Economic Report of the President

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and it is possible that the unemployment rate will reach 11 percent atsome point during 1983.Beyond those officially counted as unemployed, the recent recessionhas prevented many Americans from working as much as theywould like. In December 1982 there were over two million personsinvoluntarily working part time. The Bureau of Labor Statistics alsoreported that there were over 1.8 million discouraged workers in December.These are individuals who have given up looking for workbecause they believe they cannot find jobs.Unemployment is often linked to economic hardship. While manyof the unemployed receive unemployment insurance and live in familiesthat have other members who work, many unemployed individualsand their families suffer economic distress. Table 2-1 presentsinformation on the incomes of families in which the husband, wife, orhead of household experienced unemployment during 1981. (Datafor 1982 are not yet available.) Three types of families are distinguished:(1) families in which both husband and wife worked, (2)families in which only the husband or male head worked, and (3)families in which only the wife or female head worked. For all of thefamily types, unemployment experienced by husband, wife, or headof household significantly lowered median family income. For example,single-earner families in which the husband (or male head) wasnever unemployed had a median income in 1981 of $25,000. In contrast,the median income of similar families in which the male headexperienced 1 to 26 weeks of unemployment was $16,500. Familiesin which the male head was unemployed for more than 26 weeks hada median family income of $10,200.TABLE 2-1.—Median family income by unemployment and family status, 1981 (current dollars)Family statusUnemployment status of husband, wife,or head of householdPersonneverunemployedPersonunemployedless than26 weeksPersonunemployedmore than26 weeksHusband and wife both work$31,600$23,000$17,900Only husband or male head works..25,00016,50010,200Only wife or female head works18,90015,20011,200Source.- Department of Labor, Bureau of Labor Statistics.The financial losses of the unemployed are not the only costs of aprolonged economic decline. Considerable anxiety and emotionaldistress is experienced by those who have lost their jobs or who fearthat they might lose their jobs in an economy with a decliningnumber of employment opportunities. Protracted unemployment is30
frequently associated with poor heafyh, psychological problems, andgradual erosion of job-related skills.THE COMPOSITION OF CYCLICAL AND STRUCTURALUNEMPLOYMENTThe unemployment problem can be divided into two components,cyclical and structural unemployment. The term cyclical unemploymentis used to refer to the unemployment associated with cyclical downturnsin aggregate economic activity. The incremental unemploymentassociated with the recent recession would fall into this category. Theterm structural unemployment is used to refer to the unemployment thatremains even after cyclical recoveries in aggregate economic activity.In large part, structural unemployment is a natural concomitant ofa dynamic economy with constantly changing patterns of demand.Labor markets are in constant flux, with people entering and leavingthe labor force, losing or quitting old jobs, and looking for and acquiringnew jobs. Some amount of structural unemployment is aninevitable aspect of a large modern industrial economy such as ours. Itis important to realize that although expansionary macroeconomicpolicies cannot reduce structural unemployment permanently, certainmicroeconomic policy interventions can affect the ease and speed ofthe process that matches workers with jobs.Some insight into the differences between cyclical and structuralunemployment can be obtained by comparing the characteristics ofthe unemployed in 1982 and in a period of low cyclical unemployment.Since the unemployment rate in 1978 was 6.1 percent, close tomost observers' estimates of full employment, data from that yearwill be used to illustrate the characteristics of structural unemployment.The next two sections examine the composition of the unemployedpopulation in 1978 and 1982 in terms of demographic compositionand reasons for unemployment. A third section analyzes thedynamics of unemployment.DEMOGRAPHIC COMPOSITIONChart 2-1 provides information on the demographic compositionof the unemployed population in 1978 and in 1982. The chart showsthat young people under age 24 account for a substantial fraction ofunemployment both when the economy is weak and when it isstrong. Persons under 24 accounted for 49 percent of total unemploymentduring 1978 and 41 percent of unemployment in 1982.The decline in the share of youth unemployment reflected the largeincrease in unemployment among adult males in cyclically sensitivesectors of the economy, such as manufacturing.31
Page 5: CONTENTSPageECONOMIC REPORT OF THE
Page 9 and 10: ECONOMIC REPORT OF THE PRESIDENTTo
Page 11 and 12: Monetary policy will play a critica
Page 13 and 14: Interest Rates and the U.S. Trade D
Page 15: THE ANNUAL REPORTOF THECOUNCIL OF E
Page 19 and 20: CONTENTSPageCHAPTER 1. FROM RECESSI
Page 21 and 22: PageConclusions 122CHAPTER 6. REVIE
Page 23 and 24: CHAPTER 1From Recession to Recovery
Page 25 and 26: slowed somewhat in the 1970s regard
Page 27 and 28: nal GNP growth is reflected in a sl
Page 29 and 30: inflation. More specifically, the A
