erp 1949 midyear

Midyear Economic Reportof the President

TRANSMITTED TO THE CONGRESS

July 1949

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE MIDYEAR ECONOMIC

REPORT OF THE PRESIDENT

To the Congress, July 11, 1949

Together with a report

THE ECONOMIC SITUATIONAT MIDYEAR 1949

by the

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 1949


LETTER OF TRANSMITTAL

THE WHITE HOUSE,

Washington, D. C, July 11, 1949.

The Honorable the PRESIDENT OF THE SENATE,

The Honorable the SPEAKER OF THE HOUSE OF REPRESENTATIVES.

SIRS: I am presenting herewith a Midyear Economic Report to theCongress. This is supplementary to the Economic Report of the Presidentof January 7, 1949, and is transmitted in accordance with section 3 (b)of the Employment Act of 1946.

In preparing this report I have had the advice and assistance of theCouncil of Economic Advisers, members of the Cabinet, and heads ofindependent agencies.

Together with this report I am transmitting a report, the EconomicSituation at Midyear 1949, prepared for me by the Council of EconomicAdvisers in accordance with section 4 (c) (2) of the Employment Act of1946.

Respectfully,

in


ContentsPage

T H E MIDYEAR ECONOMIC REPORT OF THE PRESIDENT 1

Summary review of recent economic developments 3Policies for economic stability and expansion 5Summary of legislative recommendations 13

T H E ECONOMIC SITUATION AT MIDYEAR 1949 (a report to the Presi-dent by the Council of Economic Advisers).


To the Congress of the United States:

The United States economy is the strongest and most productive theworld has ever known—and we have the resources and the skills to makeit still stronger and more productive.

In recent months we have seen the abatement of postwar inflationaryforces. We are now in a transition period, in which we must work towardconditions that will promote a more stable and enduring growth in pro-duction, employment, and purchasing power.

The fundamental task facing us all—businessmen, workers, farmers,Government—is to apply positive policies with confidence and courage inorder to achieve a sounder price structure and the restoration of maximumproduction and employment. In so doing, we need to start with a clearunderstanding of the facts concerning our present situation.

Our economy today possesses vitally important elements of strength thatdid not exist in earlier periods. Over the course of the last 16 years, manysteps have been taken by the Government to bulwark our economy againstthe forces of recession.

Unemployment insurance has helped to alleviate the hardships of unem-ployment and to sustain consumer incomes and expenditures. The old-ageretirement system and public assistance for needy persons also serve to main-tain purchasing power. The housing program recently enacted by theCongress will furnish positive support for housing construction and slumclearance.

The Federal Reserve System has been developed into an instrument ofsuch strength and elastic power that the risk of credit restriction at the verytime when business requires easier credit has been greatly reduced. Theinsurance of bank deposits has eliminated the danger of widespread lossfrom bank failures. The several credit institutions established within theGovernment go far toward preventing waves of bankruptcies and fore*closures. The farm price-support program affords assurance that our6,000,000 farmers and the two-fifths of our population in rural communitieswill not be forced out of the markets for goods.

These and other Government policies are providing strong supports tobusiness activity and are enlarging the opportunities of private business.The fact that public expenditures of Federal, State, and local governmentsare running at a rate of close to 60 billion dollars a year is itself an elementof great stability in the present situation.

Our position would be even stronger if we had taken adequate steps tocontrol the inflation between 1945 and 1949. We were confronted, as anaftermath of the war, by an inflationary boom that lifted production andemployment to extraordinarily high levels. But underneath the surfaceof the inflationary boom, there were serious dangers. Some incomes weredisproportionately high. Most prices were rising at a perilous rate, andserious price and wage distortions were being developed. The spiraling


cost of living was inflicting hardship on millions of families. These con-ditions threatened to bring about a serious break in employment and pro-duction. Therefore, I recommended repeatedly, for private and publicaction, an anti-inflation program to curb these dangers before we sufferedthe consequences.

A large part of the necessary anti-inflation program was not adopted andthe inflation went on largely uncontrolled. The dangers that are latentin inflation, of which I repeatedly warned, are now being revealed.

Employment is still high, but unemployment has been increasing andveterans and others leaving school are finding it much harder to obtainwork than a year ago. Production is still high, but it is lower, particularlyin some industries, than it was last year. Business investment is at a highrate, but plans for new investments are being made with caution.

The 1949 decline has been moderate, and the opportunity is now oursto reverse the trend and achieve maximum production and consumptionof goods and services without the evils of inflation.

The adjustment process has been rendered less difficult by the prudentactions of many groups and individuals in our business system. We havehad no speculative spree in either securities or commodities. Inventorybuying has been moderate and distress liquidation of inventories, such aswe experienced in 1920, is not to be anticipated. Personal indebtedness,on the part of farmers, home owners, and consumers generally, has beenheld to conservative levels. Many far-seeing businessmen made sincereefforts to avoid or minimize price increases during inflation, and in recentmonths have reduced their prices and have sought valiantly to maintainproduction and employment. Many labor unions have used their collec-tive strength with moderation and with consideration for the interests ofthe whole economy. All groups in the Nation have gained an improvedunderstanding of economic problems since the 19205s, and their actionsreflect this fact.

We should not, however, be lulled into a false sense of security by thesefavorable aspects of the situation. Many of the price adjustments thathave taken place have been healthy, and afford ground for expectation thatour economy will work its way successfully through a difficult period oftransition. But there is nothing healthy about more unemployment orless production. Such trends can and must be reversed by positive action,private and public. The way to check a decline in business investmentor production is to take affirmative action that will lead to more invest-ment and more production. The way to check an increase in unemploy-ment is to take affirmative action that will provide more jobs. The way toprevent our economy from shrinking is to take affirmative action that willhelp it to expand.


These things cannot be done by business, labor, agriculture, or govern-ment acting alone. They can only be done by all of us working togetherin mutual respect and with common objectives.

It is with these considerations in mind that I transmit to the Congressa brief summary of the economic situation and recommendations for actionat this time.

Summary Review of Recent EconomicDevelopments

A moderate downward trend characterized most phases of economicactivity in the first half of 1949.

Civilian employment averaged 58 million. This was slightly below thelevel of the first half of 1948, with the greatest decrease in manufacturingindustries. In June of this year, civilian employment was 59.6 million; inJune of last year, 61.3 million. The number of unemployed averaged 3.2million, the increase of about one million over the first half of 1948 aboutequaling the increase in the total labor force. The unemployed were 6percent of the civilian labor force in June, compared with 3.4 percentin June of last year. The number of unemployed in June was 3.8 million,and acute unemployment problems have developed in certain localities.

Production of all goods and services, adjusted for price changes and forseasonal variation, in the first half of 1949 was about l*/2 percent less thanin the second half of 1948. The decline in industrial production was rapid,and by June had reached 13 percent below last fall's peak. Other businessactivity as a whole changed but little. A moderate decrease in privateconstruction was partly offset by a rise in public construction. This year'sagricultural production seems likely to approach last year's.

Prices generally decreased, reflecting the shift from a sellers' to a buyers'market. The decreases were in most instances moderate and orderly, withno indication of a general spiraling downward. Wholesale prices by mid-year had declined 9 percent, consumers' prices 3 percent, from their highpoints of last August.

Wages increased in some industries, but, at least in manufacturing, theincreases were more than offset by reduced overtime and shorter work-weeks. Since the cost of living decreased by about as much as workers'average earnings, real earnings generally were maintained.

Profits reflected the decline in prices and production. Corporate profitsbefore taxes and inventory valuation adjustment in the first half of this yearwere about 13 percent below the first half of last year. The correspondingfigure for unincorporated enterprises, however, fell only about 7 percent.

Farm income was about 8 percent below the first half of 1948.


Credit requirements of business decreased as inventories and customerreceivables were reduced. Commercial loans of large city banks shrank 15percent, but otherwise loans by banks and other investment institutionsremained stable. Total bank deposits and money in circulation decreasedabout 2 percent during the past half year. Interest rates continued low.

Business investment decreased in the first half of 1949 from the 1948 level.Allowing for seasonal variations, in the second quarter it was 26 percentbelow the peak rate of the fourth quarter of 1948, chiefly as a result ofreductions in inventories. Plant and equipment outlays were still about ashigh as a year ago, but some decrease is anticipated in the last half of 1949.

Corporate finance reflected the reduction of inventories and of customercredit. Funds thus freed helped corporations to reduce their total indebted-ness by about 3.5 billion dollars.

Housing starts were less than in the first half of 1948, but since Marchhave been moving up toward last year's levels.

Personal income of consumers after taxes decreased only about 1 percentfrom the level of the last half of 1948. Since consumers' prices dropped 2percent, real income did not change significantly. Consumption expendi-tures in dollar terms decreased nearly 3 percent. Total liquid assets ofindividuals and business firms are now about 235 billion dollars. However,nearly 30 percent of our families have no reserve of liquid assets.

In foreign trade, an increase in exports and a falling off of imports havecontinued the rising trend in the export surplus which began last fall. Thesurplus was financed almost entirely through Government foreign-aidprograms.

Government fiscal transactions were a source of support against otherfactors making for decline in the economy during the past half year. Usingfigures on a consolidated cash basis, rather than the conventional budgetbasis, to reflect the effective impact of total governmental receipts andpayments upon the economy, cash payments by the Federal Governmentran at a rate more than 20 percent higher than in the first half of 1948, andState and local payments at a rate about 13 percent higher. Federal cashreceipts were down about 10 percent, State and local receipts were up about5 percent. All governmental units combined showed a cash deficit inthe first half of 1949 at a seasonally adjusted annual rate of 2.4 billion dollars,in contrast to a surplus at a rate of 12.1 billion dollars in the correspondingperiod in 1948. The Federal cash deficit in the past half year was at anannual rate of about 1 billion dollars, contrasted with a surplus at an annualrate of 12.3 billion dollars in the first half of last year.


Policies for Economic Stability andExpansion

These facts show that our economy is still operating at high levels ofemployment and production. The kind of Government action that wouldbe called for in a serious economic emergency would not be appropriatenow.

However, it would be even less appropriate to rely entirely on "lettingnature take its course" to restore economic stability and maximum pro-duction and employment. Within the memory of this generation, we haveexperienced both the terrible consequences of inaction and the saving valueof affirmative policy. It is consistent with the whole history of Americanprogress to recognize that, now as before, action can and should be takento make our economy still stronger and to deal with the new problems ofthe present.

It is fundamentally important to recognize that we should direct ourpolicies and actions not merely toward preventing a depression or holdingour ground. Many times I have pointed out that the life and spirit of theAmerican economy is progress and expansion. We need to use the pro-ductive capacity of a growing labor force. We need to translate improvedproductivity and managerial skills into constantly increasing output. Ifthe real needs and aspirations of our people are translated into effectivedemand through constantly growing employment and purchasing power,our markets can absorb a vigorously expanding output. We can achievewithin a few years a national output well above 300 billion dollars, valuedat current prices.

Our goal of growth and expansion determines the kind of policies thatprivate enterprise and Government should now develop and apply.

To restrict business investment, curtail production, reduce employment,or slash wages, because our economy has declined somewhat, would onlyserve to drag us further downward. But if in every field of action wedo the things that are consistent with a strong and growing economy, wewill have a strong and growing economy.

It is vitally important that Government policy be based upon the deter-mination to achieve a constantly growing economy. While some businessmenmay find it difficult to expand their operations under current circumstances,the Government can always take conscious and positive action to counteractrecessionary forces.

Yet there are those who assert that the decline in national income requiresthat we cut essential national programs. Nothing could represent greatereconomic folly than to follow this course of action. It would contribute tothe very recessionary forces that we should be counteracting. It would be adefeatist admission that we cannot prevent our economy from running


downhill and that those programs which are vital to the internationalsecurity and domestic welfare of our people, as well as to the strength of oureconomy, must be steered in the same downward direction.

This issue is fundamental. Are we going to admit that the forces ofprogress in our economy have become so feeble that we must content our-selves with lower levels of education, health and housing, internationaland domestic security, and national development? Or are we going tomove forward toward making our economy as strong and productive asour resources and skills permit, and adopt the programs which are con-sistent with that kind of economy and necessary for its attainment?

I propose that we follow the latter course.

Business investment

Initiative, ingenuity, and courage have always been characteristic ofAmerican businessmen. The production goals achieved during the warwere a miracle to the rest of the world. There are now great opportuni-ties for business investment to remove obsolescence, to make use of therapid progress of science and invention, to improve transportation facili-ties, to enlarge the housing supply, to industrialize underdeveloped areasof our country, to bring conveniences and labor-saving devices to Americanhomes and farms, and to meet the needs of a population that will continueto grow. Businessmen should lift their sights to the needs of an economythat grows and prospers from year to year.

I have previously recommended, and I again recommend, that the Con-gress provide for a broad study of potential business investment, expansion,and market opportunities under conditions of maximum use of our pro-ductive resources in a growing economy—conditions which the EmploymentAct of 1946 contemplates and which can be achieved if we have the con-fidence and determination to achieve them. This study should be designedespecially to discover inadequacies in capacity in basic industries whichmay serve as limiting factors to expansion when the upward movement ofbusiness is resumed.

Price and wage policies

In addition to the need for expanded business investment, positive actionsare required to enlarge consumer purchasing power.

Businessmen have a great opportunity to maintain production and salesvolume by adjusting prices downward, even at the cost of temporarily re-duced profits. Maintaining volume in the present situation is far moreimportant than maintaining profit margins. The only ultimate source ofsustained profits is sustained employment and purchasing power.

The same concept should guide wage policies. Business cannot be pros-perous unless the purchasing power of workers is maintained. While pricereductions are desirable, they should not be attained at the expense of wagecutting. Management and labor, through collective bargaining, should


seek agreements which recognize that the benefits of improved technologyand productivity should be reflected both in the wage structure and in theprice structure.

Fiscal policyThe Government's programs of expenditures and receipts must be care-

fully planned in the light of economic developments as they occur.The Federal Budget in recent years has necessarily been large, reflecting

not only the needs of the people for Government services but also theextraordinary responsibilities of the United States in working toward apeaceful world.

The sound objective of Government policy is to contribute toward themaximum use of our resources, not to contribute toward having them lieidle and unused. When I submitted my budget for the fiscal year 1950 lastJanuary, the programs of expenditure that I then recommended were held toa minimum consistent with our basic needs in view of the inflationary strainupon materials and manpower then prevailing. Now that this strain hasbeen removed, it would be inconsistent with sound fiscal policy and commonsense to make these programs smaller.

Continuing these necessary programs involves the problem of howand when we should achieve a balance of Federal receipts and expendi-tures, and a reduction of the national debt. No one has been more con-cerned with this problem than I, and this concern has not diminished. Iwill continue to exert every effort to achieve every economy in the develop-ment and execution of programs that is consistent with the national welfare.Balancing the budget and reducing the national debt are objectives to beachieved at the earliest feasible time.

But these objectives cannot be achieved without regard to the generalstate of the Nation's economy. During the fiscal years 1947 and 1948 wewere able to achieve, although not to the extent desired, the objective ofbalancing the budget and reducing the national debt. I urged repeatedlyduring this inflationary period that Government revenues be maintained toprovide a surplus for retirement of the national debt. The present deficitof Federal receipts below expenditures, caused primarily by the untimelytax reduction of 5 billion dollars during the height of inflation, against whichI so strongly advised, has been aggravated by the loss in revenue resultingfrom the decline in production and national income.

As I said in my Economic Report in January of this year:

The national tax policy should be flexible and should be promptly adjusted to thechanging needs of business and consumers in the course of evolving economic events.

Under present economic conditions, we cannot immediately correct thetax mistakes of the past or the conditions which led to a lower level ofnational income and lower Federal revenues. Any tax increase should


be judged by the effect which it might have upon national income andpurchasing power. Under present conditions, immediate tax increasesshould be limited to raising estate and gift tax rates and closing the loop-holes in their administration, so as at least to restore the revenue from thissource lost under the Revenue Act of 1948. This will have no significantadverse effects upon present economic conditions. At the same time, the taxon transportation of goods, which enters directly into such a large number ofbusiness costs, should be eliminated. Furthermore, the loss carry-over pro-visions in the corporate income tax laws should be liberalized in order togive an increased incentive to some business investments which may nowbe held back because of uncertain profit expectations. The net effect of thesethree changes in our tax structure, taken together, will be favorable to theexpansion of business activity, without causing a significant net loss intotal receipts. No changes in the tax laws which would result in a largernet loss in revenues would be justified at this time.

In view of our domestic and international obligations, an abundanteconomy is the only safe road to a Government surplus. In 1948 thevalue of our national output of goods and services was above 250 billiondollars. A 3- or 4-percent annual growth of our economy, which I setas a practical objective in my Economic Report in January, would increaseannual national output in real terms by 7 ^ to 10 billion dollars. Highernational output means more Federal revenues at any given tax rate.

Present levels of expenditures are due in large measure to the extraordi-nary costs of our national defense and international activities. Theseactivities are of such paramount importance that it is out of the questionto slash them at this time. But, as our policy for peace takes effect, itshould be possible in future years to reduce these expenditures which nowmake such heavy demands upon our Federal budget. As opportunityoffers, I shall make every effort to achieve an excess of Federal incomeover outgo, consistent with our major objectives of peace and prosperity.

But if we tried to avoid a budget deficit by cutting essential expenditures,we would contribute to lower national output and lower employment, Fed-eral receipts would fall further, and the burden upon Federal expenditureswould increase. We cannot expect to achieve a budget surplus in a declin-ing national economy.

