,729 6,309 20,488 21,417 26, 25510, 627 10,004 18,955 17,835 21,1857,003 9,607 18,403 16, 044 15, 337773 1,396 4,740 5,431 8,2545,264 7,043 10, 242 10, 224 13, 3661,253 2,180 5,941 7,436 10, 3651 Beginning January 1973, transshipments of certain grains and oilseeds through Canada are shown as exports to unidentifiedcountries.2 Includes Finland, Yugoslavia, Greece, and Turkey.3 Includes developing countries in Oceania.< Consists of certain low-valued shipments not identified by country.N Ote—Exports are f.a.s. (free alongside ship); 1959-73 imports are Customs values, generally the market value in theforeign country; and 1974-76 imports are transaction values f.a.s. Petroleum exporting developing countries are as follows:OPEC (Organization of Petroleum Exporting Countries)—Algeria, Ecuador, Gabon, Indonesia, !ra,,, Iraq, Kuwait, Libya,Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela; and other petroleum exporting developing countries-Angola, Bahamas, Bahrain, Brunei, Egypt, Leeward and Windward Islands, Netherlands Antilles, Oman, Trinidad andTobago, and Tunisia.Source: Department of Ccmmerce (Bureau of the Census and Bureau of International Economic Policy and Research).299

TABLE B-98.—U.S. overseas loans and grants, by type and area, fiscal years, 1962-75[Millions of dollars]Type of program and fiscal periodTotalNearEastandSouthAsiaLatinAmericaEastAsiaAfricaEuropeOtherandinterregionalTOTAL ECONOMIC LOANS AND GRANTS (OBLI-GATIONS AND LOAN AUTHORIZATIONS)!1962-74 averageLoansGrants1975 „_Loans_GrantsOFFICIAL DEVELOPMENT ASSISTANCE TO LESSDEVELOPED COUNTRIES*Obligations and loan authorizations:1962-74 average1975Loan repayments and interest receipts:1962-74 average1975Agency for International DevelopmentObligations and loan authorizations:1962-74 average1975Loan repayments and interest receipts:1962-74 average. . .1975Food for PeaceObligations:1962-74 average1975Loan repayments and interest receipts:1962-74 average1975Contributions and subscriptions to internationalfinancial institutions 3Obligations:1962-74 average1975Other official development assistance, includingPeace Corps *Obligations:1962-74 average1975OTHER ECONOMIC LOANS AND GRANTS TO LESSDEVELOPED COUNTRIESObligations:1962-74 average1975Loan repayments and interest receipts:1962-74 average1975TOTAL ECONOMIC LOANS AND GRANTS TO DE-VELOPED COUNTRIESObligations:1962-74 average19755,4963,1792,3187,6594,4293,2303,9814,8926757832,1602,5052903741,2461,3283574093647842112758662,0265131,2156497401,3249613632,0061,2777301,1441,7854213305781,0121701535557672471771061802211053841,1637404231,4669315358677767514446323942115127128172920434871612966902854161,2445486961,7431,285457969737931035975073545345217565827131577834415411822341321320258333624833633434711891712342125135929222879249238062159527504489134913481334131918442811514983561794234087261196071,3561091,2476161,2471 Some data are preliminary.3 Official development assistance is defined as concessional aid for development purposes. Countries have been classified"less developed" on the basis of the standard list of less developed countries used by the Development Assistance Committeeof the Organization for Economic Cooperation and Development. On this basis, "less developed" countries includeall countries receiving U.S. loans or grants except the following which are considered "developed": Japan, Australia, NewZealand, Republic of South Africa, Canada, and all of Europe except Malta, Spain, and Yugoslavia.3 Includes paid-in capital subscriptions and contributions to the Inter-American Development Bank, the InternationalBank for Reconstruction and Development, the International Development Association, and the Asian Development Bank.* Data for certain programs from Department of Commerce, Bureau of Economic Analysis.Source: Agency for International Development (except as noted).300413295631148811594368016722108109

