Economic Report of the President

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List of Tables and Charts—ContinuedTablesPa % €18. Measures of Price Change, 1976-80 14919. Alternative Measures of Consumer Price Changes, 1980...... 15020. Measures of Compensation and Employment Costs, 1977-80 15321. Alternative Measures of Changes in Real Earnings perHour, 1978-80 15422. Shares of National Income, 1976-80 15523. Actual and High-Employment Federal Receipts and Expenditures,National Income and Product Accounts, CalendarYears, 1973-80 15724. Growth in Monetary and Bank Credit Aggregates, 1979-81 15825. Economic Outlook for 1981 17026. Economic Projections, 1981-86 17827. Revised Potential GNP, 1973-80 18128. Real GNP Growth in Major Industrial Countries, 1976-82.. 18329. Current-Account Balances in Major Industrial Countries,1978-81 18730. Inflation in Major Industrial Countries, 1976-82 18931. Global Oil Balances, 1973-80 19132. Global Current-Account Balances, Exclusive of OfficialTransfers, 1978-81 20233. Non-Oil Developing Countries: Current-Account Financing,1973-79 204Charts1. Standard Unit Labor Costs 352. Price Index for Personal Consumption Expenditures ExcludingFood and Energy 353. Changes in Consumer Prices Since 1913 384. Productivity Adjusted for Cyclical Variation 705. Prices Received by Farmers 1166. Relative Food Prices 1167. Selected Interest Rates and Bond Yields 1358. Personal Saving Rate 1399. Real Inventory-Final Sales Ratio, Nonfarm Business 14310. Labor Costs, Value-Added Deflators, and Labor Share inSix Major Foreign Countries 18511. Wage and Price Changes in Seven Major Countries 18828
CHAPTER 1Inflation and Growth in the 1980sIN THE 1980s THE UNITED STATES will confront a variety ofstubborn problems that have developed during the past 15 years.Chief among these problems is one that is shared by most other industrialcountries—the persistence of large wage and price increases,even in the face of high unemployment and slack production. Thisproblem poses the single most important challenge to U.S. economicpolicy—reducing inflation while maintaining a reasonably prosperousand growing economy.Many other problems are themselves closely related to inflation,either as cause or as consequence. Our Nation's productivity growthhas virtually halted in recent years. The era of cheap energy hasended, the world has grown vulnerable to supply disruptions, and thecourse of domestic inflation and unemployment has become closelydependent on economic and political developments in the oil-richbut politically unstable Middle East. Meanwhile, the struggle to find aproper balance between a clean, healthy, and safe environment, onthe one hand, and satisfactory economic growth with lower inflation,on the other, will continue. All of these developments, together withthe growing interdependence of the world economy, have set inmotion major changes in economic structure, occupational skill requirements,and industrial location that will continue to pose sizableadjustment problems to many industries, communities, and workers.While the magnitude of these economic challenges is cause for seriousconcern, it does not warrant pessimism. During the 1970s theU.S. economy performed quite well in many important respects. Overthat decade our country outperformed most other major countries inproviding jobs for its people (Table 1). Employment grew almost 25percent as the American economy created jobs not only for millionsof youths entering the labor market for the first time but also for millionsof women, who found job opportunities in growing numbers.This performance continued through the last years of the decade atan increased pace. While the growth in the number of employed personswas temporarily interrupted by the recession of 1980, the basicperformance was virtually unparalleled.333-540 0 - 81 - 3 :QL 329
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Page 7: ECONOMIC REPORTOF THE PRESIDENT
Page 10 and 11: We have heard much about American i
Page 12 and 13: at an approach that took account of
Page 14 and 15: een due to overall demand in the ec
Page 16 and 17: to $27.5 billion in the new budget
Page 18 and 19: ductions would amount to over $27 b
Page 20 and 21: 10 percent inflation rate, keeping
Page 22 and 23: tutes for petroleum. The Synthetic
Page 24 and 25: esponse can be so large as to wipe
Page 27: THE ANNUAL REPORTOF THECOUNCIL OF E
Page 31 and 32: CONTENTSCHAPTER 1. INFLATION AND GR
Page 33: PageChallenges to the International
Page 37 and 38: needed to control inflation by resi
Page 39 and 40: decline in productivity growth may
Page 41 and 42: Chart 1Standard Unit Labor CostsPER
Page 43 and 44: end of 1974 the world price of oil
Page 45 and 46: price decisions cannot easily be re
Page 47 and 48: Federal budget achieved a surplus.
