Economic Report of the President

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in this age group. Women workers now have somewhat lower unemploymentrates than men, a reversal of the historical relation.The labor force participation rate—the ratio of the labor force tothe population over 16 years of age—has experienced a modestupward drift as women workers continue to join the labor force. Thegrowth in adult women's labor force participation has been strong inthe past. Declining participation has occurred among workers lessthan 20 years of age and among workers, especially males, over 55—who are likely to have an income cushion provided by social security,private pension plans, and savings.WAGES, PRODUCTIVITY, AND PRICESIn response to slack labor markets and lower rates of price inflation,wage increases slowed substantially in 1982. As shown in Table6-4, the rate of increase in several measures of wages and compensationdeclined about 2 percentage points from 1981. The 5.9 percentincrease in the hourly earnings index for private nonfarm workerswas the smallest since 1973. As measured by the employment costindex, wages and salaries of private industry workers increased 6.9percent between the third quarters of 1981 and 1982. The decelerationwas about the same for union and nonunion workers. A surveyof major collective bargaining settlements reached in private industryshowed that in the first 9 months of 1982 the agreements providedwage adjustments that averaged 3.8 percent in the first contract year,exclusive of cost-of-living adjustments, compared with 8.3 percentwhen the same parties last bargained. Total labor compensation inthe nonfarm business sector increased 6.7 percent, compared withAdjusted hourly earnings index 3 .Employment cost index *Union workersNonunion workers.Nonfarm business sector:*TABLE 6-4.—Changes in wages and compensation, 1978-82[Percent change, fourth quarter to fourth quarter and 5-year average]MeasureCompensation per hourReal compensation per hour..19798.4 8.07.7 8.78.0 9.07.6 8.59.0 9.4.0 -2.919809.69.010.98.010.6-1.719818.48.89.68.58.81982*5.9•6.95 7.46 6.66.62.05-yearaverage 1 *'Preliminary.* Based on annual data.'Private nonfarm employees.4 Wages and salaries, private nonfarm industry workers.•Third quarter 1981 to third quarter 1982.'All persons.Sources: Department of Commerce (Bureau of Economic Analysis), Department of Labor (Bureau of Labor Statistics), andCouncil of Economic Advisers.8.28.18.87.89.C134
8.8 percent in 1981. These declines in wage inflation provide a basisfor expecting that recent reductions in price inflation may be sustained.Real compensation per hour rose 2.0 percent in 1982 as pay increasedmore rapidly than consumer prices. This was the first rise inthis series since early 1978 and suggests that the historic trend ofrising real wages and family incomes may resume.Even though output declined for the third straight year, as shownin Table 6-5, labor productivity in the nonfarm business sector experiencedits first substantial improvement since 1977. Lower rates ofincrease in hourly compensation and higher productivity growth togetherresulted in labor costs per unit of output increasing only 4.6percent. This was less than half the rate of increase recorded in1980, when labor productivity was weaker and hourly compensationrose at double-digit rates. The 4.6 percent increase in unit laborcosts was associated with a rise of 4.3 percent in the nonfarm businesssector price deflator.TABLE 6-5.—Productivity, costs, and prices in the nonfarm business sector, 1978-82[Percent change, fourth quarter to fourth quarter and 5-year average]Item 1978 1979 1980 1981 1982 > 5-yearaverage 1 2Output5.60.2-0.6-0.2-1.71.2Output per hour.3-1.9.3-.11.9.0Compensation per hour..9.09.410.68.86.69.0Unit tabor cost8.611.610.28.94.69.0Implicit price deflator8.28.510.79.64.38.31 Preliminary.2 Based on annual data.Note.—Data relate to alt persons.Source: Department of Labor, Bureau of Labor Statistics.By all other measures as well, the rate of inflation declined significantlyin 1982, as shown in Table 6-6. After increasing at doubledigitrates in 1980 and by nearly 9 percent in 1981, the broadestmeasures of inflation—the GNP fixed-weight price index and theGNP implicit price deflator—increased nearly 5 percent in 1982. Theall-urban consumer price index increased 4.5 percent, the slowestrate since 1972. Even when food and energy prices, which were especiallyweak, are excluded, consumer prices increased about 5 percent.Beginning in 1983, the homeownership component of the consumerprice index for all-urban consumers will be computed on a rentalequivalence basis. On this conceptual basis, consumer prices increasedabout 5 percent in 1982.Producer prices of finished goods increased only 3.6 percent in1982, about the same as in 1972 and 1976. Price increases for bothconsumer finished goods and capital equipment showed a markeddeceleration.135
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CONTENTSPageECONOMIC REPORT OF THE
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ECONOMIC REPORT OF THE PRESIDENTTo
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Monetary policy will play a critica
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Interest Rates and the U.S. Trade D
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THE ANNUAL REPORTOF THECOUNCIL OF E
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CONTENTSPageCHAPTER 1. FROM RECESSI
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PageConclusions 122CHAPTER 6. REVIE
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CHAPTER 1From Recession to Recovery
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slowed somewhat in the 1970s regard
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nal GNP growth is reflected in a sl
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inflation. More specifically, the A
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inflation rate, or with a 12 percen
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1988, an increase of about one-four
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CHAPTER 2The Dual Problems of Struc
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frequently associated with poor hea
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Chart 2-2Distribution of Unemployme
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Chart 2-4Distribution of Unemployme
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These findings suggest several conc
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Wage RigidityA number of studies sh
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that these measures may have caused
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Most young people find jobs or leav
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to employers who hire youths. Tax c
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defined broadly to include individu
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ship between incomplete experience
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CHAPTER 3The United States in the W
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with 2.6 percent in the other Organ
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TABLE 3-1 .—Structure ofthe U.S.