TABLE B-99.—International reserves, 1952, 1962, and 1972-16[Millions of SDRs * ; end of period]Area and country 1952 1962 1972 1973 1974 19751976NovemberAll countries.Industrialized countries 3 ..United States.CanadaJapan..AustriaBelgiumFranceGermanyItalyNetherlandsScandinavian countries (Denmark,Norway, and Sweden).SwitzerlandUnited KingdomOther EuropeAustralia, New Zealand, and SouthAfricaOil exporting countries.IranNigeriaSaudi Arabia..Venezuela....Other 4Other less developed areasOther Western Hemisphere...Other Middle EastOther AsiaOther Africa2 49,31136,76024,7141,9441,1011061,1336869607229508171,6671,9561,5591,5091,6991775004435797,3242,2248263,47879662,61949,24917, 2202,5612,0221,0771,7534,0496,9574,0681,9431,3622,9193,3082,9662,0662,0302112892685836796,3081, 6G59922,663988146, 51997,46112,1125,57216,9152, 5033,5649,22421,9075,6054,4073,4596,9605,20111,7487,61210, 0438843462,3031,5954,91519, 6557,4922,6957,5541,915152, 24095,75011,9194,78210,1512,3824,2287,07027,4975,3355,4274,4997,0635,36813,4216,48612, 0411,0254833,2141,9995,32024, 5429,9503,6048,7912,197180, 06897,93513,1164,75811, 0422,8014,3667,23026,4615,6695,6823,7577,3605,66712, 2734,95638, 4076,8474,59511,6675,3209,97826,4989,7093,88410, 4562,449194, 275104,11213, 5684,54910,9473,7924,95210,75726, 5104,0786,0735,2888,9084,66311,1684,18648, 2857,4294,95719,9207,5698,41026, 5258,5194,42411,1882,394111,49116,4154,41814,5473,5504,2258,34130,1185,6306,2714,5628,8444,5403,5187,9354,42123,2057,320i Special drawing rights. For conversion to U.S. dollars, use the following U.S. dollars per SDR for end of period: 1952—1.00000; 1962—1.00000; 1972-1.08571; 1973-1.20635; 1974-1.22435; 1975—1.17066; 1976: Nov.—1.14982.2Includes Cuba,a Includes Luxembourg.* 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."301

TABLE B-100.—U.S. reserve assets, 1946-76[Millions of dollars]End of year ormonthTotal reserveassetsTotalGold stock iTreasury 2Specialdrawingrights(SDR) 3Convertibleforeigncurrencies*Reserveposition inInternationalMonetary Fund*194619471948 .19491950195119521953195419551956195719581959196019611962196319641965 . .196619671968196919701971197219731974197519761976: JanFebMar .AprMayJuneJulyAugSeptOctNovDec.20, 70624, 02125, 75826, 02424, 26524, 29924, 71423, 45822,97822, 79723,66624, 83222, 54021, 50419, 35918,75317, 22016,84316, 67215, 45014, 88214,83015,7107 16,96414, 4877 12,1677 13,1517 14,378«15,883U6,226818, 74716, 62216,66116,94117,43817,95818, 47718, 24618, 58618, 94519.01319,4168 18. 74720,70622, 86824, 39924, 56322, 82022, 87323, 25222,09121, 79321.75322, 05822, 85720, 58219, 50717, 80416,94716, 05715, 59615,471« 13, 80613, 23512, 06510, 89211, 85911,07210, 2067 10,487Ml, 65211,65211,59911,59811,59911,59911,59911,59911,59811, 59811,59811, 59811,59811,59811,59811,59820, 52922,75424, 24424, 42722, 70622,69523.18722, 03021,71321, 69021,94922,78120, 53419, 45617, 76716, 88915,97815, 51315, 3886 13,73313,15911,98210, 36710 36710, 73210,1327 10,4107 11,56711 65211,59911,59811,59911,59911,59911, 59911,59811, 59811,59811, 59811,59811, 59811, 59811, 5988511,1007 1,9587 2,166»2 3748 2,3358 2,3952,3762,3762,3512,3252 3092,3162,3182,3252,3572 3522,365s 2,395lie 992124327811,3212 3453,5287 2 7816297 27624185803203332965719369381,3658648451,0381 0661,1463201 1531 3591,4611 4451 4261 4621 3671 1851 0441 6081 9751 9581 9971 5551*6901 064l' 0357696 8633264201 2902 3241,9355857 4657 55281 8528 2,'2128 4, 4342,3142,3902,4202,5783 1133,1983,4663,8183,9523 9974 3078 4, 4341 Includes gold sold to the United States by the International Monetary Fund (IMF) with the right of repurchaseand gold deposited by the IMF to mitigate the impact on the U.S. gold stock of purchases by foreigncountries for gold subscriptions on increased IMF quotas.2 Prior to December 1974, excludes gold held by the Exchange Stabilization Fund (ESF). In December 1974,the Treasury acquired all the gold held by the ESF.3 Includes initial allocation on January 1, 1970 of $867 million, second allocation on January 1, 1971 of$717 million, and third allocation