ECONOMIC

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-