Page 31 and 32: inflation rate, or with a 12 percen
Page 33 and 34: 1988, an increase of about one-four
Page 35: CHAPTER 2The Dual Problems of Struc
Page 39 and 40: Chart 2-2Distribution of Unemployme
Page 41 and 42: Chart 2-4Distribution of Unemployme
Page 43 and 44: These findings suggest several conc
Page 45 and 46: Wage RigidityA number of studies sh
Page 47 and 48: that these measures may have caused
Page 49 and 50: Most young people find jobs or leav
Page 51 and 52: to employers who hire youths. Tax c
Page 53 and 54: defined broadly to include individu
Page 55 and 56: ship between incomplete experience
Page 57 and 58: CHAPTER 3The United States in the W
Page 59 and 60: with 2.6 percent in the other Organ
Page 61 and 62: TABLE 3-1 .—Structure ofthe U.S.
Page 63 and 64: TABLE 3-2.—Trade balances by comm
Page 65 and 66: concentrate on doing what it does r
Page 67 and 68: the United States will depress pric
Page 69 and 70: Chart 3-3Real Exchange Rates Of Maj
Page 71 and 72: AN UNDERVALUED YEN?The explanations
Page 73 and 74: arily reduced the international com
Page 75 and 76: nancial markets. These transactions
Page 77 and 78: TABLE 3-6.—Economic performance b
Page 79 and 80: were undoubtedly a highly favorable
Page 81 and 82: of lenders that some debtors will n
Page 83 and 84: CHAPTER 4Increasing Capital Formati
Page 85 and 86: ate of net investment was required,
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able share in Japan and 56 percent
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During the 1970s, productivity grow
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MEASURING NATIONAL SAVINGDomestic s
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TAX RULES AND PERSONAL SAVINGMany e
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on consumption taxation might also
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Nevertheless, a number of economic
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tion permitted businesses to deprec
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A final problem under current tax l
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fleeted efforts to deal with proble
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egulation was probably not applicab
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Aeronautics Board, for example, the
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system resulted. Price controls, wh
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NGPA, both controlled and decontrol
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Price and allocation controls only
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nications industries through the re
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Several major pieces of legislation
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tempt to set cartel rates would be
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computer information and advertisin
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of computer technology to the payme
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trend by widening the sources and u
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changes. That is, members can arbit
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ceived to be a consequence of exces
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lowest point in the post-World War
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ing. Partly in response to the drop
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Chart 6-3Ratio of Consumer Installm
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Chart 6-4RATIO1.85Real Inventory/Sa
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percent increase in real defense pu
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8.8 percent in 1981. These declines
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housing. Borrowing by the nonfinanc
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orous competitor for credit as usur
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1982 their share had risen to over
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TABLE 6-9.—Economic outlook for 1
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A critical element in achieving hea
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Report to the President on the Acti
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ety of interagency and internationa
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ence J. Kotlikoff (Yale University)
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CONTENTSNATIONAL INCOME OR EXPENDIT
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B-70. Mortgage debt outstanding by
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Gross national product
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19291933193919401941194219431944194
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TABLE B-5.—Changes in GNP and GNP
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TABLE B-ll.—Gross national produc
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TABLE B-13.—Output, costs, and pr
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TABLE B-14.—Personal consumption
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TABLE B-16.—Gross and net private
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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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