Economic Report President

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Chart 6-3 Real Value of the Dollar and the Trade DeficitThe trade deficit is a macroeconomic phenomenon: increases typically follow anappreciation of the dollar.Index (first quarter 1976 = 100)140Percent of GDP41303120Real value of the dollar(left scale)Real trade deficit(right scale)211011009008076:Q1 78:Q1 80:Q1 82:Q1 84:Q1 86:Q1 88:Q1 90:Q1 92:Q1 94:Q1 96:Q1 98:Q1-1Sources: Department of Commerce (Bureau of <strong>Economic</strong> Analysis) and Federal Reserve Bank ofDallas.Chart 6-4 Dollar Exchange RatesThe dollar has fluctuated sharply against the currencies of Japan and other majortrading partners, but less sharply against broader indexes of foreign currencies.Index (fourth quarter 1993 = 100)140Broad trade-weighted index120Broad real trade-weighted index100Trade-weighted index,G-10 countries80Japanese yen/dollarGerman mark/dollar93:Q1 93:Q3 94:Q1 94:Q3 95:Q1 95:Q3 96:Q1 96:Q3 97:Q1 97:Q3 98:Q1 98:Q3Note: The broad trade-weighted index is relative to 129 trading partners; the real measure is relative to111, and is adjusted for domestic inflation. A rise in an index indicates an appreciation of the dollar.Sources: Board of Governors of the Federal Reserve System and Federal Reserve Bank of Dallas.254
Chart 6-5 Terms of TradeImport prices have fallen more than export prices since the onset of the Asiancrisis, leading to an improvement in the terms of trade.Index (fourth quarter 1983 = 100)140130Price ofimports120110100Price of exports9080Terms oftrade701983 1985 1987 1989 1991 1993 1995 1997Source: Department of Labor (Bureau of Labor Statistics).THE TRADE AND CURRENT ACCOUNT DEFICITSThe Short-Term Behavior of the Trade ImbalanceIn 1998, faster U.S. growth relative to growth in our trading partnerscombined with the continued appreciation of the dollar to exert apowerful impact on the U.S. trade balance. The deficit in trade in goodsand services rose substantially. Based on data for the first 11 months ofthe year, it now appears that the deficit for 1998 will be in the neighborhoodof $170 billion, up from $110 billion in 1997. Compared with1997, it appears that exports of goods and services in 1998 will bedown about 1 percent, whereas imports of goods and services will be upabout 5 percent. Relative to past trends, the decline in exports is by farthe more striking of the two figures.A large fraction of the increase in the dollar value of the trade deficitis related to the decline in exports to Asia; the contribution of importgrowth to the increased nominal value of the deficit has been quitemodest thus far. The decline in exports to six key East Asian countries(Indonesia, Japan, Korea, Malaysia, the Philippines, and Thailand),measured at an annual rate, was running at $25 billion to $30 billionin the fall of 1998. Korea alone accounted for almost two-fifths of thedecline. Imports from these countries have also risen, continuing anupward trend that has persisted for several years.255
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EconomicReportof thePresidentTransm
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C O N T E N T SPageECONOMIC REPORT
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ECONOMIC REPORT OF THE PRESIDENTTo
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Once we have saved Social Security,
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THE ANNUAL REPORTOF THECOUNCIL OF E
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C O N T E N T SPageCHAPTER 1. MEETI
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PageCHAPTER 5. REGULATION AND INNOV
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Page2-3. Accounting for Growth in R
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Page6-5. Terms of Trade ...........