Page 49 and 50: As an abrupt increase in the price
Page 51 and 52: policies but are based on the wides
Page 53 and 54: tion, and can policies be designed
Page 55 and 56: duction and employment to grow only
Page 57 and 58: Moreover, their actions must indica
Page 59 and 60: Starting with its 1975 targets as a
Page 61 and 62: well after the fact whether the mon
Page 63 and 64: Reserve provides some flexibility i
Page 65 and 66: in response to circumstances in par
Page 67 and 68: Although the flexibility of TIPs ma
Page 69 and 70: ard or that thought the administrat
Page 71 and 72: given standard, as the reward and t
Page 73 and 74: large firms. Even among large firms
Page 75 and 76: cause declining productivity growth
Page 77 and 78: vanced technology and will therefor
Page 79 and 80: ather than restoring the growth of
Page 81 and 82: correct some of the distortions in
Page 83 and 84: 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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dependence on foreign oil mean that
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While the market solution might pro
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High energy prices and excessive de
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part, the interests of these partie
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Federal regulations designed to pro
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Agency (EPA) from considering prosp
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other things, that federally assist
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ing services. Money-market mutual f
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holdings of consumer and business l
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they once had and thus cannot conti
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finding ways around outdated regula
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proportion of the existing farms pr
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prices for years in the future, reg
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derground water resources once thou
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comprehensive, actuarial crop insur
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duced a decline in the median age o
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elude government investments in loc
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some of the firms in the chosen sec
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CHAPTER 3The Economy: Review and Pr
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uild up oil inventories and maintai
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Chart 7Selected Interest Ratesand B
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had risen just 2 months earlier. By
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Chart 8Personal Saving RatePERCENT1
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chief cyclical determinant of housi
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ment were sharply diminished by the
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dropped even faster, in large part
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ployment grew more vigorously after
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terials fell for a full third of th
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1979, slowed to a 19 percent annual
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costs of production. The evidence s
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sharp decline in output in the seco
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ecord high interest rates during th
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automatic transfer services (ATS) n
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plunged in March, although the only
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(FHLB) System increased their borro
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THE PROSPECTS FOR 1981 AND 1982In 1
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expectations. Of course, if the eco
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The uncertainty of developments in
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produce a slight decline in the sav
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more rapid growth thereafter. Durin
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eemergence of modest but sustained
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hike would depend on many factors,
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major revision of the NIPA occurred
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per year. This modest acceleration
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THE INDUSTRIAL ECONOMIES: TRENDS AN
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Chart 10Labor Costs, Value-Added De
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Rather, the German current account
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TABLE 30.—Inflation in major indu
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THE GLOBAL OIL MARKETTable 31 summa
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may be preserved. Stocks are in fac
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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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Page 249 and 250:
Page 251 and 252:
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
Page 269 and 270:
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
Page 277 and 278:
TABLE B-33.—Unemployment by reaso
Page 279 and 280:
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
Page 312 and 313:
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
Page 334 and 335:
TABLE B-83.—Sales, profits, and s
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TABLE B-85.—Relation of profits a
Page 338 and 339:
TABLE B-87.—Sources and uses of f
Page 340 and 341:
TABLE B-89-—State and municipal a
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TABLE B-91.—Business formation an
Page 344 and 345:
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
Page 350 and 351:
TABLE B-99— U.S. international tr
Page 352 and 353:
TABLE B-100.—U.S. merchandise exp
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TABLE B-102.—U.S. merchandise exp
Page 356 and 357:
TABLE B-104.— World trade: Export
Page 358 and 359:
TABLE B-106.—International reserv
Page 360 and 361:
• • ' •TABLE B-108.—Industr
Page 362 and 363:
TABLE B-110.—Summary of major U.S
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