There are economic and social deficits that would be far more serious thana temporary deficit in the Federal budget. Gould we be truly prosperousif the level of business investment or consumer purchasing power shouldbecome seriously deficient? Could we be truly prosperous with gapingdeficts in our educational system or our housing or our health services orour programs for resource development? If we should allow these deficitsto multiply, they would drag the whole economy down, and there wouldbe no hope for balancing the Government budget. But if we prevent thesedeficits, if we realize the productive potentials of the American economy,


the whole Nation will prosper, and not only will we balance the Federalbudget, but we can also move forward to improve the tax system and toresume reduction of the national debt.

Monetary and credit policy

Federal monetary and credit policies should contribute to the needs ofan expanding economy.

Present conditions of ample credit supplies and low interest rates arefavorable to business investment. The policy of the Government will be tocontinue to maintain orderly conditions in the Government security marketsand to encourage banks and other institutions to maintain and expandtheir productive lending activities.

Over the years, Federal lending has come to exercise an important influ-ence upon business investment by providing funds which would otherwisenot be available, particularly for small and new businesses. In a period ofbusiness contraction, no matter how moderate, deficiencies in capital fundsforce many enterprises to the wall. It is no answer to this difficult questionto say that this squeezes out the inefficient, because it also ruins many whoare temporarily in adverse financial circumstances without being inefficient,and prevents others from getting a start in business.

The Reconstruction Finance Corporation, under its existing authority,will continue its support of business activity by making loans based uponreasonable assurance of repayment, not under depression conditions, butunder generally prosperous, long-run conditions. The Corporation is alsovery properly focusing its loan activities toward areas where unemploymenthas become serious. New legislation is needed, however, to extend the maxi-mum maturity periods for loans, in order to permit financial assistance bythe Corporation to business ventures which are economically sound andurgently needed in an expanding economy, but which require long periodsof time to develop and produce earnings that will permit orderly amortiza-tion of debt.

Agricultural policy

Millions of American consumers derive their livelihood from farmingand buy the products of industry. Experience has taught us that there canbe no lasting general prosperity without farm prosperity.

There is immediate need to overcome a number of shortcomings in exist-ing farm legislation. It is necessary to assure fair and adequate supportsfor major farm products, notably livestock products, which have not beencovered in past programs. It is necessary to authorize the use of directproduction payments as an alternative to the pegging of market prices ifan effective support program is to be carried forward without waste ofcommodities and without denying to consumers the benefits of agriculturalabundance. It is desirable to recognize clearly that the oBjective farmsupport prices is to maintain an adequate level of farm income and promote


shifts in lines of agricultural production which will encourage an increasein the total domestic consumption of farm products. I urge the Congressto enact at this session legislation to meet these needs.

Minimum wagesMinimum-wage legislation is essential to maintaining adequate consumer

purchasing power among large groups of our population. The cost of liv-ing has been reduced very little, so that low-paid workers are still facedwith a grave problem in meeting living expenses. Higher minimum wagesare an element in the general improvement of American living standardswhich we can afford and must achieve. I repeat my request for the im-mediate raising of the minimum wage under the Fair Labor StandardsAct to at least 75 cents an hour, and the extension of the Act's coverage.

Social securityAlthough unemployment has not risen to the dangerous levels which

would call for all-out emergency measures, there is an inescapable obliga-tion of Government to take action when large numbers of people are unem-ployed through no fault of their own. Such action is important not onlyto the unemployed but also to business, since unemployment benefits main-tain to some extent the purchasing power of those who have lost their jobs.Because these measures contribute toward isolating the consequences ofunemployment and reducing its duration, it is not economical even by themeasure of dollars alone to leave these protective devices in an inadequatestate. The cost of such measures is determined not only by the extent ofcoverage or size of benefits but also by the extent and duration of unem-ployment.

Under current economic conditions, it is urgent that the unemploymentcompensation system be broadened and liberalized. I recommend that theCongress strengthen our Federal-State unemployment insurance system byestablishing minimum benefit standards for all parts of the country andby broadening coverage. These minimum standards should providebenefits for 26 weeks ranging up to $30 a week for single individuals, withadditional amounts for dependents.

Ample funds are available for this purpose in the trust accounts of mostStates. However, these increased benefits will require action by the Statelegislatures and it will obviously take some time before the laws of all Statescan be amended for this purpose. It will be necessary, therefore, to allowa reasonable period before the requirement for new standards takes effect.

To encourage the States to meet the new standards without waitingfor this period to expire, I recommend that a Federal reinsurance fund beestablished for those States which meet the minimum standards to assurethat the increased protection will not threaten the continued solvency ofState unemployment funds. This would represent an extension andstrengthening of the present legislation authorizing Federal loans to Stateswhose unemployment funds run low, which expires on December 31, 1949.

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I further recommend that the expiration date for unemployment benefitsfor veterans under the Servicemen's Readjustment Act be extended for oneyear, to July 25, 1950. Such benefits should not be available to those eli-gible for unemployment compensation under State laws, except wherenecessary to bring State payments up to the Federal level, or when Statebenefits are used up.

The improvements in the old-age and survivors' insurance system whichI have recommended to the Congress are also badly needed. The presentschedule for increasing pay roll taxes to \l/i percent each on employersand employees next January will provide the financial basis for such im-provements without unduly reducing consumer purchasing power.

I have already recommended to the Congress that in addition to Federalaid to the States for the needy aged, for the blind, and for dependent chil-dren, such aid should be extended to other needy persons receiving generalassistance. In most States, the programs now in operation are inadequateand in many localities there is no program at all. Recent economic develop-ments have emphasized the need for aid, and I again urge its favorableconsideration by the Congress.

Public works

Public works programs, Federal, State, and local, assume added signifi-cance under present conditions as a means of maintaining consumer pur-chasing power and stimulating investment opportunities. My Januarybudget proposals called for Federal expenditures for civil public works infiscal year 1950 in the amount of about 3 billion dollars, compared to about2*4 billion dollars in fiscal 1949. Continuing the programs included inthe present budget, even without any new starts, will require expendituresof approximately 3 billion dollars in each of the fiscal years 1951 and 1952,at construction rates now planned.

This is a substantial program, and, coupled with private constructionexpenditures at the current rate, and with local and State expendituresat a rate in excess of 3 billion dollars a year, should maintain the con-struction industry at a high level of activity and thus strengthen the wholeeconomy.

The economic situation does not now call for an immediate and sweep-ing expansion of public works. It would be dangerous, however, toneglect the precautionary preparation of measures which might be neededif the business downturn should become more serious. Such preparatorymeasures by themselves will serve to inspire confidence that the Govern-ment will, if necessary, help further to maintain a high level of demand.They will thus reduce doubts that businessmen may have about planninginvestments for the future. They will also encourage consumers to con-tinue their normal purchasing with more confidence.

I urge, therefore, that the Congress (1) enact legislation to provide forloans to assist State and local advance planning of public works; (2) pro-

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vide funds for the Public Buildings Administration for advance planningand site acquisition for Federal construction, under the authority recentlyenacted; (3) enable the Bureau of Public Roads to make advances to Statesfor acquiring and clearing rights-of-way; and (4) provide for the surveysand planning for school construction which I have previously recommended.Together with the advance planning already under way by many Federalagencies, these actions will round out a substantial backlog of planned publicworks.

Concentration upon areas of relatively serious unemployment

While unemployment is not now at a very high level for the countryas a whole, there are many localities and even some States where it isserious. These pools of heavy unemployment need to be treated beforethey spread, and the responsibility is in part national.

There are a number of Federal programs of direct action or assistanceto localities which can be timed and channeled so as to concentrate uponareas where unemployment is heavy without sacrifice of general nationalobjectives. This principle of wise selectivity is particularly applicable toprocurement and construction activities, but it is also relevant to other grantor loan programs designed to stimulate private enterprise or to effectpublic improvements. Toward this end, I am directing that a continuingreview of such activities be undertaken within the Executive Office, in orderto coordinate planning, to keep the various types of activity and theirgeographic distribution in proper balance and readiness, and to focusemphasis upon alleviating unemployment in particular areas where itbecomes serious before it has a chance to spread. I am also having a studymade of possible changes in the laws governing these activities which maybe needed for these purposes.

Foreign economic policy

The decline in our business activity is reducing our imports, which is animportant factor affecting the ability of foreign countries to earn the dollarsthey require to restore their economic health. The decline in imports, iflong continued, could have very serious effects. If a severe shrinkage in theflow of dollars abroad occurred, it would not only reduce our exports now,but would also force other countries to try to save dollars by making dis-criminatory trading arrangements that would adversely affect the long-runfuture of our foreign trade. Moreover, it would set back recovery andreconstruction abroad, and might precipitate developments which wouldhave serious consequences for world political stability.

For these reasons, it is especially important at this time for us to continuethe efforts we are making to help rebuild a strong and advancing worldeconomy, based upon an effective network of world trade and the growingproductive strength of free nations. In addition to maintaining our foreign-assistance programs, and restoring a full-scale Reciprocal Trade Agreements

12


Act, I urge the Congress to enact the legislation I have recently recom-mended to expand both technical and capital assistance for the economicgrowth of underdeveloped areas.

The expansion of foreign investment, by making more dollars availabledirectly to the underdeveloped countries and indirectly to the capital-goods-exporting countries of Europe, will improve the rest of the world's abilityto buy from us. The expansion of technical assistance will stimulate foreigninvestment by assisting countries that want capital for development totranslate their aspirations into concrete projects, by creating new productiveinvestment opportunities, and by increasing the private investor's knowledgeof those that already exist. Both under its existing authority and under thenew legislation I have proposed, the Export-Import Bank will be expandingits operations and substantially contributing to these objectives.

These actions are called for by both our foreign policy and our domesticeconomic policy. They will be supplemented by the strong support of theUnited States for an expansion in the development activities of the Inter-national Bank for Reconstruction and Development.

There is danger that a further reduction of economic activity may giverise to pressure to restrain imports, in an attempt to divert to United Statesmarkets part of the small fraction of total demand now directed towardforeign goods. It should be recognized that diversion is a poor substitutefor expansion of total demand. Protectionist measures would not merelyshift the problem of inadequate markets to other countries but would also,with the present dollar stringency, promptly reduce our own exports. Suchmeasures would, therefore, not have a stimulating effect on the domesticeconomy, even in the short run.

Summary of LegislativeRecommendations

In summary, I recommend that the Congress take the following actionsat this session because of their vital importance in the current economicsituation:

1. Repeal the tax on the transportation of goods, liberalize the pro-visions for carry-over of losses by corporations, and raise estate and gifttaxes. No major increase in taxes should be undertaken at this time.

2. Extend the maximum time limit now fixed by law on the maturityof loans to business made by the Reconstruction Finance Corporation.

3. Provide for a broad study of investment and development needsand market opportunities in an expanding economy.

4. Adopt an improved program of farm income supports.5. Increase the minimum wage to at least 75 cents an hour and

broaden its coverage.


6. Strengthen the unemployment compensation system by increas-ing the amount and duration of benefits and extending coverage.

7. Extend to July 25, 1950, the availability of readjustment allow-ances for veterans not protected by State unemployment compensationlaws.

8. Raise benefits and extend coverage under the old-age and sur-vivors insurance system and improve the public assistance program.

9. Enact legislation to permit Federal agencies, and assist States andlocalities, to intensify their advance planning and to acquire sites foruseful projects.

10. Enact legislation to provide technical assistance to underdevel-oped areas abroad and to encourage investment in such areas.

11. Restore the Reciprocal Trade Agreements Act.* * * * * * *

The core of my message to every businessman, worker, and farmer, andto everyone responsible for the making of national policy is just this: Wecannot have prosperity by getting adjusted to the idea of a depression—by cutting investment or employment or wages or essential Governmentprograms. We can be prosperous only by planning and working for pros-perity, by increasing private investment, production, employment and pur-chasing power, and by carrying forward essential Government programs.

The whole world is watching developments in the American economy.Our own people insist upon the maintenance of prosperity, and will nottolerate a depression. Our friends abroad know that their well-beingand hopes for world peace are greatly dependent upon the economicstrength of the United States. Those opposed to our system and way oflife are hoping for the vindication of their prophecies that economic collapseis inevitable in a free society.

Ours is at once a fateful responsibility and an inspiring opportunity toprove to ourselves and to the world that prosperity and freedom will enduretogether.


THE ECONOMIC SITUATION

AT MIDYEAR 1949

A REPORT TO THE PRESIDENT

BY THE

COUNCIL OF ECONOMIC ADVISERS


LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS.,

Washington, D. C, July 2,1949.T H E PRESIDENT:

SIR: The Council of Economic Advisers herewith submits a report, TheEconomic Situation at Midyear 1949, in accordance with section 4 (c) (2)of the Employment Act of 1946.

Respectfully,

Chairman.

Vice Chairman.

in


ContentsPage

I. THE COURSE OF ECONOMIC ADJUSTMENT AND ITS PROBLEMS. . . . 1

The economy in transition 1Factors of underlying strength 2Elements of uncertainty 3The process of price and income adjustment 4The need for maintaining the rate of investment 9Public and private responsibilities 10

II. ECONOMIC INDICATORS AND THE NATION'S ECONOMIC BUDGET. . 13

The course of employment and production 13Employment 13Production 16

Prices, wages, and profits 19Prices 19Wages and labor relations 23Profits 24

Money and credit 26The flow of goods and purchasing power 27

Consumer income, spending, and saving 27Business investment and finance. 31International transactions 38Government transactions 42Summary: The Nation's Economic Budget 46

APPENDIXES

A. THE NATION'S ECONOMIC BUDGET 51B. THE DISTRIBUTION OF INCOME AND LIQUID ASSETS AND PERSONAL

SAVING 65C. SURVEYS OF ACTUAL AND INTENDED BUSINESS INVESTMENT 73D. STATISTICAL TABLES RELATING TO EMPLOYMENT, PRODUCTION,

AND PURCHASING POWER 85

844384—49 3


I. The Course of Economic Adjustmentand Its Problems

The United States in 1949 is faced with the problems of a new and strik-ingly different phase of postwar economic adjustment. We are seeking toliquidate inflation without being overcome by business depression. Ourproblem is to work out a lower level of prices without a further decline ofproduction and employment, and to effect the transition to more stableconditions conducive to maximum employment and production. In thisreview of the situation at midyear, the Council of Economic Advisers isundertaking to report on the economic state of the Nation, giving full valueto the elements of basic strength but not failing to recognize the realities ofcurrent recessionary factors. We find the prospect reassuring.

THE ECONOMY IN TRANSITION

During the early postwar years the situation was dominated by shortagesof goods, tremendous* backlogs of deferred consumer demand created bythe war, an acute shortage of productive capacity in many lines, the vastaccumulation of liquid savings, and the high level of expenditures neededto meet military and foreign requirements. In earlier reports, these variousfactors were dealt with extensively. It was pointed out that they representedthe active elements in the inflationary course which the economy took afterwartime controls were removed. So long as these extraordinary factors weremaintained in combination, it was possible to continue very high employ-ment and production even without a balanced adjustment between prevail-ing prices and current incomes. But it was foreseen that, when temporarysupports slackened, full prosperity could not be preserved without a widerange of adjustments.

It was not to be expected that all of these adjustments could take placewithout any temporary slackening of employment and production; thatwould be too much to expect, given the dynamic quality of our free economy.But there was concern lest these adjustments, if too long delayed, wouldculminate in a manner which experience had taught us might carry thewhole economy downhill rapidly and far. How to limit the inflation andprevent it from running a disastrous course to economic crisis and depressionwas the central theme of previous reports.


The public and private actions which were taken were not sufficient toprevent a very substantial degree of inflation from developing. More ex-tensive measures of public control and more restrained private behaviorwould have reduced the difficulties of the inevitable adjustment. But theactions taken have been effective enough to prevent the kind of exaggeratedspeculative spree which could end only in a disastrous slump. The infla-tionary tendency has eased off gradually at one point after another, so thatwe have arrived at the present stage where general inflationary pressures?have disappeared without being followed by a collapse of the price structure.

In the first quarter of 1949 some reduction in the level of economic activitywas expected on a seasonal basis. But in addition to this seasonal slacken-ing, there was an increase in the number of points at which the catching-upprocess caused markets to weaken and some reduction of production andemployment to appear. After relatively moderate developments of thischaracter in the first quarter, intense interest centered on whether therewould be the normal seasonal improvement in the second quarter. This waswidely regarded as the test of whether or not the economy was slippingdownward.

In the second quarter of the year there was indeed some noticeable im-provement in various areas of industry, particularly residential construction,and a seasonal pick-up in agricultural employment. The level of consumerincome remained high, there was no general withdrawal from markets,and no contagious development of sharp downward price spirals. Onthe other hand, after allowance for seasonal factors, the general drift ofprices, production, and manufacturing employment was still downward.And, in particular, the market weakness extended to metals and otherproducts which at the beginning of the year were still in a tight demand-supply situation. It is no longer possible to describe the situation as oneof mixed inflationary and deflationary forces, as at the beginning of theyear. The weakening of markets has become general.