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CHAPTER 1Meeting Challenges and Bui
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Box 1-1.—The Dating of Business C
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Chart 1-1 Core Inflation and Unempl
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expansion prematurely. In fact, the
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the duration of the typical unemplo
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throughout that decade of peace and
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all individuals aged 65 and older r
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extent that it would reduce Social
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the vulnerability of the internatio
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access. Even so, international agre
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eliminated entirely, because the go
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Nevertheless, adjustment assistance
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CHAPTER 2Macroeconomic Policyand Pe
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Then the chapter explores two other
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target Federal funds rate brought t
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high of 66.8 percent in the third q
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the third-quarter deceleration and
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(that is, excluding food and energy
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probably would have increased by ab
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Equities clearly involve risk as we
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highest level in at least 40 years
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attributed to the lesser liquidity
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971231 980106 980112 980116 980122
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about the potential impact of large
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With respect to leverage, the degre
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noted earlier, investment-grade bor
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Chart 2-8 Corporate Profits and Net
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is attributable to the strong econo
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productivity; the latter is in turn
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the year 2000, mistaking it instead
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Box 2-2.—continuedare not expecte
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construct an accurate forecasting m
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is estimated as the location where
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the recent surge in productivity re
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Box 2-3.—continuedhowever. Import
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Chart 2-12 Three Measures of Core I
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a level of capacity utilization tha
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Box 2-4.—continuedChanges to be i
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Nonfarm manufacturing and trade inv
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has been for the past 3 years. But
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who have traditionally not fared as
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Box 3-1.—continuedas well as full
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and been replaced by younger, more
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Particularly interesting, however,
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Chart 3-5 Median Hourly Wages of Me
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In fact, in 1990 immigrants and nat
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Box 3-2.—continuedsome firms may
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Box 3-3.—continuedmaximum of $3,7
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willing to hire welfare recipients
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participation. The renewed increase
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TANF grants in reserve at the Treas
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JOB DISPLACEMENTWorkers are conside
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evidence finds that the percentage
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their non-labor market activities.
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The Administration is especially co
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CHAPTER 4Work, Retirement, and theE
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Chart 4-1 Life Expectancy at Age 65
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Population aging is not just an Ame
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Box 4-1.—continuedfor couples and
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earlier retirement, by increasing l
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uyouts may also have contributed to
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Box 4-2.—Social Security RulesThe
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available with the same hourly pay,
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Box 4-4.—Types of Pension PlansUn
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worker—declined. More of these ol
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survey) was about 13 percent higher
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well-being is that families have di
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Chart 4-9 Living Arrangements of El
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mentioned earlier in this chapter a
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Box 4-7.—The Federal Role in Empl
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inequality among retirees who have
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whether minorities and women are li
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TABLE 4-4.—Poverty Rates Among th
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TABLE 4-6.—Family Holdings of Fin
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variety of reasons, including the f
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the number of patents granted in th
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The United States has a decades-lon
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matter, depending on various condit
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company Roche Holdings, Ltd. Some o
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The antitrust authorities’ linkin
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espective Writings and Discoveries.
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Box 5-3.—Cooperative Innovation a
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machine owned by another. The disti
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companies begin to offer DSL servic
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and compete for customers on the ba
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In another part of the Internet mar
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technology at hand. But incentive-b
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the flexibility to choose lower cos
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In contrast to both performance and
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The SO 2 experience reveals several
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Box 5-7.—The Partnership for a Ne
Page 202 and 203: Consumers’ investment in energy e
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Page 206 and 207: Chart 5-2 Energy Efficiency and Pri
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Page 210 and 211: Box 5-9.—Is There an Environmenta
Page 212 and 213: larger coal plants. In 1994 these t
Page 214 and 215: around the country, and seven other
Page 216 and 217: other social goals. The fund would
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Page 220 and 221: Chart 6-1 Net Capital Flows to Deve
Page 222 and 223: Box 6-1.—The Explosive Growth of
Page 224 and 225: Recent Financial LiberalizationIn m
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Page 228 and 229: Box 6-2.—Market-Based (Arm’s-Le
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Page 232 and 233: Box 6-4.—Sovereign Spreads in Eme
Page 234 and 235: social safety nets in the crisis co
Page 236 and 237: Box 6-5.—Moral Hazard in Financia
Page 238 and 239: Empirical studies confirm that, by
Page 240 and 241: withdrew $26 billion in 1997. Altho
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Page 246 and 247: sary revenues to meet these extra i
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Page 250 and 251: ates at home, they sought higher re
Page 254 and 255: The increase in the trade deficit a
Page 256 and 257: Chart 6-6 Current Account BalanceTh
Page 258 and 259: Chart 6-7 Economic Growth and Trade
Page 260 and 261: investment. The U.S. gross investme
Page 262 and 263: Chart 6-10 Current Account Deficit
Page 264 and 265: with other countries to strengthen
Page 266 and 267: REFORM OF THE INTERNATIONAL FINANCI
Page 268 and 269: about their macroeconomic and finan
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Page 272 and 273: Other measures recommended by the w
Page 274 and 275: ADOPTION OF MEASURES TO REFORM THEI
Page 276 and 277: Another way to improve global surve
Page 278 and 279: Issues Posed by Hedge Funds and Oth
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Page 288 and 289: Box 7-1.—continuedpartner; a stro
Page 290 and 291: Chart 7-1 European Short-Term Inter
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Page 294 and 295: Box 7-2.—continuedthrough an auto
Page 296 and 297: advantages of EMU to U.S. residents
Page 298 and 299: Box 7-3.—How Does the Dollar Rank
Page 300 and 301: connection between the currency in
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as an economic superpower early in
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Appendix AREPORT TO THE PRESIDENT O
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Council Members and Their Dates of
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The Chair and Members work as a tea
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countries. The Council heads the U.
