Economic Report of the President

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ness of U.S. producers in the wake of the depreciation of the dollarin 1977 and 1978,Government Purchases of Goods and ServicesReal government purchases of goods and services grew 1.5 percentduring 1980, as gains in Federal purchases more than offset the declinein State and local purchases. Over the 4 quarters of 1980 Stateand local purchases fell 0.3 percent. Reduced purchases of durablegoods (down 1.6 percent) and structures (down 6.5 percent) were thekey factors. Real compensation of employees grew 0.7 percent in1980, a significant deceleration from the 2.4 percent average rate inthe previous 3 years. There had been widespread expectations thatreductions in Federal grant-in-aid support, particularly for publicservice employment payrolls, combined with the recession squeezeon tax receipts and political pressures for reduced growth, wouldforce an even sharper cutback in the growth of State and local payrolls.Instead, State and local governments have attempted to insulatepayrolls from the worst of the budget pressures while cutting expenditureselsewhere. The decline in structures investment over theyear was heavily concentrated in those areas dependent on the housingcycle: sewer system construction and highway and street constructionand renovation.Real Federal purchases of goods and services grew 4.7 percentduring 1980. Real defense spending grew 5.7 percent during 1980,with the pace of spending picking up in the last half of the year. Realnondefense purchases grew at a slower 3.2 percent for the year as awhole.LABOR MARKET DEVELOPMENTSThe volatility in demand for goods and services during 1980 producedsimilar swings in the demand for labor (Table 17). Civilianemployment peaked at 97.8 million in February 1980. Then duringthe next 4 months employment fell sharply (1.1 percent) to 96.8 millionin June. Over this same period unemployment rose from 6.5 millionto 7.8 million. Automobile and construction employment wereespecially hard hit. Although these two industries constituted onlyabout 6 percent of total payroll employment, they accounted fornearly two-fifths of the decline in employment from February toJune.Employment growth resumed at midyear. The magnitude of thesubsequent recovery differs, depending on which of the two standardmeasures of employment is utilized. Judged by the household survey,employment growth after midyear was relatively modest so that byyear-end total employment was still 500,000 lower than in December1979. When measured by data from business payrolls, however, em-146
ployment grew more vigorously after midyear and by December 1980stood some 450,000 higher than a year earlier. Statistical discrepanciesof this sort are not unusual for changes over short periods oftime. Even with this difference, both measures clearly indicate thatthe decline in overall employment during 1980 ended quickly.Increase in civilian employment, total...Males 20 years and overFemales 20 years and overBoth sexes 16-19 yearsWhiteBlack and other..Unemployment rate, total 3 ....Males 20 years and overFemales 20 years and overBoth sexes 16-19 yearsWhiteBlack and other....Participation rate, total *Males 20 years and overFemales 20 years and over..Both sexes 16-19 yearsWhiteBlack and other..,TABLE 17'.—Labor market developments, 1976-80Component 1976 IV 1977 IV 1978 IV 1979 IV 1980 IV3.42.64.63.03.34.2Percent change from year earlier l4.43.35.28.04.34.73.62.55.42.63.27.0Percent 21 Changes for 1978 IV adjusted for the increase of about 250,000 in employment and labor force in January 1978 resultingfrom changes in the sample and estimation procedures introduced into the household survey.2 Seasonally adjusted.3 Unemployment as percent of civilian labor force.4 Civilian labor force as percent of civilian noninstitutional population.Source: Department of Labor, Bureau of Labor Statistics.The impact of the year's labor-market weakness was spread unevenlyacross demographic groups. The unemployment rate for adultmen rose by a much greater percentage than did the unemploymentrates for women and teenagers. The total unemployment rate rosefrom 5.9 percent in the fourth quarter of 1979 to 7.5 percent in thefourth quarter of 1980. The unemployment rate for men 20 yearsand over rose from 4.4 percent to 6.3 percent during this period. Bycontrast, the unemployment rate for women 20 years and over onlyincreased from 5.7 to 6.7 percent. In the third quarter of 1980 theadult male unemployment rate exceeded the adult female rate. Whilethis is highly unusual, adult male unemployment rates typically risemore than adult female rates during recession. This is becauseoutput declines tend to be concentrated in construction and durablegoods manufacturing, sectors with a much higher proportion of adultmale workers than, say, the relatively stable service sector. In thefourth quarter employment recalls in such industries as autos, steel,7.86.07.419.17.013.361.879.947.454.462.159.66.64.86.716.65.713.362.679.948.656.862.960.65.94.15.716.35.111.563.579.850.158.463.761.82.11.33.92.02.95.94.45.716.25.211.363.879.651.058.164.161.7-0.3-.71.5-6.7-.2-.97.56.36.718.36.614.163.779.251.456.464.161.2147
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Economic Reportof the PresidentTran
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ECONOMIC REPORTOF THE PRESIDENT
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We have heard much about American i
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at an approach that took account of
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een due to overall demand in the ec
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to $27.5 billion in the new budget
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ductions would amount to over $27 b
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10 percent inflation rate, keeping
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tutes for petroleum. The Synthetic
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esponse can be so large as to wipe
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THE ANNUAL REPORTOF THECOUNCIL OF E