on January 1, 1972 of $710 million of special drawing rights (SDR)in the Special Drawing Account in the IMF, plus or minus transactions in SDR.4 Includes holdings of Treasury and Federal Reserve System.5 The United States has the right to purchase foreign currencies equivalent to its reserve position in theFund automatically if needed. Under appropriate conditions the United States could purchase additional amountsequal to the United States quota.6 Reserve position includes, and gold stock excludes, $259 million gold subscription to the fund in June 1965for a U.S. quota increase which became effective on February 23, 1966.7 Includes increase (in millions as follows: for 1969, $67 resulting from revaluation of German mark inOctober 1969 ($13 in mark holdings); for 1971, $28 in dollar value of foreign currencies revalued to reflectmarket exchange rates as of December 31, 1971; for 1972, $1,016 in total assets resulting from the changein par value of the U.S. dollar on May 8, 1972 ($828 total gold stock, $822 Treasury gold stock, $155 SDR,and $33 reserve position); for 1973, $1,436 in total assets resulting from the change in par value of thedollar on October 18, 1973 ($1,165 total gold stock, $1,157 Treasury gold stock, $217 SDR, and $54reserve position).8 Beginning July 1974, the IMF adopted a technique for valuing the SDR based on a weighted average ofexchange rates for the currencies of 16 member countries. SDR holdings and reserve position in the IMF arealso valued on this basis beginning July 1974. At valuation used prior to July 1974 SDR1 = $1.20635), end ofmonth values are (in millions of dollars):TotalReservereserve SDR positionassetsin IMF1974: Dec 15,812 2,338 1,8171975: Dec 16,366 2,404 2,2831976: Dec 18,895 2,482 4,495Note.—Gold held under earmark at Federal Reserve Banks for foreign and international accounts is not included inthe gold stock of the United States.Sources: Department of the Treasury and Board of Governors of the Federal Reserve System.302

TABLE R-101.—International investment position of the United States at year-end, J971-75[Billions of dollars]Type of investment 1971 1972 1973 1974 19751Net international position of the United States..U.S. assets abroadU.S. official reserve assets 2GoldSpecial drawing rights (SDR)Reserve position in International Monetary Fund(IMF)Foreign currencies56.1179.512.210.21.1.6.349.6199.513.210.52.0.5.261.9225.214.411.72.2.6.077.4264.815.911.72.41.9.093.6304.116.211.62.32.2Other U.S. Government assetsU.S. loans and other long-term assets 3U.S. foreign currency holdings and U.S. short-termassets34.231.82.436.134.12.038.836.22.638.436.32.141.839.82.0U.S. private assetsDirect investments abroadForeign securitiesU.S. claims on unaffiliated foreigners reported byU.S. nonbanking concernsU.S. claims reported by U.S. banks, n.e.c133.183.023.59.616.9150.390.527.611.420.7172.0103.727.813.826.7210.6118.828.617.046.2246.1133.235.218.359.5Foreign assets in the United States..123.3149.9163.3187.4210.5Foreign official assetsU.S. Government securitiesOther U.S. Government liabilitiesU.S. liabilities reported by U.S. banks, n.e.c.Other foreign official assets52.544.41.26.863.252.91.68.5.269.653.82.812.6.580.357.73.518.4.687.063.25.215.92.7Other foreign assetsDirect investments in the United StatesU.S. securities other than U.S. Treasury securities.U.S. liabilities to unaffiliated foreigners reported byU.S. nonbanking concernsU.S. liabilities reported by U.S. banks:Long-term liabilitiesU.S. Treasury securities and other short-termliabilities70.913.930.19.216.986.714.938.810.7.921.593.718.336.811.71.225.7107.122.427.813.41.242.3123.626.736.513.546.01 Preliminary.2 Reserve assets include increases from changes in the par value of the dollar, as officially implemented: on May 8,1972,the increase totaled $1,016 million, consisting of $828 million gold stock, $155 million SDR, and $33 million reserve positionin IMF; on October 18, 1973, the increase was $1,436 