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TABLE 3-2.—Trade balances by comm
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concentrate on doing what it does r
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the United States will depress pric
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Chart 3-3Real Exchange Rates Of Maj
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AN UNDERVALUED YEN?The explanations
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arily reduced the international com
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nancial markets. These transactions
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TABLE 3-6.—Economic performance b
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were undoubtedly a highly favorable
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of lenders that some debtors will n
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CHAPTER 4Increasing Capital Formati
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ate of net investment was required,
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able share in Japan and 56 percent
Page 89 and 90: During the 1970s, productivity grow
Page 91 and 92: MEASURING NATIONAL SAVINGDomestic s
Page 93 and 94: TAX RULES AND PERSONAL SAVINGMany e
Page 95 and 96: on consumption taxation might also
Page 97 and 98: Nevertheless, a number of economic
Page 99 and 100: tion permitted businesses to deprec
Page 101 and 102: A final problem under current tax l
Page 103 and 104: fleeted efforts to deal with proble
Page 105 and 106: egulation was probably not applicab
Page 107 and 108: Aeronautics Board, for example, the
Page 109 and 110: system resulted. Price controls, wh
Page 111 and 112: NGPA, both controlled and decontrol
Page 113 and 114: Price and allocation controls only
Page 115 and 116: nications industries through the re
Page 117 and 118: Several major pieces of legislation
Page 119 and 120: tempt to set cartel rates would be
Page 121 and 122: computer information and advertisin
Page 123 and 124: of computer technology to the payme
Page 125 and 126: trend by widening the sources and u
Page 127 and 128: changes. That is, members can arbit
Page 129 and 130: ceived to be a consequence of exces
Page 131 and 132: lowest point in the post-World War
Page 133 and 134: ing. Partly in response to the drop
Page 135 and 136: Chart 6-3Ratio of Consumer Installm
Page 137 and 138: Chart 6-4RATIO1.85Real Inventory/Sa
Page 139: percent increase in real defense pu
Page 143 and 144: housing. Borrowing by the nonfinanc
Page 145 and 146: orous competitor for credit as usur
Page 147 and 148: 1982 their share had risen to over
Page 149 and 150: TABLE 6-9.—Economic outlook for 1
Page 151: A critical element in achieving hea
Page 155 and 156: LETTER OF TRANSMITTALCOUNCIL OF ECO
Page 157 and 158: Report to the President on the Acti
Page 159 and 160: ety of interagency and internationa
Page 161: ence J. Kotlikoff (Yale University)
Page 165 and 166: CONTENTSNATIONAL INCOME OR EXPENDIT
Page 167 and 168: B-70. Mortgage debt outstanding by
Page 169 and 170: NATIONAL INCOME OR EXPENDITURETABLE
Page 171 and 172: TABLE B-2.—Gross national product
Page 173 and 174: 19291933193919401941194219431944194
Page 175 and 176: TABLE B-5.—Changes in GNP and GNP
Page 181 and 182: TABLE B-ll.—Gross national produc
Page 183 and 184: TABLE B-13.—Output, costs, and pr
Page 185 and 186: TABLE B-14.—Personal consumption
Page 187 and 188: TABLE B-16.—Gross and net private
Page 189 and 190: TABLE B-18.—Inventories and final
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TABLE B-20.—Relation of national
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TABLE B-21.—National income by ty
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TABLE B-22.—Sources of personal i
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TABLE B-24.—Total and per capita
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Year or quarterTotalTotalTABLE B-26
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POPULATION, EMPLOYMENT, WAGES, AND
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TABLE B-29.—Noninstitutional popu
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TABLE B-31.—Selected employment a
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TABLE B-33.—Civilian unemployment
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TABLE B-35.—Unemployment by reaso
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TABLE B-37.— Wage and salary work
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TABLE B-39.—Average weekly earnin
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TABLE B-41.—Changes in productivi
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TABLE B-43-—Industrial production
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TABLE B-45.—Capacity utilization
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TABLE B-46.—New construction acti
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TABLE B-48.—Nonfarm business expe
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TABLE B-50.—Manufacturers' shipme
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Year or monthAllitemsPRICESTABLE B-
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TABLE B-53.—Consumer price indexe
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TABLE B-55.—Changes in consumer p
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TABLE B-57.—Producer price indexe
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MONEY STOCK, CREDIT, AND FINANCETAB
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TABLE B-63.—Commercial bank loans
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TABLE B-64.—Total funds raised in
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TABLE B-66.—Aggregate reserves of
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TABLE B-67 .—Bond yields and inte
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TABLE B-69.—Consumer installment
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TABLE B-71-—Mortgage debt outstan
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TABLE B-72.—Federal budget receip
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TABLE B-74.—Relation of Federal G
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TABLE B-76.—Federal Government re
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TABLE B-78.—State and local gover
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TABLE B-80.—Estimated ownership o
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CORPORATE PROFITS AND FINANCETABLE
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Year or quarterTABLE B-84.—Corpor
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TABLE B-86.—Relation of profits a
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TABLE B-88.—Determinants of busin
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TABLE B-9Q.~Current assets and liab
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TABLE B-92.—Common stock prices a
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AGRICULTURETABLE B-94.—Farm incom
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TABLE B-96.—Farm input use, selec
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TABLE B-98.—U.S. exports and impo
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INTERNATIONAL STATISTICSTABLE B-100
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TABLE B-101.—U.S. international t
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TABLE B-103.—U.S. merchandise exp
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TABLE B-105.—International invest
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TABLE B-107.— World trade balance
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TABLE B-109.—Growth rates in real
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TABLE B-lll.—Unemployment rate, a
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