FACTORS OF UNDERLYING STRENGTH

Many factors augur well for the successful culmination of the readjust-ment process in early stability followed by renewed growth. Among themost favorable elements is that the readjustment has thus far proceededgradually without giving rise to panickp reactions. Neither the sharp reac-tion in farm commodity prices in early 1948 nor the 6 months' downslidelast fall and winter proved contagious. The management of inventorieshas been carried out in a spirit of caution rather than pessimism. Produc-tion, which on account of inventory reductions has fallen below the rateof sales in many lines, should before too long come back at least into linewith current sales if nothing occurs to create more pessimistic anticipations.Aggressive merchandising efforts have been producing favorable results inmany markets. New investment in plant and equipment was higher in


the first quarter of 1949 than a year earlier and is continuing at a highlevel. Investment plans, as reported by recent surveys, indicate no earlylet-down of serious proportions, though there is considerable uncertaintyabout the situation 6 months hence. Housing starts, after reaching alow point in the winter, have moved sharply upward, to a level only justbelow that of a year ago. Business credit is in general available in ampleamount and on favorable terms, and there is no evidence of serious bank-ing pressure on borrowers to liquidate their loans.

The strength of the economy is further fortified by many governmentalpolicies and programs. Federal, State, and local governments have nowundertaken many of the urgent public works which were deferred dur-ing the war, and expenditures for these purposes will be expanding.The payment of unemployment insurance and other social-security bene-fits has helped to sustain buying power and the demand for goods. Thefarm-price-support policy, which was so important in the winter of 1948 andagain in early 1949, gives assurance that there will not be a collapse ofrural buying such as that which occurred in 1920. The international situa-tion is responsible for an increase in combined Government expenditures forforeign aid and military preparedness, which contribute to the domesticdemand for goods and services. Through deposit insurance and other bank-ing and financial measures, the economy is protected to a high degree againstfinancial crisis.

Both reflecting and reenforcing these elements of strength is the fact thatdisposable income has been well maintained. Gross national product,national income, consumers' disposable income, and consumer expendituresare at or near the levels of a year ago. Furthermore, consumers and businessfirms have large resources of liquid assets, and there has been no threateningincrease of personal and business indebtedness such as that which in earlierperiods has created vulnerability. Private debt is low, and both home andfarm mortgages are to a large extent on an amortized basis.

Evidence of the sort presented provides a basis for belief that we mayhave the unique and fortunate experience of liquidating a major inflationwithout falling into a severe recession.

ELEMENTS OF UNCERTAINTY

In spite of these elements of strength, the situation is beset with manyuncertainties and problems. The most serious fact confronting us is thatthe decline, which has reached serious proportions in some sectors of theeconomy, has not yet been reversed.

Nonagricultural employment has declined by nearly 2 million since ayear ago, mainly because of a substantial drop in manufacturing employ-ment. Unemployment now stands at 1.7 million above a year ago.


Roughly measured, total production of goods and services in the firstsix months of 1949, measured in real terms, appears to have been about V/2percent below the last half of 1948. (See chart 1.) The drop in industrialproduction has been more striking, the index in June of this year being about13 percent below the peak level of last autumn. The sharpness of the recentdeclines in manufacturing is shown by a fall of 10 percent between Marchand June of the present year.

It is probable that the growing industry practice of paid vacations willaugment the drop in the production index during the summer months. Thesummer unemployment figures will reflect as usual the large number of per-sons who temporarily enter the labor force.

Total private investment, a key element in the picture, which reached aseasonally adjusted annual rate of more than 43 billion dollars in the fourthquarter of 1948, fell by about 25 percent to a 32-billion-dollar rate in thesecond quarter of 1949. This represents mainly a change-over from netaccumulation of inventories to net liquidation. There has not been asimilar decline in the level of investment in new construction and equipment.

Since its peak in August 1948, the wholesale price index has declined byabout 9 percent, and since the end of 1948 by about 5 percent. The con-sumer price index has declined by 3 percent since the same peak month andby 1.3 percent since the end of last year. The decline in personal incomeshas been more moderate than might have been expected, being in the firsthalf of 1949 only 2 percent below the second half of 1948.

The uneasiness and business hesitation arising from all these circum-stances will not be cleared away until actual developments introduce a newnote into the business outlook. In the meantime, business sentiment mightbe so adversely affected that the potential recuperative influences outlinedearlier would not come into play. If uncertainty about the future shouldreach the point of distinct pessimism, orders and inventories might besharply reduced, production cut back, and investment plans shelved toan extent that would initiate a further spiral of unemployment, loss ofconsumer income, and decline in consumer demand.

The weight of evidence as we see it does not support so gloomy an outlook.But we may still face an unsatisfactory alternative. While the declinemay be halted or even reversed, a satisfactory expansion might not follow.Our real need is for industrial production not only to rebound to the levelof present consumption but also for both production and consumption tocontinue to rise sufficiently to absorb a labor force which is both growingin size and increasing in productivity per man.

THE PROCESS OF PRICE AND INCOME ADJUSTMENT

Previous Economic Reports have repeatedly pointed out that price levelswhich were geared to war-created temporary factors of demand andshortages of supply could not be sustained indefinitely. The downward


CHART 1

ECONOMIC INDICATORSCHANGES FROM 2nd HALF 1948 TO 1st HALF 1949

PERCENTAGE CHANGE

+ 80

+ 60

+ 40

+ 20

- 2 0

- 4 0

- 2 0

- 4 0

- 2 0

- 4 0

- 2 0

EMPLOYMENT

PERCENTAGE CHANGE

+ 80

TOTAL

CIVILIAN AGRICULTURALEMPLOYMENT E M P L 0 Y M E N T

Y//////A

NONAGRICULTURALUNEMPLOYMENT -

PRODUCTION

PRODUCT GOODS INDUSTRIAL(1948 PRICES) AND PRODUCTION

UTILITIES

ilii! HI::::::::::::! I;;;;;;;;;:;;:BUSINESSPUBLIC „ EXPENDITURES

CONSTRUCTION FOR NEWPLANT 8

PRIVATE EQUIPMENTCONSTRUCTION*

PURCHASING POWER

NATIONAL IUUIUUUUUI

INCOME FARMINCOME (MANUFACTURING)

CORPORATEPROFITS

AFTER TAXES

PRICES *WHOLESALE

Eftfi&Sa

CONSUMERS

OTHER ALL

AND FOODS

+ 60

+ 40

+ 20

- 2 0

- 4 0

- 2 0

- 4 0

- 2 0

- 4 0

- 2 0

* * WITHOUT ALLOWANCE FOR INVENTORY VALUATION ADJUSTMENT.

SOURCE: BASED ON DATA IN APPENDIX D.


adjustments now under way are a reflection of the fact that full productioncan no longer be absorbed by the market at peak price levels.

In its initial stages, the process of downward price readjustment is almostcertain to be accompanied by some declines in production and employment.Price declines not only affect the critical relationships among various pricesand the size and the distribution of money incomes. They have, in addi-tion, two other important effects: the favorable effect of increasing thepurchasing power of the dollar and the unfavorable effect of generatinganticipations of further price declines which lead to postponement of buying,thus depressing the levels of production, employment, and incomes.

Fortunately, the process of price adjustment has been in the main orderly.Although in individual cases it has been sharp, it has not been widely char-acterized by dumping at distress prices. Its orderly character is in largepart due to the fact that it has been occurring while consumer demand,though weakened, is still at very high levels, with residential construction andinvestment in plant and equipment still very high and with governmentexpenditures still rising. In the case of agricultural prices, an additionalfactor has been the existence of support prices which, while they have notprevented sharp fluctuations in prices, have been effective in limiting theextent of the price fall.

The question arises nonetheless as to the extent to which the price cutswhich have been made thus far have helped to stimulate demand. Inthe case of wholesale prices, the reductions appear to have had littleeffect in stimulating business demand. For this there are two reasons:(a) The initial effect of price cuts when a trend is reversed is to create theexpectation of additional price cuts, thus further drying up demand, atendency which is reinforced by the fact that so many of the price cutshave been so slight in amount thus far; and (b) there is the natural desireon the part of business to reduce inventories in a period of slackening demandbefore reordering on a more normal basis even in those areas where theprice declines have been substantial. Though inventories were not out ofline with sales, business has been sensitive to the possibility of inventorylosses due to price declines. The tendency to liquidate inventories, accom-panied by cut-backs of new orders, has brought further downward pres-sure on prices and production.

In the case of consumer prices, the declines, as pointed out earlier,have been much more limited than in wholesale prices. In individualcases, where large cuts in prices have been made for sales promotion orwhere new lines at much lower prices have been introduced, consumerresponse on the whole has been relatively favorable. One of the distinctivefeatures during the war and the postwar inflation was the reduction in thevolume of and the actual disappearance of many stripped models and low-priced items of apparel and house furnishings, which had formed so largea part of the sales during prewar years. With the weakening of consumer


demand, there is a growing trend now for manufacturers to reintroduce andemphasize such low-priced items to make products available to consumers atprices which they are able to pay. The relatively favorable showing in theselines indicates that consumers are actively seeking them. Taking consumerprices as a whole, however, the declines that have taken place have not beengreat enough to encourage consumers to expand their purchases of consumergoods.

The process of price adjustment to date suggests that further price reduc-tions, made promptly to promote volume and not tardily in response tofalling sales, are essential. Where and how they are made is also important.

While increasingly active competition has already brought about partof the needed adjustment, there are many fields where the power to "admin-ister" prices is strong and where the practice of price leadership is well-entrenched. It is in these fields that the capacity of businessmen to takethe long view and to adopt policies conducive to fundamental and healthyeconomic readjustment will be put to the test. If, while other prices arefalling, they cut production to whatever degree is necessary to maintaintheir prices, they will impair the effort to maintain economic activity at thehighest possible level.

Businessmen generally will not believe that any important group ofgoods can escape from the forces which are strong enough to compel thecurrent general reduction in the price level, and they will be unsure aboutthe situation until price cuts, which they believe are inevitable, have beenmade on all important groups of goods, and the results can be observed.Competition will, sooner or later, force some kind of adjustment in theseareas, but voluntary and well-calculated price reductions now, with a viewto maintaining volume, would be highly preferable to forced and possiblymore drastic reductions later on.

A difficult problem of price adjustment is presented by the public-utilityservices, especially transportation, where competition is not directly effective.Their prices are a substantial element in the cost of production of manu-factured goods, and, instead of falling, they are still rising in response topast advances in the cost of materials and labor. Public utility commis-sions as well as company executives have the special responsibilities ofadjusting rates in relation to changed cost and demand conditions, withspecial emphasis upon the interests of the economy as a whole.

The process of widespread price readjustment is not pleasant nor easy toeffect. Weaker firms are overtaken by financial difficulties. Instances ofinefficiency in management and low productivity of labor, which tend tobe condoned in times of inflation, have to be eliminated. These are neces-sary conditions for establishing a firm economic base from which a newexpansion can be projected.

What price adjustments will prove feasible and helpful must be con-sidered in close connection with wage and other income adjustments.


Price reductions add to real income only if consumers' money incomesare not correspondingly reduced. This leads to special concern forprotecting those major sources of income upon which demand so largelyrests. The attempt to secure lower prices through wage cutting wouldclearly be damaging at a time like the present when consumption demand isproving inadequate and business slack is developing. A sound first rule toapply now is that the general level of wage rates should at least be main-tained. Beyond that, there is a strong presumption in favor of havingmoney wages move upward over the years to participate in the gains oftechnological progress and increased productivity. There are difficultiesin applying the general principle to specific situations, but this adaptationcan be worked out through sound collective bargaining. Particular con-sideration should be given to those in the lower wage brackets.

With wage negotiations now under way in a considerable number ofbasic mass-production industries, there is a possibility of an impasse.While a still very high cost of living encourages a determined attitude on thepart of labor, the uncertain business situation encourages an equally deter-mined attitude on the part of management. Should industry-wide strikesresult, they would not merely reduce the spending ability of the directlyaffected workers, but would also spread loss of production and income toother areas and thus darken the business outlook. At the present timeboth employers and workers should strive to work out adjustments whichwill help to stimulate activity, bearing in mind the need both for holdingbusiness costs down and for maintaining consumer purchasing power at highlevels.

If wage incomes are maintained, this obviously places a limit upon theextent to which prices can be adjusted downward. There would be nopurpose, and much potential damage, in an attempt to get back to somedrastically lower price level by wage cutting, since incomes are now gearedto prices substantially higher than before the war or immediately after thewar. Such an effort would involve a deep and vastly unsettling declinein wages as the accompaniment to a prolonged period of severe depression.From that, practically no one would gain; the economy would lose tragically.

Another example of the necessity of maintaining adequate buying poweris to be found in the agricultural situation. The decline in the prices offarm products, which began early last summer, was not arrested until theprices of wheat, corn, tobacco, cotton, and hogs were close to or even belowGovernment support levels. Farm income as a whole has been only mod-erately affected, because lower prices have been in part offset by high yields.But the prospects of another year of large crop production on top of presentcarry-overs indicate that the problems of supporting farm prices will beincreasingly difficult.

The vulnerability of a small-unit industry whose markets are dominatedby exchange and auction methods of sale has led to the development during


the past 20 years of governmental price supports to agriculture. It is nowwidely recognized that this institutional development has protected theeconomy against a danger of collapse in a major segment which, on pastoccasions, has tended to undermine the whole structure. While this institu-tional development needs still further improvement in the light of experi-ence, there is also need for further reduction of the prices of industrialproducts bought by farmers.

THE NEED FOR MAINTAINING THE RATE OF INVESTMENT

The contraction in business investment this year has been due mainlyto inventory liquidation, but the completion of many postwar expansionand modernization programs adds an element of uncertainty to the future ofinvestment in plant and equipment. Fortunately, only a moderate curtail-ment of investment in plant and equipment has occurred, and no severecurtailment is clearly in sight for the remainder of this year. Whether theliquidation of inventories during the first half of 1949 is followed by a moregeneral investment slack next year depends in large degree upon the extentto which investment incentives continue to appear adequate. This, inturn, depends upon the speed with which the price and inventory adjust-ments result in an upturn in production and the extent to which otherrecessionary factors are offset by stimulative developments.

The problem of investment is closely connected with the profit question.The maintenance or advance of consumer incomes during a period whenprice reductions are in process requires business to operate on narrowermargins and, for the time being, to take smaller profits. In this connection,businessmen should realize that it is safer to pursue a course of acceptingminimum profits or even temporary losses than to conduct a rear-guardaction to protect profit per unit. If, in weakening markets, downwardprice adjustments are resisted, the effect is to reduce production and employ-ment. A lower use of productive capacity and a more precarious structureof prices would be a much more serious deterrent to new investment thana situation in which basic adjustments supported a larger use of capacity.

In at least one respect, moreover, increased pressure on profit marginsprovides a stimulus to investment. With capacity in many fields now rela-tively adequate, future investment will stem in larger degree from thecompetitive urge for modernization and improvement. This motive forinvestment will be strongest in an atmosphere of active competition, wherethe maintenance of profit margins is subordinated to maintenance of com-petitive position as the primary aim of business pricing and investmentpolicies.

The problem of adequate investment cannot, however, be solved simplyby making the price adjustments which are appropriate to weakeningmarkets. These adjustments merely provide a sounder foundation fromwhich to start. The actual decision to invest depends on business judg-


ment concerning future markets and possibilities of profitable return.A farseeing realization of the prospects for development is required, andthis is peculiarly needed at the present time. If businessmen act in theconviction that employment and the use of capital resources can with ourpresent economic "know-how" be maintained at high levels with only minordips of a readjustment character, then they will go ahead with investmentplans which will be adequate for a growing economy.

The investment plans reported recently, while they show some decline, arestill at a high level. They presumably were based upon careful technologi-cal and managerial analyses of what is needed for firms to keep abreast ofadvancing techniques, of changing consumers' tastes and habits, and of thepredictable growth of population. While those plans represent the com-panies' present intentions, they could easily be curtailed if the businessoutlook should deteriorate, and such curtailment would have the effect ofaggravating the downward movement.

Among the foremost purposes of public economic policy must be that ofkeeping private investment incentives active. This it can do by providingsupports which improve the short-run and long-run business outlook andby encouraging those institutional improvements which facilitate the in-vestment process. When such measures are inadequate, Government musttake some direct responsibility for stimulating and supplementing privateactivity.

PUBLIC AND PRIVATE RESPONSIBILITIES

The task now confronting us is made more challenging because the prob-lem is not simply to prevent a further weakening of the economic situation,but instead to reverse the trend and move toward higher levels of productionand employment. We cannot be satisfied with a static economy even ifthat could be achieved. Mere retention of current levels of productionwould mean that unemployment would grow from year to year and thatwe would fail to use our known capacity to lift the living standards of ourpeople. With a growing labor force, increased productivity, new tools,and improved business efficiency, both production and employment mustexpand if we are to fulfill the conditions of a healthy economy. While thegoal for 1949 of a million more jobs and a 4-percent increase in production,set forth as our objective in January, is not now being achieved, the domesticaspirations of our people and the imperatives of world conditions alikerequire that we regain rapidly the full utilization of our material and humanresources.

It is plain from the preceding analysis of current conditions and trendsthat the direction of further developments cannot be forecast with any cer-tainty. There is a considerable possibility that present adjustments willlead, after some further decline this summer, to an increase in productionand employment. But there is still reason for real concern that the present

10


slack may take a more serious recessionary turn, or not be succeeded by anexpansion to satisfactory levels of employment and production. Conse-quently, it is necessary to approach the situation with positive and con-structive measures, rather than to assume that the recuperative factors atwork are adequate in themselves.

