Economic Report of the President

ose from 6.0 percent in December 1979 to 6.3 percent in March andthen spurted to a peak of 7.6 percent in May. The rate remained between7.4 and 7.6 percent for the rest of the year. During the firsthalf of the year, employment declined by 1.0 percent, a decline of 1million jobs. From June to December, employment grew 0.5 million,thus reversing a substantial portion of the first-half loss. The laborforce grew 1.3 percent over the 4 quarters of the year.The rate of inflation increased in 1980. The implicit price deflatorfor GNP rose 10.0 percent over the 4 quarters of 1980, a 1.9 percentagepoint increase over the 1979 rate. For the 12 months endingNovember 1980 the consumer price index (CPI) for all urban consumersrose 12.6 percent—the same rate of increase as in the 12months ending in November 1979. Due to the special circumstancescreated by increases in the prices of food and energy, and thetreatment of home purchase and finance in the CPI, this latter comparisonunderstates the rise in inflation in 1980. Excluding thesefactors, the CPI rose 9.9 percent as compared with 7.2 percent in 1979.Wage rates, which had shown moderation during 1979 despite therise in inflation, accelerated in 1980. Average hourly earnings grew9.3 percent, up 1 percentage point from the 1979 rate. For the yearending with the third quarter of 1980 productivity was virtually unchanged,although this was an improvement as compared with the1-percent decline recorded in 1979.The year saw continued improvement in the U.S. international position.After absorbing the huge 1979 increases in our foreign oil bill,the U.S. balance of payments moved sharply into surplus in thesecond half of the year. All other major oil-importing countries, bycontrast, are experiencing substantial current-account deficits. TheU.S. dollar remained strong in relationship to other currenciesthroughout much of the year. At year-end, on an average weightedbasis, its value was 6 percent higher than at the beginning of the year.The United States reduced its total energy use in 1980. In addition,as compared with 1979, oil imports declined by 20 percent to about6 x /2 million barrels per day at year-end. In 1980 we imported less oilthan in any year since 1975. While a portion of this reduction can betraced to weakness in economic activity, much was due to intensifiedconservation efforts that have followed the recent rapid increases inenergy prices.AN OVERVIEW OF THE YEARThe slowing in the growth of the economy that occurred in 1980was largely the consequence of events that began in 1979.The first of these was the significant disruption in the world oilmarket triggered by lost Iranian oil production. Extensive efforts to132