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CONTENTSCHAPTER 1. INFLATION AND GR
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PageChallenges to the International
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CHAPTER 1Inflation and Growth in th
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needed to control inflation by resi
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decline in productivity growth may
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Chart 1Standard Unit Labor CostsPER
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end of 1974 the world price of oil
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price decisions cannot easily be re
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Federal budget achieved a surplus.
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As an abrupt increase in the price
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policies but are based on the wides
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tion, and can policies be designed
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duction and employment to grow only
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Moreover, their actions must indica
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Starting with its 1975 targets as a
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well after the fact whether the mon
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Reserve provides some flexibility i
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in response to circumstances in par
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Although the flexibility of TIPs ma
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ard or that thought the administrat
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given standard, as the reward and t
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large firms. Even among large firms
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cause declining productivity growth
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vanced technology and will therefor
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ather than restoring the growth of
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correct some of the distortions in
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higher than it would otherwise be b
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EXPECTED PRODUCTIVITY GAINSAlthough
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supply of adult men in the work for
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increase demand pressures, especial
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time hours also has drawbacks. For
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eintroduce the problem of changing
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CHAPTER 2Improving the Adaptability
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use less and produce more energy in
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expectation of price controls or fu
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Page 103 and 104: While the market solution might pro
Page 105 and 106: High energy prices and excessive de
Page 107 and 108: part, the interests of these partie
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Page 111 and 112: Agency (EPA) from considering prosp
Page 113 and 114: other things, that federally assist
Page 115 and 116: ing services. Money-market mutual f
Page 117 and 118: holdings of consumer and business l
Page 119 and 120: they once had and thus cannot conti
Page 121 and 122: finding ways around outdated regula
Page 123 and 124: proportion of the existing farms pr
Page 125 and 126: prices for years in the future, reg
Page 127 and 128: derground water resources once thou
Page 129 and 130: comprehensive, actuarial crop insur
Page 131 and 132: duced a decline in the median age o
Page 133 and 134: elude government investments in loc
Page 135 and 136: some of the firms in the chosen sec
Page 137 and 138: CHAPTER 3The Economy: Review and Pr
Page 139 and 140: uild up oil inventories and maintai
Page 141 and 142: Chart 7Selected Interest Ratesand B
Page 143 and 144: had risen just 2 months earlier. By
Page 145 and 146: Chart 8Personal Saving RatePERCENT1
Page 147 and 148: chief cyclical determinant of housi
Page 149 and 150: ment were sharply diminished by the
Page 151: dropped even faster, in large part
Page 155 and 156: terials fell for a full third of th
Page 157 and 158: 1979, slowed to a 19 percent annual
Page 159 and 160: costs of production. The evidence s
Page 161 and 162: sharp decline in output in the seco
Page 163 and 164: ecord high interest rates during th
Page 165 and 166: automatic transfer services (ATS) n
Page 167 and 168: plunged in March, although the only
Page 169 and 170: (FHLB) System increased their borro
Page 171 and 172: THE PROSPECTS FOR 1981 AND 1982In 1
Page 173 and 174: expectations. Of course, if the eco
Page 175 and 176: The uncertainty of developments in
Page 177 and 178: produce a slight decline in the sav
Page 179 and 180: more rapid growth thereafter. Durin
Page 181 and 182: eemergence of modest but sustained
Page 183 and 184: hike would depend on many factors,
Page 185 and 186: major revision of the NIPA occurred
Page 187 and 188: per year. This modest acceleration
Page 189 and 190: THE INDUSTRIAL ECONOMIES: TRENDS AN
Page 191 and 192: Chart 10Labor Costs, Value-Added De
Page 193 and 194: Rather, the German current account
Page 195 and 196: TABLE 30.—Inflation in major indu
Page 197 and 198: THE GLOBAL OIL MARKETTable 31 summa
Page 199 and 200: may be preserved. Stocks are in fac
Page 201 and 202: straint on growth. Finally, policie
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outside government, both at home an
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ates are high, differences in polic
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Japanese trade performance in volum
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No "Say's Law" operates in internat
