ECONOMIC

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Chart 1Changes in GNP, Real GNP, GNP PriceDeflator, and the Unemployment RatePERCENT CHANGE FROM PRECEDING QUARTERJ/UNEMPLOYMENT RATE 1/4 —19721973_!/ SEASONALLY ADJUSTED ANNUAL RATES.2/ SEASONALLY ADJUSTED.SOURCES: DEPARTMENT OF COMMERCE AND DEPARTMENT OF LABOR.48
The whole process depended, at least for its magnitude, on the factthat in 1973, at an earlier stage than had been anticipated, supply limitationsmade it impossible to obtain further rapid increases of production.If we could have increased output more readily in response to the strongdemand, prices would have risen less, and the additional spur to demandresulting from the rising prices could have been avoided. The rise of outputduring 1973, especially after the first quarter, was limited by a slowgrowth of productivity while the labor force was growing quite fast. Theslow growth of productivity, in turn, resulted from shortages of certain basicmaterials used for further production, retardation in the flow of laborout of agriculture, an increase in the proportion of less experienced workersin the labor force, and supply difficulties in agriculture. At the end of theyear energy shortages may have been hurting productivity, although giventhe limited information now available this is not entirely clear and does notin any case bulk large in the statistics for 1973 as a whole.The foregoing remarks and much of the remainder of this chapter aremeant to explain what was unexpected and disappointing about the economyin 1973, notably the inflation. This question holds the most interest,and perhaps the most lessons, for the future. Worth emphasizing, however,is that in terms of the objectives of the Employment Act, "maximum employment,production, and purchasing power," 1973 was a successful year.Total employment was at a record high, as was the proportion of theworking-age population employed. Production was also higher than everbefore and close to its potential. The purchasing power of the Americanpeople, measured by consumers' real income after taxes, per capita, alsoreached a record level and was well above the 1972 average.DEMAND AND OUTPUT IN 1973The year 1973 started out on a very expansive note. Closing figures for1972 showed that from the third to the fourth quarter real GNP hadincreased at an annual rate of 8.1 percent and nominal GNP at a rate of 11.7percent. These were followed by still larger increases in the first quarter(Chart 1). The real increases were unsustainable in terms of the economy'spotential to produce, and the nominal increases were undesirable from thepoint of view of stabilization policy.The slowdown that policy had aimed for finally came in the spring. In thesecond and third quarters of 1973 the deceleration of the rise was moderatefor aggregate demand but substantial for total output. Against a backgroundof strong and rising demand by business and foreigners, the slower rise intotal expenditures took the form of some softening in automobile demandfrom extremely high levels reached early in the year and a weakening inhousing. All of this had its impact on production, but the production risewas also held down by shortages of many basic materials and limitations oncapacity in a number of industries.49
Page 1:
ECONOMICTRANSMITTEDTO THE CONGRESSF
Page 5: CONTENTSPageECONOMIC REPORT OF THE
Page 9 and 10: ECONOMIC REPORT OF THE PRESIDENTTo
Page 11 and 12: of the inflation rate of 1973, and
Page 13: or permit incentives—including hi
Page 16 and 17: people of an easy time. Like our pa
Page 19: THE PRESIDENT:LETTER OF TRANSMITTAL
Page 22 and 23: CHAPTER 3. INFLATION CONTROL UNDER
Page 24 and 25: Page7. Unemployment Rates by Sex an
Page 26 and 27: Page53. Maximum Percent Change in E
Page 28 and 29: We have specific problems, too, asi
Page 30 and 31: This curtailment of supply does, of
Page 32 and 33: consumption we would not have chose
Page 34 and 35: outside the food and fuel sectors a
Page 36 and 37: about $14 billion from deficit to s
Page 38 and 39: 8 percent, at annual rates. Continu
Page 40 and 41: A third method, which seems to have
Page 42 and 43: DEVELOPMENT OF LOW-COST ENERGY FOR
Page 44 and 45: would otherwise have been invested