The Employment Act of 1946 is designed to encourage an economy offree competitive enterprise. Our businessmen, workers, farmers, and con-sumers create the Nation's wealth, and it is their decisions which will pri-marily determine whether the economy will move up or down and whetherthe Government will be required to play a larger or a smaller part. It iseminently desirable in the current situation that each of these groups baseits action upon confidence in the long-run future of the American economyand thus contribute to the most favorable outcome. In this Midyear Eco-nomic Review, we have sought to highlight those lines of private actionwhich are most needed in this task.

But while we point out the course of private action that our analysis con-vinces us would be beneficial to the economy, we are quite aware that manyindividuals feel compelled to act in accordance with what they feel is likelyto happen in the short run rather than in accordance with what they wouldlike to see happen over a more extended period. No one can quarrelwith this natural rule of self-preservation, but it indicates the need for thecultivation of a general economic environment in which all who participatein the Nation's economic affairs would be justified in following en masse acourse which few of them could run the risk of following alone.

It was with this dilemma in mind that the framers of the Employment Actalso underscored the role of Government policy to promote through all itsresources the objectives of maximum employment, production, and purchas-ing power. This involves no departure from our national traditions. It isimportant that Government agencies, both executive and legislative, re-examine and reshape policy in the light of the situations which have beendeveloping during the first half of this year and are in broad outline foresee-able as to the second half. We have learned through bitter experience thata little recession may lead into a big depression before we find the road torenewed prosperity, and this experience dictates the timely and preventiveuse of public policy to supplement the efforts of private enterprise.

In seeking to define and apply these public policies, we are not writingon a blank page. The mere fact that the Federal Government is cur-rently withdrawing well over 40 billion dollars a year from private-incomechannels and is disbursing a like or even greater amount into the marketand income stream means that the Government is already the most in-fluential single factor in the current operation of the economy. What thelegislative representatives and the executive agents of the people decide to doby way of enlarging, contracting, or redirecting these money streams and howthey shape by legislative act or administrative policy the institutions through

I I


which workers, traders, and investors conduct their private affairs maysharply affect conditions in the next few months and strongly affect themfor the longer pull.

During the years of inflation, the President rigorously held expendituresto the lowest levels consistent with meeting the most pressing of ourdomestic needs and international requirements. This was for the pur-pose and had the effect of reducing inflationary pressures. Our analysishas indicated that, with the abatement of inflationary pressures, such Gov-ernment outlays have operated in the main as a salutary sustaining force,and the slashing of such expenditures at this time would aggravate defla-tionary trends. On the other hand, an attempt to raise taxes at this timein order to produce a balanced Budget would increase the difficulties ofbusiness management in trying to effect cost and price adjustments to sus-tain volume operations in a weakening market, or would lessen the dispos-able incomes of consumers, or would have both of these consequences. Inthe presence of these opposing difficulties, the appearance of a Governmentdeficit will have to be accepted.

In addition to fiscal policy, there is essential need for promotion by Gov-ernment of conditions under which the generality of businessmen will havethe highest attainable confidence about the future course of economicdevelopment and therefore make those decisions which will contribute mostto a favorable outcome. Similarly, Government policies which supportthe maintenance and exercise of consumer purchasing power lend strengthto the business system and to general public confidence. We have also deter-mined that those unemployed in the process of economic transition, whetherthey be many or few, are entitled to such protection as our rich economycan reasonably provide, because too much of the cost of such disturbancesshould not be borne by a particular group. And, finally, without a prema-ture commitment of resources, it is wise to prepare and make ready those pro-grams of Government action which should be available to support economicexpansion if the forces of the market alone should fail to provide the neededuplift. The understanding by the community that a far-sighted programhas been adopted should in itself be a powerful factor in holding businessactivity on a high level.

Delay in implementing these principles would prove costly in terms ofeconomic waste and loss of confidence. Action in time through the coopera-tive efforts of public and private instrumentalities at all levels will demon-strate that we have learned to pursue the twin objectives of economic stabili-zation and economic welfare under our free and democratic institutions.

12


II. Economic Indicators and theNation's Economic Budget

The adjustment of the economy to a new price level, following theabatement of postwar inflationary forces, proceeded throughout the firsthalf of 1949 without developing a sharp recessionary spiral. At midyearthe process of transition is continuing in orderly manner.

T H E COURSE OF EMPLOYMENT AND PRODUCTION

EmploymentIn June of this year, total civilian employment stood at 59.6 million; in

June of last year, at 61.3 million.During the first quarter of this year, the monthly average of total civilian

employment was about 57.4 million, compared with 57.2 million duringthe first quarter of last year, an increase of about 200,000. But duringthe second quarter of this year, the monthly average was 58.7 million,a drop of approximately 700,000 from the average of 59.4 million forthe second quarter of last year. The pick-up in employment which oc-curred in the second quarter of last year has not been equaled this year.Employment, which rose by nearly 4 million from March to June 1948,rose by slightly less than 2 million from March to June 1949. (See chart2 and appendix table D-7.)

In January, 1949, the objective of maximum employment for the yearwas set at about 1 million more jobs than in 1948. Developments duringthe first half of this year have fallen short of this objective, and the trendof employment has not compared favorably with the first half of 1948.

The most significant employment development of 1949 has been thesubstantial decline in employment opportunities in nonagricultural in-dustries, particularly in manufacturing. Nonagricultural employment hasaveraged about 600,000 less during the first half of this year than duringthe first half of last year and it is currently nearly 2 million below the levelof 12 months ago. Aside from government employment, none of the majorindustry divisions during the first half of 1949 registered significant increasesin employment over the first half of 1948. Transportation and serviceindustries have shown some employment losses, but most significant forthe state of the economy has been the substantial decline in manufacturingemployment which had, by May, fallen by nearly 10 percent from the peak


CHART 2

LABOR FORCEIncreased unemployment and decreased nonagricultural em-ployment (mainly in manufacturing industries) highlightedlabor force developments in the first half of 1949.

MILLIONS OF PERSONS *80

MILLIONS OF PERSONS*80

UNEMPLOYMENT

ARMED FORCES

TOTAL LABORFORCE

60

4 0

CIVILIANEMPLOYMENT

2 0

1947

MILLIONS OF PERSONS.*

1948 1949

MILLIONS OF PERSONS1*4

3

2

1

0

UNEMPLOYMENT(magnified scale)

* i f * * 1 t i I i \

/

-

V t *

..\.k..%.:.\ \ , iJ F M A M J J A S O N D J F M A M J J A S O N O J F M A M J

1947 1948 1949* I 4 YEARS OF AGE AND OVER.

SOURCE ; DEPARTMENT OF COMMERCE.

14


level of last September. The decline in manufacturing was about equallydivided between durable and nondurable goods industries. (See appendixtable D-8.)

This downward trend in nonagricultural employment has been some-what obscured by increases in the number of persons engaged in agriculture,which have resulted in the average total volume of civilian employment forthe first half of 1949 being only slightly less than the average for the firsthalf of 1948. But it must be remembered that agricultural employmentis subject to wide fluctuations because of weather conditions and thatin periods of declining markets some industrial workers who wouldotherwise be unemployed support themselves by farm work. Both thesefactors appear to have played some part in increasing the level of farmemployment from an average of 7.6 million in the first 6 months of 1948to an average of 7.9 million in the first half of 1949. (See chart 2.)

The true employment picture is disclosed not only by the numbers em-ployed but also by the hours worked. These have declined significantly insome industries. In manufacturing as a whole, the average of weeklyhours has declined by more than 1 hour between the first half of1948 and the first half of 1949. This has resulted both from the elimi-nation of much of the overtime that was still present a year ago and fromthe institution of shortened workweeks in industries where output has beenreduced. Bureau of the Census data show that in May of this year about1.5 million persons were working a shortened workweek by reason of slackwork, material shortages, job turn-over, and similar economic factors, com-pared with 800,000 last September. In addition, about 900,000 personswith regular part-time jobs in May wanted and would have accepted full-time work, compared with about 550,000 last September.

Against the declines in employment and hours in manufacturing, therehas been some increase in Government and agriculture. Partly becauseof the long hours worked in agriculture, the total man-hours worked in thewhole economy in the first half of 1949 were practically unchanged fromthose of the first half of last year. On a seasonally adjusted basis, theywere perhaps 1 to 2 percent below those of the last half of 1948.

The difference between unemployment this year and last year cannot beshown solely by the employment figures, because there has been a growthin the labor force which would require more employment this year than lastyear to sustain maximum employment and hold unemployment to minimumpractical levels. The average total labor force during the first half of thisyear was about 1 million higher than that for the first half of 1948. Un-employment during the first 6 months of 1949 averaged almost 3.2 million,compared with 2.2 million during the first 6 months of 1948, a differenceof about 1 million which means that there has been practically no absorp-tion of this labor force increase into employment. Actually, average civilianemployment decreased by about 250,000, balancing an equivalent increase

844384—49 4 15


in the armed forces. While unemployment in 1948 decreased from 2.4 mil-lion in March to 1.8 million in May and stood at 2.2 million in June, in 1949it increased from 3.2 million in March to 3.3 million in May and stoodat 3.8 million in June.

Adult male workers have been at least as severely hit by declines inemployment opportunities as have women and boys. This has been par-ticularly noticeable since last autumn as employment declines have beenregistered in the heavy manufacturing industries.

The duration of unemployment is a significant indicator of the extentto which unemployment is primarily frictional or something more basic.By June the number of persons unemployed 7 weeks or longer had risen to1,549,000 compared with 693,000 in June 1948 and 581,000 last October.Furthermore, 262,000 had been out of work for half a year or longer, aboutdouble the number at the same time last year.

The number of persons unemployed more than a week and claimingunemployment compensation under State programs throughout the Nationearly in June was 6.2 percent of the total covered, compared with 2.4 per-cent last October. In most of New England the number amounted tomore than 10 percent in June 1949. Other States where unemploymentis relatively heavy are California, New Jersey, New York, South Carolina,and Tennessee. The number of areas in which labor supply remains tighthas diminished rapidly. Out of nearly 100 major labor market areas, 33were in tight supply last fall but by midwinter the number had fallen to8 and by early summer to 2.

The employment developments of the first 6 months of this year may besummarized by saying that the weakening in the first quarter was more thanseasonal, and that continued declines in manufacturing in the second quar-ter outweighed seasonal gains in construction and other outdoor activities.

With unemployment now in excess of 3% million we have clearly passedthe point where we can consider it primarily a "spot" or local problem.In fact, unemployment and underemployment have become widespread,both industrially and geographically, with heavy concentrations in manyindustrial centers.

It is estimated that during the past few months one out of four unem-ployed persons was not eligible for public unemployment benefits. In mostcases ineligible persons were not covered by any plan or had been unem-ployed so long that their unemployment benefit rights had been exhausted.

Production

The dollar value of all goods and services produced (the gross nationalproduct) during the first half of 1949 was about V/2 percent below thelevel of the second half of 1948. (See appendix table D-l.) Part of thisdrop was due to a decline in prices. Rough adjustments for price changessuggest that the actual output of all goods and services together dropped

16


CHART 3

INDUSTRIAL PRODUCTIONTotal industrial production has declined about 13 percent

since reaching a postwar peak last fall. Declines have

occurred in almost all major industrial groups.

PERCENT OF 1935-39 AVERAGE

225

2 0 0

175

150

125

100

TOTAL INDUSTRIAL PRODUCTION

PERCENT OF 1935-39 AVERAGE

1225

200

175

I 50

125

100I I IA S O N D I J F M A M J

1949

DECREASES SINCE POSTWAR PEAKS *

0 -30

1

r , , .

I

F

PERCENTAGE-20

1

I>rVWWWX>

KXXXXXXXX

KtfXXX

m

I

- 1 0

1

99»S55<

yxxxAX^>

1

0

55855555*

xxxxxxxxx^

V 9 W W S . W

f:•:•:•:•:;.:•:•:•:•:

° INDUSTRY GROUPS

TOTAL DURABLE GOODS

Nonferrous Metals a Products

Machinery

Iron a Steel

Lumber a Products

Stone,Clay a Glass Products

Transportation Equipment

£1 TOTAL NONDURABLE GOODS

Textiles a Products

Rubber Products

Alcoholic Beverages

Leather Products

Paper a Products

Chemicals

Petroleum a Coal Products

Printing a Publishing

Tobacco Products

Manufactured Food Products

TOTAL MINERALS

Fuels

Metals

DECREASES 8ASE0 ON PRELIMINARY JUNE FIGURES. OATES OF POSTWAR PEAKS VARY.

SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.


by something like V/2 percent. This contrasts with the goal of maximumproduction of goods and services which we estimated in January 1949 atfrom 3 to 4 percent above the output of 1948.

The most .persistent and substantial declines have been in industrial pro-duction (manufacturing and mining), which on a seasonally adjusted basisdeclined continually after last November and by June was about 13 percentbelow the high level attained last fall. This rapid fall in industrial output,in contrast with the relative stability of the nonindustrial segment of theeconomy, has been typical of past recessionary movements. For manufac-tures, the seasonally adjusted index, which in June 1948 was 198 percent ofthe 1935-39 average and reached a peak of 202 in October, declined to193 by March 1949 and to 174 by June. During the early part of thisperiod of decline, reductions were greater in the production of nondurablegoods than in the production of durable goods. In May and June, how-ever, output of nondurable goods has shown little further decline whileoutput of durables has fallen off considerably. For the minerals the sea-sonally adjusted index, which stood at 161 in November 1948, fell to 146 inMay of this year and, with coal output curtailed, declined further to 134in June. (See chart 3 and appendix table D-13.)

Situations in the major industry groups have varied. Some of the largestdeclines (20 percent or more) from postwar peaks are found in nonferrousmetals and products, textiles and textile products, rubber products, alcoholicbeverages, leather products, machinery, and lumber and products, each ofwhich has been declining for more than a year. Iron and steel productionis currently also about 20 percent below its first quarter 1949 peak, withpronounced drops during recent weeks.

On the other hand, automobile production has increased and activity inthe tobacco products, printing and publishing, and most manufacturedfood products industries has shown little or no decline.

The volume of private nonresidential construction put in place so farthis year has declined compared with the same period in 1948, but thisdecline has been virtually balanced by increases in public construction.(See appendix table D-14.) New nonfarm housing units started throughJune are about 7 percent fewer than the number started in the same periodlast year, but starts in June 1949 were about the same as in June 1948.(See chart 12, p. 38.)

This year's agricultural production for human use is likely to approachthat of 1948 unless weather becomes less favorable. Production of mostlivestock products is running slightly ahead of 1948, and an appreciableincrease in hog marketings is in prospect toward the end of the year.Another large wheat crop is being harvested. Preliminary informationindicates a total crop acreage about the same as last year's, and, except forcontinuing drought in the Northeast, weather in the major agriculturalareas so far has been generally favorable for crop development.

18


PRICES., WAGES, AND PROFITS

Prices

Prices during the first half of 1949 declined on a broad front, thus mark-ing the first general reversal in the upward trend of prices which followedWorld War II. This decline signalized the end of the inflationary processthat began in 1940, was held under control from 1942 to the middle of1946, and then rapidly accelerated with the lifting of government pricecontrols. At their August 1948 peak, wholesale prices had increased about120 percent above 1939, and about 50 percent above June 1946. Con-sumers' prices also reached their peak in August 1948, but with less extremeadvances—about 75 percent above 1939 and about 30 percent above June1946. (See chart 4.)

Wholesale prices. Compared with their previous large rise, the declinesin wholesale prices during the first half of 1949 have in the main beenmoderate and orderly, although there have been sharp declines in individualcommodities. Wholesale prices through June have declined about 9 per-cent from their postwar peak and about 5 percent from December 1948.They have now returned to the levels prevailing in August 1947, or about100 percent above the 1939 level and about 36 percent above the June1946 level. As the following table shows, the price declines from thepeaks have been unevenly distributed, with the largest declines in farmproducts and foods, chemicals, and hides and leathers. (See table 1 andchart 5.)

TABLE 1.—Changes in wholesale prices

Commodity group Date of postwarpeak

Percentage chato postwar pfrom—

June1946

Percentage changeto June 1949 *from—

Postwar Decem-ber 1948

All commodities..

Farm products.FoodsOther than farm products and foods.

Hides and leather productsTextile products ...Fuel and lighting materials.Metals and metal productsBuilding materialsChemicals and allied products...Housefurnishing goods _Miscellaneous. _

Special groups:Raw materials _SemimanufacturesManufactured articles._ _.

August 1948

January 1948August 1948

/September 1948..\November 1948..December 1947._May 1948November 1948..

+120.2 +50.4 -9.3

January 1949September 1948..January 1948.-..December 1948._January 1948

July 1948August 1948..August 1948..

+205.1+169.6+88.9

+112.8+118.2+88.2+86.0

+125.5+84.1

' +72.0+65.2

+162.5+109.4+104. 7

+42.4+68.1+45.5+66.2+39.3+56.7+56.5+57.1+45.1+34.4+25.5

+45-9+52.5+53.4

-15.4-14.1-5.6

-12.2-8.9-5.2-5.2-6.2

-16.0-2.3

-11.0

2-9.9a-7.32-8.0

-5.2

-5.0-4.2-5 .3-3.7-5.6-4.9-4.2-5.3

-10.4-2.3-7.2

»-3.6«-7.02-3.9

1 Preliminary estimates based on weekly indexes for June.2 Based on index for May; June not available.Source: Department of Labor. (See appendix table D-20.)


CHART 4

PRICE CHANGESThe fall in prices from the postwar peaks has been much greater forwholesale prices than for consumers' prices. Compared with the pre-vious large increases from 1939 and from June 1946, the declineshave been very moderate. Rents continued to advance.