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the cost of the loans, and they may
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At the same time, access to the IMF
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to closer cooperation is to risk a
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While all countries, in attempting
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threats of disruption, market-shari
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Past Council Members and their date
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1977 to review selected analyses of
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The Chairman and the Council Member
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University). Kate Stith Pressman, s
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CONTENTSNATIONAL INCOME OR EXPENDIT
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GOVERNMENT FINANCE'—ContinuedB-72
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Gross national product
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TABLE B-3.—Implicit price deflato
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TABLE B-5.—Implicit price deflato
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TABLE B-10.—Gross national produc
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TABLE B-12.—Output, costs, and pr
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TABLE B-14.—Gross private domesti
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TABLE B-16.—Inventories and final
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TABLE B-18.—Relation of national
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TABLE B-19-—National income by ty
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Year orquarter192919331939194019411
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TABLE B-22.—Total and per capita
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Year orquarterTotalTotalCurrencyand
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TABLE B-26.—Population by age gro
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TABLE B-27.—Noninstitutional popu
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Year or monthTABLE B-29.—Selected
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TABLE B-31.—Unemployment rate by
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TABLE B-33.—Unemployment by reaso
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TABLE B-35.—Wage and salary worke
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TABLE B-37.—Average weekly earnin
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TABLE B-39.—Changes in productivi
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TABLE B-42.—Industrial production
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TABLE B-44;—New construction acti
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TABLE B-45.—New housing units sta
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TABLE B-47.—Sales and inventories
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TABLE B-49.—Manufacturers' new an
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TABLE B-51.—Consumer price indexe
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19391940194119421943194419451946194
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TABLE B-54.—Changes in special co
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TABLE B-55.—Producer price indexe
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TABLE B-57.—Producer price indexe
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TABLE B-58.—Changes in producer p
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TABLE B-60.—Components of money s
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TABLE B-62.— Total funds raised i
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TABLE B-63.—Federal Reserve Bank
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TABLE B-65.—Bond yields and inter
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TABLE B-66—Consumer credit outsta
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TABLE B-68.—Mortgage debt outstan
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GOVERNMENT FINANCETABLE B-70.—Fed
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TABLE B-l\.—Federal budget receip
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TABLE B-73.—Government receipts a
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TABLE B-75.—State and local gover
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TABLE B-77,—Interest-bearing publ
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TABLE B-79-—Maturity distribution
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TABLE B-81.—Corporate profits by
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TABLE B-83.—Sales, profits, and s
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TABLE B-85.—Relation of profits a
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TABLE B-87.—Sources and uses of f
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TABLE B-89-—State and municipal a
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TABLE B-91.—Business formation an
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TABLE B-93.—Farm output ami produ
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Year or month1940194119421943194419
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TABLE B-97.—Balance sheet of the
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TABLE B-99— U.S. international tr
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TABLE B-100.—U.S. merchandise exp
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TABLE B-102.—U.S. merchandise exp
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TABLE B-104.— World trade: Export
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TABLE B-106.—International reserv
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• • ' •TABLE B-108.—Industr
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TABLE B-110.—Summary of major U.S
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