million, consisting of $1,165 million gold stock, $217 million SDR,and $54 million reserve position in IMF. Beginning July 1974 U.S. holdings of special drawing rights and the reserveposition include changes in the SDR based on changes in a weighted average of exchange rates for currencies of 16member countries of the IMF.3 Includes loans repayable in dollars, such as paid-in subscriptions to international financial institutions and othermiscellaneous claims, and indebtedness that the borrower may repay with its currency, with a third-party currency, or bydelivery of materials or transfer of services.Source: Department of Commerce, Bureau of Economic Analysis.303

TABLE B-102.—Price changes in international trade, 1968-76[1970=100]1976Area or commodity class 1968 1969 1970 1971 1972 1973 1974 1975ThirdquarterUnit value indexes by areaDeveloped areasTotal:ExportsTerms of trade *_.United States:ExportsTerms of trade l .Developing areasTotal:ExportsTerms of trade 1 .Latin America:ExportsTerms of tradeSouthern and Eastern Asia:ExportsTerms of trade l .9199921019410090969?9694 10099 10095 100101 10097 100101 10092 10097 10097 10099 10010599103981061011019810010011410010694115101110100106138991249315511115411614317287158793101562511352091928917682327143255128193184823421452 2702 131World export price indexesPrimary commodities: Total9297100110127182308303313Foodstuffs —9195100106122175232219206Coffee, tea, and cocoa.Cereals8210687991001008910298111130184155262159232217204Other agricultural commoditiess94101100104122196224196225Fats, oils, and oilseeds.Textile fibersWoolRubber841061179487107117128oooo103102918010213916481187256353168262245249176190199204136201252230220Minerals.9296100119131173473494507Metal ores.Fuels89959596100100101125107140130189175577206588213610Manufactured goods: Total*9194100105113133162182181Nonferrous base metals*...849710087871211531201411 Terms of trade indexes are unit value indexes of exports divided by unit value indexes of imports.2 Data are for second quarter 1976.* Includes forest products.< Data for manufactured goods are unit value indexes.Note.—Data exclude trade of socialist areas in Eastern Europe (except Yugoslavia) and Asia.Sources: United Nations and Department of Commerce (Bureau of International Economic Policy and Research).304

TABLE B-103.—Consumer price indexes in the United States and other major industrial countries.1955-76[1970=100)PeriodUnitedStatesCanadaJapanFranceGermanyItalyNetherlandsUnitedKingdom1955195619571958. .1959I960196119621963 .19641965196619671968196919701971...19721973 .19741975..1974: 1IIIllIV1975: 1IIIllIV1976: 1IIIIIOctNov69.070.072.574.575.176.377.077.978.879.981.383.686.089.694.4100.0104.3107.7114.4127.0138.6121.6125.0128.9132.6135.0137.1140.1142.3143.7145.5147.8149.0149.469.970.973.275.075.976.777.178.079.480.882.885.988.992.696.8100.0102.9107 8116.0128.6142.5122.7126.8130.6134.2137.1140.1144.9147.9149.8152.1154.3156.152.652.854.454.254.756.759.763.869.271.976.780.683.888.392.9100.0106.3111.5124.5153.4171.4144.1150.5156.1162.7165.3171.0172.7176.7180.4186.6189.0192.850.451.453.261.265.067.369.572.976.479.081.083.285.489.395.0100.0105.5111.7119.9136.3152.2129.0134.3138.7143.1147.0150.6153.9157.3161.1164.8168.6171.870.171.973.375.075.776.778.580.983.385.288.191.292.593.996.4100.0105.3111.1118.8127.1134.7124.6126.6127.8129.5132.0134.5135.5136.7139.0141.1141.2141.562.264.365.267.066.768.269.772.978.383.086.788.891.692.895.2100.0105.0110.9122.4146.2171.3133.6140.8150.4160.0164.9169.3172.9178.1184.8196.5201.7211.6Sources: Department of Labor and Organization for Economic Cooperation and Development.57.858 962.763 864.366 467.068 370.974.878 783.386 089.195.8100.0107.5115 9125.2137.3151.3131.9135.9138.3142.8145.8149.9152.9156.3159.0164.3165.4169.559.061 964.266 266.567 269.572 573 976.380 083.185 289.294.0100.0109.5117 0126.7147.0182.5137.2145.3149 4156.1165.6180.7188.7195.2200.9208.0214.0219.9305U. S. GOVERNMENT PRINTING OFFICE : 1977 O - 224-250