-100 -50PERCENTAGE CHANGE

+ 50 +100 +150 +200 +250

WHOLESALE PRICES

ALL COMMODITIES | | i i | | l l j j | | JUNE 1946 TO POSTWAR PEAK

FARM PRODUCTS

FOODS

OTHER THANFARM PRODUCTSAND FOODS

\

1939 TO POSTWAR PEAK

POSTWAR PEAK TO JUNE 1949

CONSUMERS' PRICES

ALL ITEMS

FOOD

APPAREL

RENT

I l l l l l JUNE 1946 TO POSTWAR PEAK

POSTWAR PEAK TO MAY 1949

I 1

.939 TO POSTWAR PEAK

SOURCE: DEPARTMENT OF LABOR. POSTWAR PEAK IS MAY 1949.

20


During the first quarter of 1949, the outstanding development was a sharpdrop in farm and wholesale food prices in late January and early February,reminiscent of the drop during the same period a year earlier. Some farmcommodities, notably corn, fell substantially below their support prices, butfrom mid-February forward there occurred a sizeable recovery in the levelsof farm and food prices. Prices of fuel oils continued weak, and weaknessdeveloped in scrap metals and in lead and zinc. By the middle of thequarter, the general level of industrial prices had begun a downward driftas the prices of metals and metal products, building materials, and fuel andlighting materials turned down. The prices of textiles and other industrialgroups continued the decline which had begun in 1948.

In the second quarter, while farm and food prices fluctuated, most groupsof industrial prices declined fairly continuously. Particularly striking werethe series of declines in lead, zinc, and copper as well as in scrap metals.Lead and zinc, which had advanced more than 40 percent and 60 percent,respectively, during 1948, dropped 44 percent and 47 percent betweenMarch and June of 1949. Copper, which had advanced less than 10 per-cent during 1948, declined 32 percent from April to June 1949. The de-clines in scrap-metal prices, which began before the break in the primary

CHART 5

WHOLESALE PRICESIndustrial prices declined steadily through the first half of1949. Farm and food prices, after considerable fluctuations,ended the period with a moderate net decline.

PERCENT OF 1926 AVERAGE220

200

180

160

140

120

100

FARM PRODUCTS

\

OTHER THAN FARMPRODUCTS AND FOODS

1946

SOURCE: DEPARTMENT OF LABOR.

N D J F M A M J J A S 0 N 0

1947

PERCENT OF 1926 AVERAGE220

2 0 0

180

160

140

120

100

1948 1949

2 1


metals, were somewhat greater, scrap lead, zinc, copper, and steel decliningon the average about 50 percent. By midyear, some firming in the marketsfor lead and copper was noticeable. The base prices of steel remainedsteady, but some steel producers lowered prices on individual productswhere their prices were out of line with the general level. The cost ofsteel to consumers declined through the disappearance of gray-marketpremiums, some revisions of extras, and the end of high-cost conversion deals.

Consumers3 prices. The general course of consumers' prices during thefirst half of 1949 differed considerably from that of wholesale prices, declin-ing only slightly from the levels at the end of 1948 and only moderatelyfrom the August 1948 peak. Consumers' prices declined during the firsttwo months of 1949, continuing the fall that began in October 1948, thenrecovered slightly, and finally dropped again in May. By May 1949, con-sumers' prices were 1.3 percent below the December level and 3.0 per-cent below the August 1948 peak. This still left them about 70 percentabove the 1939 level and about 25 percent above the June 1946 level. (Seetable 2 and chart 6.)

CHART 6

CONSUMERS' PRICESConsumers' prices declined only slightly during the firsthalf of 1949, with food prices varying considerably. Rentscontinued to advance while many other retail prices declinedsteadily.

PERCENT OF 1935-39 AVERAGE PERCENT OF 1935-39 AVE

2 2 0

2 0 0

1 8 0

1 6 0

1 4 0

120

100

FOOD — * / • • •

-

i i i i i 1 i t i i t

APPAREL

s *v.^/.

, 1,111.. 11.

^ ^ —

ITEMS*

1 1 1 1 1 1 1 1 1 1 1

• • » •

—

1 1 1 1 1

1946 1947 1948 1949* ALSO INCLUOES HOUSEFURNlSHINGS, FUEL, ELECTRICITY, REFRIGERATION, AND MISCELLANEOUSGOODS ANO SERVICES NOT SHOWN OftTHIS CHART.


IRAGE220

200

180

160

140

120

100


There was no uniform pattern in the price changes of the major groupsof consumer items during the first half of 1949. Retail food prices, whichare a dominant factor, first declined, then recovered part of the decline,then weakened again, following the course of wholesale food prices. Meatprices in particular were strong in the second quarter. Apparel and house*furnishings dropped steadily during the first half of 1949, continuing thedownturn that began in late 1948; fuel, electricity, and refrigeration ad-vanced slightly during the first quarter to a new postwar peak and thenbegan to decline. The miscellaneous category rose during most of theperiod, reflecting the increase in the cost of transportation, the rise in gaso-line prices, and the continuing upward movement in such items as medicalcare and other services. Rents, which had previously increased much lessthan other prices, advanced steadily through the period.

The changes in consumers' prices during the first half of 1949 and fromtheir postwar peaks are shown in the following table:

TABLE 2.—Changes in consumers' prices

Group Date of postwarpeak

Percentage changeto postwar peakfrom

1939 June1946

Percentage change_Jto_May 1949 from

Postwar Decem-ber 1948

All items. /August 1948\September 1948.

} +75.6 +30.9 -3.0 -1 .2

FoodApparelRent.Fuel, electricity, and refrigeration.HousefurnishingsMiscellaneous

July 1948October 1948Mayl949__March 1949.October 1948April 1949..

+127.7+100.5+15.4+40.3+96.2+53.5

+48.9+28.2+11.0+25.7+27.4+20.9

- 5 . 1

-2 .5-4 .7— .1

- 1 . 3- 4 . 5+ .8- 1 . 7- 4 . 6+ .3

Source: Department of Labor. (See appendix table D-19.)

Wages and labor relations

As 1949 opened, the average real earnings of wage earners were slightlyhigher than a year earlier. This improvement had occurred, however, onlyin the closing months of 1948, when the modest decline in the cost of livingserved to increase slightly the real value of workers' money wages.

Such wage increases as occurred during the first half of 1949 had onlylimited effect on the average of wages earned, and were, at least in manu-facturing, more than offset by declines in the average length of the work-week. Consequently, average weekly money earnings fell in all manufac-turing after reaching a postwar peak of $55.01 in December 1948, andby May 1949 had declined to $53.08. In some manufacturing and otherindustries, the first half of the year registered declines in average hourlyearnings as overtime work and other premium payments were reduced oreliminated and as some wage rates were reduced. (See appendix tablesD-9,D-10, andD-11.)

The slight declines in the earnings of wage workers were approximatelybalanced during the half year by further slight declines in the cost of living,


leaving average real weekly earnings of all wage earners practically un-changed.

The first half of 1949 was marked by delays in settlement of labor con-tracts in some of the major industries; by a number of important instances,such as in the textile and apparel industries, where wage increases wereeither denied or not sought; by some scattered wage reductions; and by thesettlement of many contracts, particularly in local industries such as localpublic utilities, construction, and printing, which provided for wage in-creases and frequently additional benefits in the form of health or welfareplans, retirement programs, or additional paid holidays. Such increasesin wage rates as occurred in manufacturing industries were typically between5 and 10 cents an hour. The most important agreement of the year to datewas that between the railroads and the 16 nonoperating unions which pro-vided a retroactive 7-cent-an-hour wage increase and a reduction to startin September in the workweek from 48 to 40 hours without a reduction inpay for approximately 1,000,000 employees.

With major negotiations still unsettled in coal, rubber, and steel, as well asin automobile, electrical machinery, and most other metal-working indus-tries, the wage developments of the second half of the year will overshadowthose of the first half. In fact, the development of a trend in wage settle-ments which might have widespread effects necessarily awaits the settlementsin the dominant mass-production industries, which are still engaged innegotiation.

Labor relations during the first half year were relatively undisturbedby major work stoppages. Coal miners were out on two occasions—the"memorial" stoppage in March and the "stabilizing inactivity" stoppagein June—and the Ford company was struck for 3 weeks in May. Asidefrom these disruptions, most work stoppages during the 6 months wereessentially local in nature and generally of limited duration.

For the first 6 months of the year, the number of work stoppages wasabout 10 percent greater than in the corresponding period of 1948; idle-ness resulting from this year's stoppages, however, is estimated to be approxi-mately one-third less than the January to June period of 1948. Thisdevelopment is at least in part a reflection of the postponement of nego-tiations in the major mass-production industries to midyear, with theresult that the second half of the year may witness a more crucial testingof labor relations than the first.Profits

After attaining record levels in 1948, profits declined during the firsthalf of 1949, reflecting the reductions in prices and production. Corporateprofits, before taxes (not adjusted for inventory valuation), which wereestimated at 32.8 billion dollars in 1948 and at a peak annual rate of34.7 billion dollars in the fourth quarter of 1948, declined to an estimatedannual rate of 27.2 billion dollars during the first half of 1949, a fall of 17


percent from the level of 1948, and of 22 percent from the peak rate ofthe fourth quarter of 1948. Corporate profits after taxes were at an annualrate of 16.2 billion dollars in the first half of 1949 compared with 20.1 billiondollars in 1948 and an annual rate of 21.2 billion dollars in the fourth quar-ter of that year. (See appendix tables D-27 through D-31 for statistics oncorporate profits.)

Corporate profits after taxes in the first quarter of 1949 represented about4.8 percent on sales and about 8.5 percent on net worth, compared withabout 5.3 percent on sales and about 10.0 percent on net worth in 1948.

A much more moderate decline was registered for unincorporated busi-ness and the professions, net income before taxes (not adjusted for inventoryvaluation) declining from an estimated 25.8 billion dollars in 1948 to anannual rate of 23.9 billion dollars in the first half of 1949, a decline ofsomewhat more than 7 percent. Net farm income before taxes declinedfrom 18.2 billion dollars in 1948 to an annual rate of 16.8 billion dollars,or about 8 percent. (See appendix table D-2.)

The decline in profits from the fourth quarter levels to the first quarterof 1949 affected most manufacturing groups. The largest declines wererecorded for most nondurables and for such durable groups as electricalmachinery, fabricated metal products, and motor vehicles. Chemicals, onthe other hand, showed only a slight decline, and apparel and printingshowed increases. Compared with a year ago, the following durable groupsshowed increases: nonferrous metals, iron and steel, and motor vehicles.These differences in profit experiences reflected, of course, the unevenchanges in rates of activity, prices, and costs among various industries.

The estimated annual rate of corporate profits before taxes of 27.2billion dollars in the first half of 1949 represents a decline of about 5.6billion dollars from the 1948 levels. This difference is about equal to thechange in the replacements costs of inventories between the two periods,with the prices of goods in inventories rising in 1948 and falling in 1949.(This is discussed in more detail in appendix A-3, Business Account.)Although the two profit rates after the inventory valuation adjustment arevirtually identical for the two periods, there was, however, an importantdifference in trend, corporate profits rising quarter by quarter in 1948, butfalling quarter by quarter in the first half of 1949.

Although total profits for the first half of 1949 are considerably belowthe levels attained in 1948, this does not preclude the maintenance ofhealthy levels of return under conditions of high employment. In thepresent period of price-income adjustment the adverse effects of inven-tories acquired at high prices and of operating costs not yet fully pruned orshaken down color the picture unduly. Likewise we are now feeling theeffects of reduced operating rates in many companies or industries dueto current factors of uncertainty. As these are removed, we shall have abetter opportunity to ascertain what reductions in unit costs can be achieved


by efficient management at high operating rates and what profit marginsare needed to assure proper maintenance and expansion.

MONEY AND CREDIT

The easy credit conditions which have prevailed since the war and whichcontributed to inflationary pressure have continued and are now an impor-tant element of strength when the process of readjustment entails difficultiesin other aspects of the economy. Interest rates on business loans made bybanks have risen slightly since the latter part of 1948, but the interest yield oncorporate bonds and on Government securities has fallen. Pursuant to thepolicy of the Government to prevent excessive fluctuations in bond prices,the Federal Reserve banks have sold substantial amounts of Governmentbonds in order to moderate the rise in market price. Further easing ofcredit conditions has been brought about by a reduction in reserve require-ments, and the Board of Governors has recently announced its policy topermit a decline in interest rates.

The requirements of business firms for working capital, especially tocarry increasing inventories and customer receivables, lessened when ac-

CHART 7

BANK LOANSThe decline of 1.5 billion dollars in commercial bank loansduring the first half of 1949 represented a decline inbusiness loans at leading city banks.

MILLIONS OP DOLLARS50

4 0

3 0

2 0

MILLIONS OP DOLLARS50

ALL COMMERCIAL BANKS

WEEKLY REPORTING MEMBER BANKS, LEADING

i i I I I I I

CITIES

F M A M J J A S O N

1948END OF MONTH

^ESTIMATES BY COUNCIL OF ECONOMIC ADVISERS.

SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

M A

1949

3 0

2 0

26


cumulation of inventories was arrested. After the close of the Christmasshopping season it was possible for business concerns to pay off bank loans,and this process continued throughout the first half of this year. It affectedthe portfolios of the banks in the larger cities, whose commercial loans de-clined about 2.4 billion dollars, or 15 percent. (See chart 7 and appendixtable D-23.) Other types of loans by banks and total loans and investmentsby other financial institutions have been relatively stable.

Instalment buying adds to market demand during an inflationary move-ment but creates a condition which may aggravate a spiralling deflation.Consumers who suffer a decline in income must reduce their current buyingin order to meet their outstanding obligations on instalment contracts.Instalment credit increased steadily after the war as durable goods, espe-cially automobiles, became available, but the total amount at the end of1948 was not so high, in proportion to consumer income, as in 1940. (Seeappendix table D-22.) During the first half of 1949, instalment creditincreased only half as rapidly as in the corresponding period of 1948. Inview of the growing weakness in many consumer durable goods markets,the regulations covering instalment credit were relaxed early in Marchand again in April.

The supply of money—bank deposits and currency in the hands of thepublic—declined by 3.2 billion dollars in the first half of 1949 as a resultof the reduction in business loans, the lowering of prices, and the seasonalaccumulation of a Treasury cash surplus. Adjusted bank deposits were140.8 billion dollars on June 30, 1949, and 140.1 billion dollars a yearearlier, and currency outside banks declined from 25.6 billion dollars to 25.1billion dollars. (See appendix table D-24.) The amount of bank depos-its, adjusted, on December 31, 1948, was 143.0 billion dollars, and currencyoutside banks was 26.1 billion dollars.

T H E FLOW OF GOODS AND PURCHASING POWER

Consumer income, spending, and saving

Consumer disposable income was smaller in the first half of 1949 than inthe last half of 1948, but the decline was less than that of the nationalincome. Increased unemployment compensation payments offset in partthe decline in wages and salaries, and corporate income absorbed a consid-erable part of the impact of declining prices and sales. Personal taxes alsodeclined. Consumption expenditures fell off more than disposable income,so that personal saving was above the level of the first half of 1948 bothabsolutely and in relation to income. However, there was a substantialdrop in saving from the first to the second quarter.

Personal income. Personal income ran at the annual rate of about 214billion dollars during the half year, a drop of about 2 percent from thesecond half of 1948. In the second quarter of 1949 it was 4 percent below


CHART 8

CURRENT NET PERSONAL SAVINGCurrent net personal saving has increased substantially since

1947. Personal investment has absorbed a larger share of

the saving increase and currency and bank deposits a

smaller share.

BILLIONS OP DOLLARS BILLIONS OF DOLLARS+ 20

+ 15

+ 10

+ 5

+ 25

+ 20

+ 15

+ 10

+ 5

-5

-I 0

-15

- Total

CURRENT NET PERSONAL SAVING

1946 1947 1948 1949,1st. half ^

CURRENT NET PERSONAL SAVINGSELECTED COMPONENTS

CURRENCY AND BANK DEPOSITS"

INVESTMENT (GROSS)

i

I1

LIQUIDATION OF DEBT

+ 20

+ 1 5

+ 10

+ 5

+ 25

+ 20

+ 15

+ 1 0

+ 5

- 5

- I 0

- I 51946 1947 1948 1949, 1st. half

1/ SEASONALLY ADJUSTED, ANNUAL RATE.

£/ INCLUDES SHARES IN SAVINGS AND LOAN ASSOCIATIONS.

* SAME AS CONSUMER SAVING IN THE NATIONS ECONOMIC BUDGET. * * NO CHANGE. * * * N O T AVAILABLE.

SOURCE: DEPARTMENT OF COMMERCE AND SECURITIES AND EXCHANGE COMMISSION.

28


the fourth quarter of 1948. The sharpest relative cut-back was in propri-etors' income—farms and other unincorporated businesses and professions.In absolute amount, the largest decrease was in wages and salaries, whichaccount for nearly two-thirds of total personal income. Other incomeshares (dividends, rents, and interest) continued to increase although divi-dends turned down in the second quarter. An increase in governmenttransfer payments to individuals—mainly unemployment compensationbenefits and payments to veterans for educational purposes—partly offsetthe decreases in income from other sources. - (See appendix table D-3.)

The decrease in personal income in the first half of this year was partlycompensated for by the rather sharp drop in income tax payments, so thatdisposable personal income fell not much more than one percent from thelevel of the last half of 1948. Consumers' prices meanwhile went down 2percent over the same period, and, with a slight increase in population,real disposable income per capita remained about constant. (See appendixtables D-4 and D-5.)