Page 46 and 47: TRANSPORTATION REFORMLast year the
Page 48 and 49: constraints. Restrictions on entry
Page 50 and 51: In early 1974 the Commerce Departme
Page 52 and 53: Consumer SpendingConsumer expenditu
Page 56 and 57: During the fourth quarter the downt
Page 58 and 59: A number of points may be noted abo
Page 60 and 61: income do not appear to have played
Page 62 and 63: Chart 2Changes in Real GNPPERCENTUN
Page 64 and 65: of essentially declining participat
Page 66 and 67: The unemployment rate for adult mal
Page 68 and 69: from job losers, the remainder of t
Page 70 and 71: to maintain a somewhat larger work
Page 72 and 73: Chart 3Changes in Selected Price Me
Page 74 and 75: TABLE 12.—Changes in selected pri
Page 76 and 77: production workers, and it is sensi
Page 78 and 79: the profits that companies report a
Page 80 and 81: Two measures of changes in income t
Page 82 and 83: About $8 billion of the growth in e
Page 84 and 85: effect of covered wage and employme
Page 86 and 87: Since these apparent stabilization
Page 88 and 89: MONETARY POLICY AND FINANCIAL MARKE
Page 90 and 91: lation requiring ceilings on all CD
Page 92 and 93: TABLE 19.—Offerings of new securi
Page 94 and 95: CHAPTER 3Inflation Control Under th
Page 96 and 97: (A more detailed presentation of th
Page 98 and 99: ate of advance in grocery store foo
Page 100 and 101: to the economy but also in the sens
Page 102 and 103: were imposed, limiting prices to th
Page 104 and 105:
spurring of domestic inflation by e
Page 106 and 107:
was more than twice as high in 1973
Page 108 and 109:
wage increases in many cases, const
Page 110 and 111:
TABLE 26.—Behavior of items in co
Page 112 and 113:
Chart 6Changes in RelatedWholesale
Page 114 and 115:
and natural gas. A complex set of f
Page 116 and 117:
CHAPTER 4Energy and AgricultureFOR
Page 118 and 119:
al gas have contributed to the low
Page 120 and 121:
TABLE 30*—Wholesale prices, all i
Page 122 and 123:
tion sector, which in 1972 accounte
Page 124 and 125:
United States on oil imports, OPEC
Page 126 and 127:
of old oil and prices of imported a
Page 128 and 129:
LONG-TERM PROSPECTSThe price of imp
Page 130 and 131:
important that the higher costs be
Page 132 and 133:
improving the environment. The fund
Page 134 and 135:
pollutants into the atmosphere will
Page 136 and 137:
of research and rapid mechanization
Page 138 and 139:
lion in fiscal 1972. Actually the a
Page 140 and 141:
a minimum income. Unless prices fal
Page 142 and 143:
The Administration supports the exa
Page 144 and 145:
and estimates of some of these effe
Page 146 and 147:
Since families typically pool their
Page 148 and 149:
ability were not perfectly correlat
Page 150 and 151:
Farm wages and farm income received
Page 152 and 153:
TABLE 37.—Average usual weekly ea
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Chart 9Real Incomes for Men in Diff
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ecause they have acquired more expe
Page 158 and 159:
whose owners or white workers have
Page 160 and 161:
Several factors can be mentioned to
Page 162 and 163:
y social pressures, however, which
Page 164 and 165:
TABLE 42.—Relation of wage and sa
Page 166 and 167:
ferences in their mix of occupation
Page 168 and 169:
for public housing may be valued by
Page 170 and 171:
8 to 20 percent for black females.
Page 172 and 173:
sufficiently high to cover the addi
Page 174 and 175:
TABLE 45.—Federal Government tran
Page 176 and 177:
given to the problems of poverty du
Page 178 and 179:
TABLE 47.—Trends in the employmen
Page 180 and 181:
enefit increases greater than the i
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(Table 45). Medicare is chiefly des
Page 184 and 185:
Public assistance is specifically d
Page 186 and 187:
Then, subtracting equation (4) from
Page 188 and 189:
policies, and the tensions among co
Page 190 and 191:
In the fourth quarter the dollar ro
Page 192 and 193:
which include trade, grants and oth
Page 194 and 195:
tarily by foreign central banks, ev
Page 196 and 197:
ply of oil, and by domestic price c
Page 198 and 199:
in the United States. In view of th
Page 200 and 201:
TABLE 52.—U.S. balances on intern
Page 202 and 203:
esult from changes in market value
Page 204 and 205:
TABLE 54.—Major changes in capita
Page 206 and 207:
attempt was made to agree on a code
Page 208 and 209:
The official price of gold was rais
Page 210 and 211:
system, these demand changes were a
Page 212 and 213:
What Pressures Should Be Exerted on
Page 214 and 215:
The composition of reserves among d
Page 216 and 217:
prices of approximately the same or
Page 218 and 219:
tained, they would probably be felt
Page 220 and 221:
Reducing Nontariff BarriersIn order
Page 222 and 223:
Structural problems. Agreements on
Page 224 and 225:
arrangements which are designed to
Page 226 and 227:
capital and the means of putting th
Page 228 and 229:
Canada and four smaller countries u
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currencies have appreciated relativ
Page 232 and 233:
Effective Changes in Other Currenci
Page 235 and 236:
Activities of the Advisory Committe
Page 237:
Appendix BREPORT TO THE PRESIDENT O
Page 241 and 242:
Report to the President on the Acti
Page 243 and 244:
govern the exploitation of the reso
Page 245 and 246:
Manpower and Social Affairs Committ
Page 247 and 248:
Junior Staff EconomistsJames S. Fac
Page 249:
Appendix CSTATISTICAL TABLES RELATI
Page 252 and 253:
PRODUCTION AND BUSINESS ACTIVITY:Pa
Page 255 and 256:
NATIONAL INCOME OR EXPENDITURETABLE
Page 257 and 258:
TABLE C-2.—Gross national product
Page 259 and 260:
TABLE C-3.—Implicit price deflato
Page 261 and 262:
Page 263 and 264:
Page 265 and 266:
TABLE C—8.—Gross national produ
Page 267 and 268:
TABLE C-10.—Gross national produc
Page 269 and 270:
TABLE C-12.—Personal consumption
Page 271 and 272:
TABLE C-14.—Relation of gross nat
Page 273 and 274:
TABLE C—16.—Relation of nationa
Page 275 and 276:
TABLE C-18.— Total and per capita
Page 277 and 278:
TABLE C-19.—Sources of personal i
Page 279 and 280:
TABLE C-21.—Saving by individuals
Page 281 and 282:
POPULATION, EMPLOYMENT, WAGES, ANDP
Page 283 and 284:
TABLE C-24.—Noninstitutional popu
Page 285 and 286:
TABLE C-26.— Selected unemploymen
Page 287 and 288:
TABLE C—28.—Unemployment insura
Page 289 and 290:
TABLE C-29.—Wage and salary worke
Page 291 and 292:
TABLE C-31.—.•Average weekly ea
Page 293 and 294:
TABLE C-33.—Changes in output per
Page 295 and 296:
TABLE C—35.—Industrial producti
Page 297 and 298:
TABLE C-37.—Capacity utilization
Page 299 and 300:
TABLE C—38.—New construction ac
Page 301 and 302:
TABLE C-39.—New housing starts an
Page 303 and 304:
TABLE C-41.—Sales and inventories
Page 305 and 306:
TABLE C-43.—Manvjacturers* new an
Page 307 and 308:
TABLE O45.—Consumer price indexes
Page 309 and 310:
TABLE C—47.—Consumer price inde
Page 311 and 312:
TABLE C~49.—Wholesale price index
Page 313 and 314:
TABLE C-50.—Wholesale price index
Page 315 and 316:
194819491950.,1951195219531954Yearo
Page 317 and 318:
TABLE C-53.—Commercial bank loans
Page 319 and 320:
TABLE G-54.—Total funds raised in
Page 321 and 322:
TABLE C-56.—Federal Reserve Bank
Page 323 and 324:
TABLE C-58.—Bond yields and inter
Page 325 and 326:
TABLE C-59.—Short- and intermedia
Page 327 and 328:
TABLE C-61.—Mortgage debt outstan
Page 329 and 330:
TABLE C-63.—Net public and privat
Page 331 and 332:
TABLE C-65.—Federal budget receip
Page 333 and 334:
TABLE C-66.—Relation of the Feder
Page 335 and 336:
TABLE C-68.—Receipts and expendit
Page 337 and 338:
TABLE C-10.—State and local gover
Page 339 and 340:
TABLE C-72.—Estimated ownership o
Page 341 and 342:
CORPORATE PROFITS AND FINANCETABLE
Page 343 and 344:
TABLE C-76.—Relation of profits a
Page 345 and 346:
TABLE C-77.—Sources and uses of f
Page 347 and 348:
TABLE C-79.—State and municipal a
Page 349 and 350:
TABLE C-81.—Business formation an
Page 351 and 352:
Year1929...1933...1939...1940...194
Page 353 and 354:
TABLE C-85.—Indexes of prices rec
Page 355 and 356:
TABLE G-87.—Comparative balance s
Page 357 and 358:
TABLE G-88.— U.S. balance of paym
Page 359 and 360:
TABLE C-90.— U.S. merchandise exp
Page 361 and 362:
TABLE C-92.—International reserve
Page 363 and 364:
TABLE G-94.—International investm
Page 365:
TABLE C-96.—Consumer price indexe
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ECONOMIC

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