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Chief of Staff and General CounselM
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affiliations. They are Christopher
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C O N T E N T SNATIONAL INCOME OR E
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B-71. Aggregate reserves of deposit
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General NotesDetail in these tables
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TABLE B-1.—Gross domestic product
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TABLE B-2.—Real gross domestic pr
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TABLE B-4.—Percent changes in rea
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TABLE B-5.—Contributions to perce
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TABLE B-6.—Chain-type quantity in
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TABLE B-7.—Chain-type price index
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TABLE B-9.—Real gross domestic pr
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Year orquarterGrossdomesticproductT
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YearBased on1972 SIC:TABLE B-13.—
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TABLE B-15.—Output, costs, and pr
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TABLE B-17.—Real personal consump
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TABLE B-19.—Real private gross fi
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TABLE B-21.—Real government consu
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TABLE B-23.—Real inventories and
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TABLE B-25.—Real exports and impo
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TABLE B-27.—Relation of national
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TABLE B-28.—National income by ty
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TABLE B-29.—Sources of personal i
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TABLE B-31.—Total and per capita
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TABLE B-32.—Gross saving and inve
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POPULATION, EMPLOYMENT, WAGES, AND
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TABLE B-35.—Civilian population a
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TABLE B-37.—Civilian employment b
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TABLE B-39.—Civilian labor force
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TABLE B-41.—Civilian employment/p
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TABLE B-43.—Civilian unemployment
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TABLE B-45.—Unemployment insuranc
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TABLE B-46.—Employees on nonagric
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TABLE B-48.—Employment cost index
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Year orquarterTABLE B-50.—Changes
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Year or monthTABLE B-52.—Industri
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TABLE B-54.—Capacity utilization
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Year or monthTABLE B-56.—New hous
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TABLE B-58.—Manufacturers’ ship
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PRICESTABLE B-60.—Consumer price
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TABLE B-61.—Consumer price indexe
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TABLE B-63.—Changes in special co
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TABLE B-65.—Producer price indexe
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YearandmonthMONEY STOCK, CREDIT, AN
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TABLE B-70.—Components of money s
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TABLE B-72.—Bank credit at all co
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TABLE B-73.—Bond yields and inter
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TABLE B-74.—Credit market borrowi
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TABLE B-76.—Mortgage debt outstan
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GOVERNMENT FINANCETABLE B-78.—Fed
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TABLE B-80.—Federal receipts and
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TABLE B-82.—Federal Government re
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TABLE B-84.—Federal and State and
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TABLE B-86.—State and local gover
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TABLE B-88.—Maturity distribution
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CORPORATE PROFITS AND FINANCETABLE
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TABLE B-92.—Corporate profits of
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TABLE B-94.—Relation of profits a
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Year or monthTABLE B-96.—Business
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End of yearTotalassetsTABLE B-98.
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YearFarm population,April 1Number(t
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YearTABLE B-102.—U.S. exports and
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TABLE B-103.—U.S. international t
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TABLE B-105.—U.S. international t
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TABLE B-107.—International invest
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TABLE B-109.—Civilian unemploymen
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TABLE B-111.—International reserv
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