Personal consumption expenditures. Throughout 1948, rising personalincome went increasingly into saving (including personal investment), withrelatively small increases in personal consumption expenditures. (See ap-pendix tables D-4 and D-6.) When income began to fall off in the firsthalf of 1949, consumption expenditure in dollar terms dropped somewhatmore than income. After the moderate price declines in the first half of1949, the level of consumption was not changed significantly.

Important changes have been taking place in the structure of consumerdemand during the postwar years. The proportion of disposable incomespent for nondurable goods has been steadily declining since early 1947.Until 1949, this accounted for most of the increase in consumer saving, sinceexpenditures for durable goods and services rose nearly in proportion toincome. In the first half of this year, however, expenditures for durablegoods fell off significantly in relation to income. Meanwhile, expendituresfor services continued to go up, and absorbed an increasing proportion ofthe declining personal income. This reflected in part continuing increasesin rents and in prices of other services.

The fall in market demand for durable goods in the first half of thisyear was an important development in consumer purchasing. For majordurables, except some makes of automobiles, market demand at currentprices no longer exceeds supply.

Personal saving. Net personal saving increased both in absolute termsand as a ratio to disposable income from mid-1947 through the first quarterof 1949, but declined substantially in the second quarter. This saving hastaken the form both of direct investment in homes, farms, and businesses,and also of accumulation of liquid assets such as securities and bank depositsand the building up of insurance reserves. Increase in personal debt isoffset against the increase in investments and liquid assets in order to arrive


at net personal saving. This offsetting item increased greatly until thefirst quarter of 1949.

Although net personal saving was increasing, net liquid saving (additionsto currency and bank deposits, securities and insurance reserves, less theincrease in consumer and mortgage debt) declined from 1946 to 1947, andfrom 1947 to 1948. Saving was going increasingly into direct personalinvestment in homes and in farm and business inventories and plant andequipment. A considerable part of the increase in personal investmentbetween 1947 and 1948, it is true, was due to an increase in farm inven-tories, which is largely involuntary. (See appendix table B-4.) Never-theless, the growth in investment, as shown in chart 8, is quite striking.Since it constitutes a direct demand for goods and services, it has been animportant factor in sustaining the economy.

The trend of liquid saving, on the other hand, has until recently beendownward. Liquid saving shows marked quarterly fluctuations, as isshown in chart 9. In the first quarter it is low because funds are withdrawnto pay taxes. In the first quarter of this year it amounted to about 100 mil-lion dollars, or less than half a billion at an annual rate. It contrastssharply, however, with the 1.2 billion-dollar reduction in liquid assets in

CHART 9

CURRENT NET LIQUID SAVING*Current net liquid saving in the last quarter of 1948 and inthe first quarter of 1949 was sightly above the level of theprevious year.

BILLIONS OF DOLLARS BILLIONS OF DOLLARS+ 4+ 4

+ 3

+ 2

+ 1

0

- 1

- 2

—

1949

1st. Qtr.

CURRENT

/

2nd. Qtr.

NET

194

/

LIQUID SAVING

/ \

^ 1 9 4 8

3rd. Qtr.

—

^ _

—

4 th. Qtr.

— + 2

— +1

- 2

EXCLUDES GOVERNMENT INSURANCE ANO ARMED FORCES LEAVE BONOS.

SOURCE: SECURITIES ANO EXCHANGE COMMISSION.


the same quarter of 1948. The largest difference was in consumer debt,where repayments exceeded new loans so that, for the first time since thewar, there was a net contraction of consumer credit for the quarter as awhole. (See appendix table B-5.) Withdrawals of currency and bankdeposits also were less than in the first quarter of last year.

Unlike direct personal investment, liquid saving does not constitute adirect demand for goods and services. To maintain total demand, theliquid savings put aside by some groups must be matched by borrowingson the part of other groups. A rising rate of saving in liquid form wouldreinforce the importance, pointed to elsewhere in this report, of maintaininga high level of business investment.

While as yet we have little evidence whether income has become moreor less concentrated in the last year or 18 months, we do know that holdingsof liquid assets are less evenly distributed throughout the population thanthey have been at any time since the end of the war. In early 1947, 24percent of families had no liquid assets, and the percentage had increasedto 29 by early 1949. The number of families owning United States savingsbonds has been declining ever since the war, and it dropped substantiallyin 1947 and in 1948. The volume of deposits in the smaller bank accountshas likewise gone down over the past year, and has gone down relativelymore than have deposits as a whole.

Business investment and finance

Total business investment in new construction, equipment and inventoryaccumulation, at a seasonally adjusted annual rate, reached an all-time peakof 43.6 billion dollars in the final quarter of 1948. This represented 16.4percent of the total national product of goods and services. In the firstquarter of 1949, this private investment, again adjusted for seasonal varia-tion, fell to 38.9 billion dollars or 15.1 percent of the gross national product,and in the second quarter to 32.4 billion dollars or 12.9 percent. Com-paring the adjusted annual rates in the fourth quarter of last year and thesecond quarter of this year, total private investment declined by 26 percentwhile the gross national product declined by only 6 percent. Most of thedecline in investment was due to a shift from net accumulation to netliquidation of inventories. (For further details, see appendix table C-l.)

This illustrates the greater relative fluctuation in investment outlays ascompared with other expenditures, a characteristic of previous swings inthe business cycle. As earlier reports have stressed, the unusually highratio of business investment to consumption in the postwar period is sig-nificant because it raises the question whether it can be permanently main-tained. As regards investment in expansion of inventories, it is quite clearthat the pace set in the first three postwar years was abnormally fast.

It is desirable to seek a more stable ratio of business investment to con-sumption. A downward swing in total investment may generate large-scale

844384—49 5 31


unemployment and business uncertainty if it is too abrupt and goes too far.Too often in the past, declines in investment have aggravated a depressiontrend as the reduction of employment and income in producers' goods andconstruction industries weakened the consumer markets on which profitablefurther investment in facilities depended. The present problem is thus tosee that business investment does not fall to levels below those needed forthe maintenance of technological progress, but provides for a healthy rateof growth. In this sector of the economy, as elsewhere, it is necessary toprevent some of the excesses of the boom from leading to excesses in theopposite direction.

Plant and equipment. The high levels of plant and equipment invest-ment in recent years have been a response to high postwar levels of demand,straining the capacity of facilities which in all but a few industries at theend of the war were still geared to prewar markets and production tech-niques. (See chart 10.) A nongovernmental survey made late in 1948indicated that the larger manufacturing concerns expanded capacity duringthe 3 years 1946-48 at an average rate of about 6 percent a year, which ismuch faster than the long-run growth trend of industrial output in the past.

In the second quarter of 1949 the dollar rate of nonfarm plant and equip-ment outlays was apparently, for the first time in the postwar period, nohigher than that of a year earlier, although still at a very high level. Thequarterly SEG-Gommerce sample survey of investment anticipations madein May showed that businessmen expected to spend 4 percent less on plantand equipment in the third quarter of 1949 than in the second quarter of1949 or the third quarter of 1948. Taking into account the decline incosts of construction and equipment, this probably represents little changein volume. Though the plant and equipment investment outlays of gasand electric utilities are still running well above levels of a year ago, thoseof most main fields of nonfarm business are expected to fall below thoselevels in the third quarter, according to this survey. (See appendix tableD-15.) Construction contracts and equipment orders indicate that plantand equipment outlays in the fourth quarter of this year will be below thoseof the fourth quarter of 1948.

Projects already scheduled are generally being followed through, but thereappears to be hesitation in scheduling new major investment commitmentsin view of uncertainties as to markets, prices, and costs. Investment planswill, of course, be influenced by the trend of changing economic conditions.

If expenditures for plant and equipment should decline below currentlevels, the decline would not reflect a general excess of productive facilitiesin relation to the needs of a maximum employment and production economy.For such an economy, present capacity in general is now no more than ade-quate and in some industries is distinctly inadequate. Continued long-runeconomic growth will call for further expansion of productive capacity,though quite possibly not at as rapid a pace as in the first postwar years.


CHART 10

NON FARM PLANT & EQUIPMENT OUTLAYS& INVENTORY ACCUMULATIONInventory accumulation gave way to liquidation in the secondquarter of 1949. Seasonally adjusted outlays for plant andequipment turned down but were still close to peak levels.

BILLIONS OF DOLLARSBILLIONS OF DOLLARS

+ 35

+ 30

+ 25

+ 20

+ 15

+ 10

+ 5

+ 35

+ 30

+ 25

+ 20

+ 15

PLANT AND EQUIPMENT O U T L A Y S ^

INVENTORY ACCUMULATION(ADJUSTED FOR REVALUATION)*

+ 10

- 1 01939 1940 1941 1942 1943 1944 1945

* S E E APPENDIX TABLE C - l .

SOURCE: DEPARTMENT OF COMMERCE.

1946 1947 1948 1949

Moreover, there is no definite ceiling on the amount that might be spentcontinuously, under favorable conditions, for modernization of facilities. Itappears, in fact, that in some important classes of capital goods, includingmotor vehicles, tractors, locomotives, railroad cars, and oil refining equip-ment, there is now a special backlog of deferred replacement needs arisingfrom the unusually high proportion of over-age units in service.

Nonfarm business inventories. By the spring of 1949, postwar replenish-ment of stocks was completed in virtually all lines, and the weakening salesand prices led businessmen in general to buy a little less than they expectedto sell. Even though inventory accumulation had been generally moderatethroughout 1948 and inventories were not out of line with current sales,book values of inventories were sufficiently high to arouse caution when theoutlook weakened. Business was sensitive to the effect of possible price de-clines on the value of such inventories, based as they were on high postwarlevels of prices.

The total book value of inventories in manufacturing and trade declinedby 2.1 billion dollars during the half year, from 54.0 billion at the end of

33


1948 to 51.9 billion at the end of June 1949. Changes in book valuesreflected in part the price decline and the normal seasonal tendency forstocks to rise in the first quarter and to decline in the second. The mostsignificant development was the shift from accumulation of nonfarm inven-tories at an annual rate of 1.4 billion dollars during the first quarter, afteradjustment for revaluation and seasonal variation, to liquidation at a simi-larly adjusted annual rate of 4.0 billion dollars in the second quarter.

TABLE 3.—Changes in manufacturing and trade inventories and indexof new orders, 1948-49

[Not adjusted for seasonal variation]

Item

1948

Firstquarter

Secondquarter

Third Fourthquarter quarter

1949

Firstquarter April M a y '

Change in book value, millions of dollars

Inventories:Manufacturing and trade

Manufacturing _Materials and goods in process.Finished goods.>_

Wholesale tradeBetail trade

+3,222+1,044

-32+1,076

+324+1,854

+104+663+176+487+84

-643

+2,331+983+683+300+290

+1,058

+318+1,003

+194+809+72

-757

+806+80

-537+617+130+596

-1,010-527-590+63

-293-190

-1,224-443-485+43

-268-513

Average quarter or month of 1939=100

New orders received by manufacturers:All manufacturing -

Durable goodsNondurable goods

253297227

254289233

254294230

246277227

222257201

195206188

202206200

1 Preliminary estimates.

NOTE.—Detail will not necessarily add to total because of rounding.

Source : Department of Commerce.

The shift of inventory position, shown in chart 10, has had an importantimpact on producers' order books and on the financial requirements of busi-ness in general, as discussed elsewhere in this review. During at least thefirst 4 or 5 months of the year, manufacturers' stocks of finished goods await-ing sale rose while their stocks of materials and goods in process (relatedto actual and prospective production) were falling off. This held goodin both durable and nondurable lines, with the accumulation of finishedstocks predominant in durables and the reduction of materials and processstocks predominant in nondurables. Attempts to cut inventories of ma-terials were offset by an unwanted piling-up of unsold goods.

The relatively cautious and well-informed inventory policies of busi-ness in general in the postwar period, as compared to previous periods ofprosperity, had moderated the potential inflationary effects of inventorybuying and left the ratio of inventories to sales still low, by prewar stand-ards, after 3 years of postwar restocking. Adjustments in individual busi-ness, and the broader adjustment to general business slackening in thefirst half of 1949, were therefore accomplished more quickly and with less

34


effect upon production rates than had been the case in most comparableearlier periods. During the second quarter, the stocks of retailers, whole-salers, and manufacturers all declined in both value and physical volume,reflecting general expectations of falling sales and prices. At the middleof the year, stocks were still a little below prewar ratios to sales, and eventhe proportion of manufacturers' stocks of finished goods to their totalstocks was likewise still conservative by prewar standards. (For furtherdetails see appendix tables D-16, D-17, and D-18.) In a number ofspecific lines of business, the liquidation of inventories had proceeded so farby the middle of 1949 that some recovery of business purchasing and evena moderate resumption of inventory accumulation in these lines could beexpected later in the year. In other lines, the outlook is for furtherliquidation.

Corporate finance. During the first half of 1949 the postwar corporatefinancing picture underwent a drastic change. In 1947 and 1948 corpora-tions had used an average of 10.5 billion dollars a year to finance inventoryaccumulation and expansion of customer financing, but during the firstsix months of this year they needed no new capital for these purposes. Onthe contrary, there was a net liquidation of these accounts to the extentof 4.8 billion dollars. Funds obtained from this liquidation, plus a con-tinued high level of profits, enabled corporations to reduce their existingindebtedness substantially, principally in the form of bank loans and accountspayable, and at the same time to finance a continued high level of plant andequipment expenditures. (See appendix table D-32.)

Though the decline in financial requirements for increase of workingcapital was abrupt, it represented a natural adjustment following a postwarperiod of restocking, and rapidly rising prices, in which the value of bothinventories and credit to customers increased much more than would berequired for long-run normal business growth. Even in 1948, as chart 11indicates, there was a marked trend toward smaller new working capitalrequirements.

During the first 6 months of 1949, internal sources of funds for new invest-ment fell about 18 percent below last year's level. Because of general main-tenance of dividend payments, retained earnings fell by a greater proportionthan total profits during this period. Depreciation reserves continuedto rise moderately; and in general corporations did not reduce their liquidassets significantly, either to finance expansion or to reduce indebtedness.

Since this decline in internal funds was much less than the declinein total financial requirements, corporations were able to reduce theirtotal liabilities by more than 3.5 billion dollars in the first half of 1949. Thisis in sharp contrast with the experience of the last several years. Corpora-tions acquired debt capital to the extent of about 12 billion dollars in 1947and about 9 billion dollars in 1948. The net reduction in total corporateliabilities was due to a very sharp decline in short-term debt, partially

35


CHART 11

CORPORATE FUNDS SOURCES AND USES

The major changes in the corporate financial picture duringthe first half of 1949 were a liquidation of nearly 5 billiondollars in inventories and customer receivables, and a largerepayment of bank and trade debt.

rlOBILLIONS OF DOLLARS

+5 +10 +15 +20

SOURCES*

RETAINED PROFITS** aDEPLETION ALLOWANCES

DEPRECIATION

INCREASE IN BANK LOANSa MORTGAGES

NET NEW ISSUES

CHANGE IN TRADE DEBT

USES

PLANT a EQUIPMENTOUTLAYS

INCREASE IN

CHANGE IN CUSTOMERRECEIVABLES

wmmm1 1

1947

#1949 lltim™W!k

A

mmmm

i

i i

* FUNDS FOR "OTHER" SOURCES NOT SHOWN HERE.* * PROFIT ESTIMATES FOR 1st HALF 1949 BY COUNCIL OF ECONOMIC ADVISERS.

* * * ANNUAL RATES, NOT ADJUSTED FOR SEASONAL VARIATION.

SOURCES: DEPARTMENT OF COMMERCE ESTIMATES BASED ON SECURITIES AND EXCHANGECOMMISSION AND OTHER FINANCIAL DATA.


offset by an increase in long-term debt. During the first half of the year,bank loans fell by about 2 billion dollars, and debts to other firms by 3.5billion dollars. On the other hand, new bond issues and mortgage loanstogether exceeded the 1948 rate during this period. This is in part a reflec-tion of the continued large demand for investment funds in the public utilityfield. Also, corporations have used proceeds from long-term loans and bondissues to retire existing short-term indebtedness. Stock issues continued tobe small in comparison with bond issues though there has been some rise incommon stock financing.

The burden of corporate debt, as measured by its relation to income,is very much smaller at the present time than in either the 1920's or the1930's. Moreover, interest rates are significantly lower, particularly incomparison with the 1920's.

In evaluating the present financial position of business firms, it should beemphasized that there are wide differences in the financial positions ofindividual concerns, and there is some evidence that in the present weaken-ing of business conditions these differences have increased. Smaller cor-porations have experienced a relatively sharper decline in profits, and theirposition with respect to liquid assets is not as favorable as that of the largercorporations.

Housing. Last year 931,000 new dwelling units for nonfarm familieswere started, according to estimates of the Department of Labor. (Seechart 12.) The total number of units added from all sources, includingconversions, remodeling, and shift from farm to nonfarm categories, wasconsiderably greater. This was a high figure, but certainly inadequate tomeet the needs of a growing population and improved standards of housing.For example, about the same number of dwelling units were started in 1925,with a much smaller population and a much smaller accumulated housingshortage. More important, the distribution of this housing among variousprice ranges has been inadequately adjusted to the income structure. Thiscreates the problem of avoiding a decline in housing construction when therelatively thin demand for high-priced housing is saturated.

In the first part of 1949 housing starts were less than a year earlier.There has been a sharp upturn since March, but even if a favorable trendcontinues it is certain that the output for 1949 as a whole will be far belowthe estimated need of well above 1 million units a year, exclusive of farmhousing. From the viewpoint of investment and employment opportuni-ties, an expanding housing program would be an important stabilizingfactor in an expanding economy. The problem is primarily one of housingcosts in relation to the income structure.

There is evidence that economies are now being made through declinesin cost of materials and narrowing of margins of contractors and subcon-tractors, and that the efficiency of the new labor force trained since thewar has increased. Partly in consequence of this, the houses started this

37


CHART 12

NEW HOUSING STARTSIn the latter part of 1948, housing starts fell below theprevious year. There has been a more than normal upswingin 1949 and housing starts in June were about equal to thenumber for June 1948.

THOUSANDS OF UNITS THOUSANDS OF UNITS125 I 1 125

100 — 100

25 - - 25

D I J F M A M


summer should sell for considerably less than the houses started last summer.Price adjustments this year fall far short of an adequate alignment of hous-ing costs to housing needs and to the incomes of purchasers. The housingproblem is still outstanding, and its solution will require redoubled efforts.

International transactions

In the final quarter of 1948, the surplus of exports over imports of goodsand services had increased for the first time since the inception of theEuropean Recovery Program, reversing more than a year of continuousdecline. In the first half of 1949, the total export surplus continuedto increase, as is shown in chart 13 and in table 4. From an annualrate of 6.1 billion dollars in the last quarter of 1948, it rose to an estimatedannual rate of 7.3 billion dollars in the second quarter of 1949, providinga moderate offset to the domestic forces making for sagging production andemployment. (The relation of the export surplus to the net foreign invest-ment component of the Nation's Economic Budget is explained in ap-pendix A.)


TABLE 4.—United States exports and imports of goods and services[Billions of dollars]

PeriodExports ofgoods andservices 1

4.115.019.816.8

17.716.915.816.8

16.517.1

Imports ofgoods andservices i

3.67.28.5

10.5

10.110.111.010.7

10.29.8

Surplus ofexports ofgoods andservices *

1936-38 average. _19461947 _1948Annual rates:

1948:First quarterSecond quarter. _Third quarterFourth quarter...

1949:First quarterSecond^quarter 2.

.57.8

11.36.3

7.66.84.86.1

6.37.3

i Includes income on investments.> Estimates based on incomplete data.

Source:]Department of Commerce.

The increase in the first part of this year took the form of an expansionin the surplus of exports of goods rather than of services, resulting both fromincreased exports and reduced imports. The increase of merchandise ex-ports resulted almost entirely from increased shipments to Asia, chiefly toJapan, and to western Europe, the areas receiving increased government aid.In 1948 the European Recovery Program had tended to support rather thanincrease our shipments to the participating countries. In the first quarterof 1949, exports to participating countries for the first time approached thelevel that had existed prior to the establishment of the program. Totalexports of goods in the first 4 months were almost as high as in the cor-responding period of 1948, with agricultural exports 17 percent higher invalue and nonagricultural exports about 7 percent lower. (Additionalinformation concerning merchandise exports is provided in appendix tablesD-35, D-36, and D-37.)

As inflationary pressures have eased, government export controls havebeen adapted to the changing situation. Until the latter part of 1948, themajor emphasis in the administration of export controls was the protectionof the supply needs of the domestic economy. At the beginning of 1949there were still 422 commodities on the list of items under export quotas.Easing of the supply situation has made possible the removal of licensecontrol on exports of many goods and also the removal and liberalization ofquotas on exports of many others that remained under license. Despitethe imposition of license control on some additional items for security rea-sons, the total number of commodities under license was reduced to 326 bythe end of June.

The dollar value of merchandise imports in the first half of the year fellalmost 10 percent below that of the rate prevailing in the last quarter of1948, apparently reflecting mainly the movement of domestic business ac-

39


CHART 13

EXPORTS AND IMPORTSOF GOODS AND SERVICES

The export surplus continued to rise in the first half of1949, primarily because of declining imports.

BILLIONS OF DOLLARSANNUAL RATES25

20

15

10

EXPORTS OF GOODSAND SERVICES*

EXPORT SURPLUS :•:•:•:•:•:•:

BILLIONS OF DOLLARSANNUAL RATES

25

20

15

10

IMPORTS OF GOODS AND SERVICES *

1 2 3 4 1 2 3 4 1 2 3

Practically all of the export surplus was financed by ERPor other Government aid.

15

10

EXPORT SURPLUS

15

10

* INCLUDES INCOME ON INVESTMENTS.* * ESTIMATE BASED ON INCOMPLETE DATA.

SOURCE: DEPARTMENT OF COMMERCE.

4 O


tivity. The physical quantity of imports, after having moved upwardirregularly but definitely for more than a year, declined, although foreignability to supply exports continued to increase. In physical terms, the levelof imports in the first 4 months of 1949 was only 20 percent above prewarlevels, although the increase in domestic production and purchasing powerabove prewar was vastly greater and United States tariffs were lower. Thislevel of imports is considerably lower than interwar relations between im-ports and domestic production would lead one to expect, the differencebeing concentrated in Europe and Asia. (Additional information relatingto merchandise imports is shown in appendix tables D-38, D-39, and D-40.)

Until recently it was possible to regard the relatively low quantity of im-ports as a temporary result of the war-caused reduction in foreign capacityto export, which left the United States demand for foreign goods unsatisfied.If this were still the cause, a fall in domestic business activity might notreduce imports correspondingly. The decline of imports in the first halfof this year, however, indicates that the United States market demand forforeign goods was being substantially met at the going prices and exchangerates. This situation suggests that a continuation of recent declines indomestic demand and production would, with present relations betweenforeign and American prices and present exchange rates, result quitepromptly in a further decline in the dollar value of our imports.

Under prevailing conditions of depleted dollar reserves there is a closerelation between our foreign purchases and sales. A reduction in the dollarsavailable to foreign countries, therefore, would tend to reduce domesticeconomic activity unless it were offset by changes in the amount of ourforeign aid.

Foreign aid is not as great as it had been during the spring of 1947,when it reached a rate of 8 billion dollars a year and accounted for nearlytwo-thirds of the total export surplus of goods and services. But, as table 5shows, payments made under it are now almost equal to the total exportsurplus. (More detailed information relating to the balance of internationalpayments and foreign aid is shown in appendix tables D-33 and D-34.)

Payments under the European Recovery Program are probably about attheir peak. The effects of the program upon the domestic economy arefelt before payments are made, however. Taking into account the probablecourse of procurement to be authorized under the European RecoveryProgram, it appears likely that the most intense effect of existing foreignaid programs upon the domestic economy has already been felt. Proposedmilitary aid under the North Atlantic Pact is not expected to have anysignificant economic impact during 1949.

Government aid and United States imports of goods and services haverecently been virtually the entire source of dollars that foreign countrieshave employed currently for purchasing American goods and services. Withforeign aid about at its peak and with imports showing a tendency to slacken,


no further impetus to domestic employment, production, and purchasingpower appears likely to come from exports during the rest of this year.

TABLE 5.—Financing the surplus of goods and services supplied to foreign countries[Billions of dollars]

Period

1936-38 average194619471948Annual rates:

1948:First quarterSecond quarter-Third quarterFourth quarter...

1949:First quarterSecond quarter 8_

Surplus ofexports ofgoods andservices»

.57.8

11.36.3

7.66.84.86.1

6.37.3

Means of financing

Govern-ment aid

(net) 2

5.15.74.7

5.13.44.16.0

6.37.0

Liquidationof foreigngold and

dollar assets(net) a

.82.04.5

1.42.2.6

.4

Othermeans offinancing

(net) *

.71.1

1.11.2.1.9

.1- . 1

1 Includes income on investments.2 Includes grants and loans, but excludes subscriptions to the International Bank andthe International Monetary Fund. For detail, see appendix table D-34.3 Includes net sales of gold to the United States and net liquidation of foreign dollarassets, including long-term investments. Excludes liquidation of assets held by theInternational Bank and the International Monetary Fund.4 Includes movement of United States private capital, gifts, net dollar disbursements bythe International Bank and the International Monetary Fund, and allowance for errors andomissions.

8 Estimates based on incomplete data.Source : Department of Commerce.

Government transactions

In the main, trends in the receipts and expenditure programs of theFederal, State, and local governments during the first 6 months of this yearhave conformed to the picture set forth in the Council's review in January1949. In some cases, however, these trends have been sharper thananticipated.

As has been customary in previous reports, all figures in this section areon the so-called consolidated cash basis, rather than on the conventionalbudget basis. They reflect the volume of current cash transactions betweengovernment and the public, and hence are useful in judging the immediateeconomic impacts of government programs. (A detailed description of theconcepts used is given in "The Budget of the United States, 1950," p. 1375.)

Cash payments by the Federal Government. Table 6 shows the volumeof Federal cash payments to the public, classified according to function, for1948 and the first half of 1949. In terms of seasonally adjusted annualrates, the total volume of payments increased by 5.6 billion dollars, or 15percent, over 1948 during the first 6 months of this year.

42


TABLE 6.—Federal cash payments to the public, by function[Billions of dollars, annual rates, seasonally adjusted]

Function

1948

January-June

July-December

1949,January

June i

National defenseInternational affairs and finance _._ __Veterans' services and benefitsSocial welfare, health, and security _ _.Agriculture and agricultural resourcesInterest on the public debt _Other _ - - ,Deduction from Federal employees salaries for retirementClearing account for outstanding checks and telegraphic

reports

11.15.27.02.2.4

3.95.3

- . 2

+.2

11.26.16.92.52.33.86.6

- . 3

- . 5

Total payments to the public. 35.1 38.7

12.77.37.42.62.94.06.1

— 2

42.5

i Estimates based on incomplete data.

^NOTE.—Detail will not necessarily add to totals because of rounding.

Sources: See appendix A.

Three major areas of increase were already clear by the second half of1948, namely, purchases for defense, international affairs and finance,and Federal construction programs for resource conservation and develop-ment, highways, and other purposes. In addition, the continuing declinein farm prices had led to an increase in net outlays for price support opera-tions; and there had been a significant increase in payments from unem-ployment insurance trust funds and in veterans' benefit payments. Pay-ment of National Service Life Insurance dividends is likely to start aroundthe beginning of next year.

It was feared at the start of the year that certain of these expandingprograms, especially in the defense and construction fields, might aggra-vate supply shortages and upward price trends which were then evident.These difficulties have not developed, and it is clear that Federal pro-grams have provided substantial support to an otherwise weakening mar-ket situation. The increases in net outlays for farm price supports, and inunemployment compensation payments were, of course, an automatic re-sponse to farm price declines and rising unemployment. They have par-tially offset the loss in farm and consumer incomes that would otherwisehave taken place.

Cash payments by State and local governments. As nearly as can bedetermined from incomplete information, payments by State and localgovernments still are following the upward trend which was described inthe Council's review in January 1949. Total payments for the first 6months of this year are estimated to have run at an annual rate of about16.5 billion dollars or about 10 percent above the total for the year 1948,and about 6 percent above the second half of 1948.

As has been true since the end of the war, public construction continuesto be the most sharply rising component in the activities of State and local

43


governments. State-local construction in 1948 was 46 percent above the1947 level, and for the first half of this year it was 42 percent above thesame period of 1948. (See appendix table D-14.) While some prog*ress is thus being made in providing for schools, hospitals, streets and high-ways and other community facilities, the requirements yet to be met arestill very large. In terms of physical volume, construction activity ofState and local governments is still well below its 1930 level. The disap-pearance of inflationary pressures has been accompanied by an appreciabledrop in construction costs. State and local governments should make surethat their planning is sufficiently advanced to allow them to take fulladvantage of this situation.

Staffs are still being expanded and salaries increased in line with post-war developments. The total number of employees of State and localgovernments was 3,994,000 in January 1949, as compared with 3,859,000a year before—an increase of 3}4 percent. An additional but temporaryinfluence which has reenforced the upward trend of government cashpayments has been the granting of veterans' bonuses by a number ofStates.

Federal cash receipts from the public: the cash deficit. Federal cashreceipts from the public for the first half of 1949, on a seasonally adjustedannual rate basis, were about 41.6 billion dollars, only slightly below thelevel of the last 6 months of 1948, although about 5.8 billion dollars belowthe first part of 1948 and 3.4 billion below the total for 1948 as a whole.This reflects not only the fact that the drop in business activity during thefirst 6 months of this year was moderate, but also the fact that receipts froma number of taxes during these 6 months reflected the activity levels of thepreceding year. Recent declines in corporate profits, for example, will notbe fully reflected in Federal cash receipts until the first half of 1950.

The increase in expenditures and decline in receipts resulted in a cashdeficit of about 1 billion dollars (annual rate, seasonally adjusted basis) forthe first half of this year as compared with a cash surplus of about 3.9 bil-lion for the last half of 1948, and of 8.1 billion for 1948 as a whole. Underexisting legislation, the continued upward trend in payments will result ina larger deficit for the year 1949, even with the maintenance of fairly highlevels of business activity.

State and local cash receipts. On the basis of incomplete information,it is estimated that the cash receipts of State and local governments duringthe first half of 1949 were equivalent to an annual rate of about 15.1 billiondollars, or about 4 percent above the receipts of 14.5 billion for the year1948. If business activity remains fairly high, the new taxes and increasedrates which have been enacted since the war—including a number of newmunicipal nonproperty taxes recently permitted by State enabling legisla-tion—may be expected to produce a continued upward trend in receipts.The increasing reliance of State and local governments on sales and income

44


taxes, as compared with the relatively inflexible property tax, however, willtend to mean a greater responsiveness in State and local tax revenues tochanges in general business conditions.

The estimates of the annual rates of cash payments and receipts for thefirst half of 1949 indicate a cash deficit of about 1.4 billion dollars, as com-pared with the figure of nearly 600 million for the year 1948. The consid-erable increase in borrowing which has been required to meet large capitaloutlays and veterans' bonuses has brought the gross debt of State and localgovernments close to its all-time peak in 1940. Despite this increase in debt,however, their fiscal position is considerably stronger than in the prewarperiod or in 1929. The total of State and local gross debt in 1948 was about1.4 times tax collections (excluding unemployment compensation taxes),whereas the ratio for both 1939 and 1929 was about 2.6. State and localgovernments are therefore in a better position to borrow in order to main-tain needed programs.

Table 7 summarizes the aggregate cash transactions of all levels ofgovernment—Federal, State, and local combined. Aggregate cash pay-ments during the first half of 1949 are estimated to have been equivalent toa seasonally adjusted annual rate of about 59.0 billion dollars, or more than13 percent above the 1948 level of 52.0 billion. The annual rate of cashreceipts by all levels of government during this period is estimated at 56.7billion dollars, or about 5 percent below the 1948 level. On the basis of sea-sonally adjusted annual rates, this is equivalent to a deficit in aggregate gov-ernment transactions of about 2.4 billion dollars, as compared with asurplus of about 7.5 billion dollars for 1948 as a whole, and of about 3.0

TABLE 7.—Government cash receipts from and payments to the public

(Billions of dollars, annual rates, seasonally adjusted]

Receipt or payment

Cash receipts:Federal...State and local

Total cash receipts

Cash payments:Federal __ _State and local

Total cash payments _ __.

Surplus (+) or deficit ( - ) :FederalState and local

Total surplus (+) or deficit ( - )

1948

January-June

47.414.3

61.7

35.114.5

49.6

+12.3- . 2

+12.1

July-December

42.614.7

57.3

38.715.6

54.3

+3.9- . 9

+3.0

1949,January-

June l

41.615.1

56.7

42.516.5

59.0

- 1 . 0- 1 . 4

- 2 . 4

* Estimates based on incomplete data.

NOTE.—Detail will not necessarily add to totals because of rounding.

Source: See appendix A.

45


billion for the second half of 1948. The prospect is that this deficit willincrease substantially in the second half of this year, even if business activitycontinues at high levels.

Summary: The Nation's Economic Budget

For the first time since the immediate postwar readjustment period, theNation's Economic Budget reflects a decline in business activity extendingover 6 months or more. As shown in the accompanying table, the Budgettotal, or gross national product, declined about 9 billion dollars (seasonallyadjusted annual rate) from the second half of 1948 to the first halfof 1949. This is a decline of about 3 / 2 percent in current dollars, or aboutV/z percent after allowing for declining prices. (See chart 14.) The per-centage drop from the fourth quarter of last year to the second quarter ofthis year was about 6 percent in terms of current prices.

The most conspicuous facts reflected in the Nation's Economic Budgetare that business investment shows a sharp reduction from the second halfof 1948 to the first half of 1949 while consumer income and expendituresdropped only moderately. The decline in business investment represents

CHART 14

THE NATION'S ECONOMIC BUDGETCHANGES FROM 2nd HALF 1948 TO 1st HALF 1949

Increases in Government cash payments failed to offsetdeclines in private expenditures, especially investment, inthe first half of this year.

25PERCENT OF 1948, 2nd half

50 75 100 125

GROSS NATIONAL PRODUCT ( to ta l ) *

CONSUMERS

BUSINESS

GOVERNMENT (FEDERAL, STATE, LOCAL)

ALSO INCLUDES INTERNATIONAL ACCOUNT, NOT SHOWN IN CHART.

INCLUDES RETAINED EARNINGS, ADDITIONS TO RESERVES, AND INVENTORY VALUATION ADJUSTMENT.

SOURCE: BASED ON DATA IN APPENDIX A.


largely a reversal in the trend of inventory accumulation, which in turnlargely accounts for the present decline in economic activity. This in-ventory adjustment has resulted from a basic discrepancy between thetrend of increasing production and relatively stable consumer demand overthe last few years. With the progressive fulfillment of extraordinary back-log demands over the past 6 to 12 months a slack developed first in thedemand at prevailing prices for certain luxury items and subsequently forone category after another of consumers' and producers' goods. With pro-duction increasing more than consumption, inventories were built up stead-ily. As consumers failed to absorb promptly the growing flow of goods,

TABLE 8.—The Nation's economic budget

[Billions of dollars, annual rates, seasonally adjusted]

Economic group

CONSUMERS

Disposable income relating to current pro-duction

Transfers and interest

Disposable personal incomeExpenditures for goods and servicesPersonal saving (+)._ _ -._

BUSINESS

Retained business receipts3

Gross private domestic investment ._

Excess of investment (—).__

INTERNATIONAL

Net cash Government loan transfers abroadNet foreign investment _

Excess of receipts (+) or investment (—)

GOVERNMENT (FEDERAL, STATE, AND LOCAL)

Tax payments or liabilities _Adjustment to cash basis

Cash receipts from the publicPurchases of goods and servicesOorernment transfers _

Cash payments to the publicExcess of receipts (+) or payments (—)

ADJUSTMENTS

For receipts relating to gross nationalproduct

Other adjustments

Total: Gross national product

1948, second half

Receipts

183.114.7

197.8

25.5

.9

58.9-1.6

57. S

—4.6+1.8

262.7

Expendi-tures

180.6

42.8

.5

38.815.5

54. s

262.7

Excess ordeficit

+17.2

-17. S

+.4

+S.0

-4 .6+1.8

0

1949, first half 1

Receipts

179.615.8

195.4

26.2

1.1

54.52.2

66.7

- 6 . 5-1.7

253.9

Expendi-tures

175.8

35.7

.6

41.817.2

59.0

253.9

Excess ordeficit

+19.6

-9.5

+.5

-2.4

-6.5-1.7

0

1 Estimates based on incomplete data.2 Includes adjustment for inventory valuation. See appendix table A-3.

NOTE.—Items relating to current production of goods and services are shown in romantype. Transfer payments and receipts and subtotals including them are in italics; theseitems are not included in the gross national product.

Details will not necessarily add to totals because of rounding.

Source : See appendix A.

844384—49- 47


swelling inventories induced business to cut down its orders and to stop andrecently to reverse inventory accumulation.

The sharp cut in industrial production and the inventory decline hadonly a moderate effect on consumer income and expenditures for the firsthalf of 1949 as a whole. A noticeable decline started, however, in thesecond quarter. The relatively high level of the first half of the year hasbeen due to the fact that, while employment in manufacturing and miningindustries was curtailed, employment in most other activities was maintainedor increased (after allowance for seasonal variation). Thus productiveactivity, employment, and personal incomes derived from productive em-ployment decreased much less in the aggregate than in manufacturingindustries alone. As a strengthening factor, there was a rise in expend-itures by Federal, State, and local governments, as indicated in the Nation'sEconomic Budget table. Some of these additional government expendituresare reflected directly in an increase in transfer incomes derived from risingunemployment compensation and veterans' allowances, in part offsettingthe decline in incomes derived from current production. For the first half

CHART 15

SAVING & ABSORPTION OF SAVINGConsumer saving remained high in the first half of 1949, but theexcess of business investment declined and the Governmentsurplus was changed into a deficit.

-20BILLIONS OF DOLLARS, SEASONALLY ADJUSTED ANNUAL RATES

-10 0 +10 + 20

ABSORPTION OF SAVING (-) |

1948, SECOND HALF

SAVING (+)

CONSUMERS*-*

INTERNATIONAL-*•

GOVERNMENT—*(FEDERAL, STATE.LOCAL)

«-BUSINESS

)

1949, FIRST HALFCONSUMERS -

INTERNATIONAL -

-BUSINESS

•-GOVERNMENT(FEDERAL,STATE, LOCAL)

"PERSONAL SAVING .

SOURCE: THE NATION'S ECONOMIC BUDGET (Appendix A ) .

48


of the year, government ran a deficit, as compared with a surplus in thepreceding period. (See chart 15.)

Some conditions are now favorable for a reversal of the downward trendin industrial production and employment. Inventories in several lines ofbusiness already have been brought into a better relationship with sales,there are indications that prices are being brought into a better relationshipwith disposable incomes, and it is probable that orders have in many casesbeen cut below the level justified by current markets. The expected furtherrise in government expenditures will continue to give support to demand.

There are other factors, however, which could produce a further weaken-ing. For example, present surveys indicate that business expendituresand investments in plant and equipment in the third and fourth quarter of1949 may run increasingly below the levels attained in 1948. Thus, ifcounteracting forces are not marshalled, it is at least possible that theinventory and price adjustment may develop into an investment recessionlater this year or next year.

Despite the significance of investment, it should be stressed that thedownturn commenced with a failure of consumer markets to expand in linewith total output. The maintenance and stimulation of consumer expendi-tures are essential both for maintaining total expenditure commensuratewith our increasing productive capacity under maximum employment, andfor providing a substantial basis for a sustainable high level of investmentitself.

49


Appendix AThe Nation's Economic Budget

TablesPage

A-l . The Nation's Economic Budget, 1948-49 54A-2. Consumer account, 1948-49 56A-3. Business account, 1948^9 58A-4. International account, 1948-49 59A-5. Government account (Federal, State and local), 1948-49 . . . 61A-6. Federal cash receipts from the public other than borrowing,

calendar years 1948-49 63A-7. Federal cash payments to the public by function, calendar

years 1948 and 1949 63A-8. Federal cash payments to the public by type of recipient,

calendar years 1947 and 1948 64NOTE.—In these tables, revised estimates for net foreign investment and

construction have been substituted for those included in the national incomeand product accounts published by the Department of Commerce in theSurvey of Current Business, February 1949 and May 1949. The revisedconstruction series and estimates of the international transactions of theUnited States have been published separately in recent issues of the Survey.

All components of national income and product are subject to revisionin the forthcoming (July 1949) Survey of Current Business.


The Nation's Economic BudgetThe Nation's Economic Budget (table A-l) is designed to show signifi-

cant changes in the economy as they are indicated by the receipts and expen-ditures of consumers, business, and government, and by net transactions withthe rest of the world. The net additions to and absorption of saving ofthese groups are also shown in the Budget. The total of the Nation's Eco-nomic Budget measures the gross national product, i. e., total current pro-duction of goods and services. On the receipts side the total consists ofwages and salaries, retained business earnings, and other incomes relatingto current production. On the expenditure side it consists of purchasesof current output.

Besides expenditures for current output and the corresponding receiptsthere are transfers of purchasing power, such as government payments tosocial security beneficiaries and veterans' pensions. While governmentaltransfers do not arise from current production, as a source of purchasingpower they are not different from any of the payments that do. They con-tribute to spendable income and have an important bearing on productionand prices. Omitting transfers from government accounts would under-state the size and impact of government budgets on incomes and expendi-tures of consumers and business and on foreign transactions. They aretherefore included in the Nation's Economic Budget.

In order to distinguish between expenditure for goods and services andtransfers the former are shown in roman type and the latter in italics inthe Nation's Economic Budget. Only the former are added to arrive atthe total, which equals the gross national product or expenditure.

53


TABLE A-l.—The Nation's economic budget, 7948-49


Economic group

CONSUMERS

1 Disposable income relating to current production...2 Government transfers and net interest payments

3 Disposable personal income __4 Expenditures for goods and services6 Personal savings (+)

BUSINESS

6 Retained business receipts from current production7 Gross private domestic investment8 Excess of receipts (+) or investment ( )

INTERNATIONAL

9 Government loan transfers abroad _10 Net foreign investment.. _ _11 Excess of rceeipts (+) or investment ( )

GOVERNMENT (Federal, State, and local)

12 Tax payments or liabilities13 Adjustment to cash basis

14 Cash receipts from the public15 Purchases of goods and services16 Government transfers

17 Cash vavments to the vublic18 Excess of receivts (+) or Davments (—}

ADJUSTMENTS

19 For receipts relating to gross national product20 Other adjustments

21 Gross national product. . . . . . .

1948, first half

Receipts

171.815. 8

187.1

22.0

1.7

58.48.8

61.7

—3.1-2.7

249.3

Expendi-tures

174.9

38.9

3.3

32.217.4

49.6

249.3

Excess ofreceipts(+)ordeficit(-)

+12.2

-16.9

-1.6

+12.1

—S.I-2.7

0

1948, second half

Receipts

183.114.7

197.8

25.5

.9

58.9-1.6

67. S

- 4 . 6+1.S

262.7

Expendi-tures

180.6

42.8

38.815.5

64.3

262.7

Excess ofreceipts(+)ordeficit(-)

+17.2

-17.8

+•4

+8.0

-4.6+1-8

0

1949, first half 1

Receipts

179.616.8 \

195.4

26.2

1.1

54.52.2

66.7

- 6 . 5-1.7

253.9

Expendi-tures

175.8

35.7

41.817.2

69.0

253.9

Excess^ofreceipts(+)ordeficit(-)

+19.6

-9.6

+•*

-2.4

-6.6-1.7

0


i Estimates based on incomplete data.NOTE.—Items relating to current production of goods and services are shown in roman type. Transfer payments and receipts and subtotals including them are in italics; these

items are not included in the gross national product.Detail will not necessarily add to totals because of rounding.

Explanatory notes:Lines 1-5: See table A-2, Consumer Account.Lines 6-8: See table A-3, Business Account.Lines 9-11: See table A-4, International Account.Lines 12-18: See table A-5, Government Account.Line 19: Includes the statistical discrepancy and the current surplus of Government enterprises less Government subsidies. The statistical discrepancy represents the differ-

ence between two independent estimates of gross national product, one arrived at by estimating the income received from current output and one by estimating expenditures for thisoutput. The adjustment for statistical discrepancy brings the estimate on the receipts side into agreement with that on the expenditure side of the accounts.

Line 20: An adjustment is necessary to balance the sum of the transfers on the receipts side with that on the payments side because of the fact that somewhat different bases formeasurement have been used in estimating various components of receipts and payments. Most of the discrepancies reduce to a difference in timing between the recording of a receiptand a payment. A correction must be made for the difference between the time a tax liability is incurred or payments are made and the time a receipt is recorded by the Gov-ernment. Payment is sometimes made for goods produced in a previous period; interest payments on a cash basis differ from the accrued interest shown under consumer receipts, etc.

Sources: This table is based on the national income and product statistics of the Department of Commerce, with revised figures for net foreign investment and construction,and on Federal cash receipts from and payments to the public estimated by the Bureau of the Budget.


Since the transfers of the government augment the receipts of consumers,business, or foreign countries, the transfer payments and receipts of transfersare conceptually equal. The small discrepancy between the totals is due tostatistical problems of measurement.

Tables A-2 through A-5 contain the accounts of consumers, business,international transactions, and the government. They indicate how thereceipts and expenditures in each account have been derived, and presentsome break-down of the totals where this is feasible.

Consumer account

Table A-2 shows personal income and its principal components, personaltaxes, and a break-down of expenditures by important classifications. Con-sumer income includes the net profits of unincorporated businesses andfarms (proprietors' income). Expenditures for construction of dwellingsare considered as a business investment and hence are not included in con-sumption expenditure. Personal saving is a residual figure derived bydeducting consumption expenditures from disposable income.

TABLE A-2.—Consumer account, 1948-49


Receipts or expenditures

1948

Firsthalf

Secondhalf

1949,firsthalf*

Receipts:Personal income arising from current production of goods and services:

Wage and salary receipts and other labor incomeProprietors' and rental incomeDividends and private interest _Business transfer payments _

Total _Plus:

Net interest paid by GovernmentOther Government transfer payments

Equals: Total personal incomeLess: Personal tax and nontax payments

Equals: Disposable personal income

Expenditures:Durable goods.._Nondurable goods ._Services. _

Total expenditures

Personal saving *

i Estimates based on Incomplete data.* See also appendix tables B-4, D-4, and D-5.NOTE.—Detail will not necessarily add to totals because of rounding.

130.050.812.2

138.651.013.1

193.6

4.510.8

208.921.8

203.3

4.610.1

218.020.1

187.1 197.8

22.0102.650.3

23.3104.752.6

174.9 180.6

12.2 17.2

135.248.813.6

198.2

4.611.2

214.018.6

195.4

21.8100.253.8

175.8

19.6


Business accountThe business account is shown in table A-3. Business income includes

undistributed corporate profits and the adjustment for corporate inventoryvaluation, plus capital consumption allowances for both corporate and non-corporate business. Because there is no information on noncorporateentrepreneurial withdrawals, it is impossible to include an estimate ofretained earnings for unincorporated business in business income. Theyare therefore included in personal income. On the other hand, investmentincludes not only the investment of all business, but also the investment ofindividuals in homes. Business income and expenditures are therefore notentirely comparable.

The inventory valuation adjustment is included as a business receipt in theNation's Economic Budget tables to make the profits estimates consistentwith the national income and product basis of accounting. Business income,both corporate and noncorporate, is reckoned by business inclusive ofchanges in the book value of inventory. The gross national output or prod-uct for any period includes only the real change in inventories (net changein physical volume valued at current prices). An adjustment is thereforemade in proprietors' and in corporate net income so that the income basisof accounting agrees with the product basis. (In table 2, proprietors'income is included net of the inventory valuation adjustment.) This doesnot necessarily imply that business receipts should be valued after inventoryvaluation adjustment for purposes other than national income accounting.

The point has been frequently made that the book profits overstate thereal position of business during the period when reported book profits arerising, since part of the profits have to be devoted to replacing inventoriesat higher prices and hence are not available to finance the expansion ofplant and equipment or for other purposes. Thus, during 1948, when re-ported corporate book profits were estimated at 32.8 billion dollars beforetaxes, it was also estimated that the additional costs of replacing inventoriesof corporations amounted to 3 billion dollars, thus yielding profits beforetaxes, adjusted for the higher cost of replacing inventories, of 29.8 billiondollars.

With the reversal of the price movement during the first half of 1949,the replacement costs of inventories have fallen. Since business in themain calculates the value of its inventories on the basis of cost or marketprice, whichever is lower, the effect of declining prices is to cause bookprofits to fall as inventories are marked down to the lower prices. Inaddition, of course, profits may fall because production or dollar marginsare reduced. During the first half of 1949, corporate book profits areestimated to have been running at an annual rate of 27.2 billion dollarsbefore taxes, but this is after an estimated write-down of inventories at anannual rate of 2.7 billion dollars. If the estimated corporate book profitsof 27.2 billion dollars (annual rate) is adjusted for the write-down in inven-

57


tories, the estimated corporate profits before taxes for the first half of 1949would then amount to 29.8 billion dollars (annual rate) which is the sameas the level of profits before taxes in 1948, similarly adjusted for the changein the replacement costs of inventories.

TABLE A-3.—Business account, 1948-49[Billions of dollars, annual rates, seasonally adjusted]

Receipts or investment

Receipts:Corporate profits before taxLess:

Corporate profits tax liabilities . . . . _ _ . .. . . .Dividends

Equals: Corporate undivided profitsPlus:

Capital consumption allowancesCorporate inventory valuation adjustment *

Equals: Retained earnings and additions to reserves. _

Private domestic gross investment:Construction4 _ _ .

Residential nonfarmNonresidential - - _ _ - -

Producers' durable equipmentChange in inventories _ _ _

Nonfarm only._ _ _.-

Total gross private domestic investment

Excess of receipts (+) or investment (—) - - -

1948

Firsthalf

31.3

12.27.4

11.8

14.2- 3 . 9

22.0

15.37.28.1

20.43.23.0

38.9

-16.9

Secondhalf

34.4

13.48.0

13.0

14.7- 2 . 2

25.5

16.17.38.9

22.34.43.1

42.8

-17.3

1949,firsthalf*

« 27.2

M0.98.28.1

15.4+2.7

26.2

14.66.38.2

21.8- . 6

- 1 . 3

35.7

- 9 . 5

1 Estimate based on incomplete data.8 Estimates by the Council of Economic Advisers.3 This adjustment is required because corporate income is reckoned inclusive of changes in the book value

of inventory, as is customary in business accounting, whereas only the value of the real change in inventoriesis counted as current output in the gross national product.

* Incorporates new construction series not previously included in the gross national product.NOTE.—Detail will not necessarily add to totals because of rounding.Source: Based on estimates of the Department of Commerce.

International account

The international account is designed to summarize our economic rela-tions with the rest of the world. Net foreign investment shows the increaseor decrease in claims against other countries and international institutions.The figure is arrived at by taking the surplus of exports over imports ofgoods and services, including investment income, and deducting net gifts,i. e., "unilateral transfers," since such gifts do not increase our claims on therest of the world. Errors and omissions in the balance of payments statis-tics are treated as being entirely in the capital account. Government giftsor unilateral transfers are now an important magnitude because of theEuropean Recovery Program. Since Government and private gifts are notincluded in net foreign investment, they are included in Government andpersonal expenditures for goods and services in arriving at total nationaloutlays.

Government gifts comprise only part of Government aid to foreign coun-tries. Loans to foreign governments and subscriptions to international


organizations such as the International Bank for Reconstruction and De-velopment and the International Monetary Fund are also important. Loansand subscriptions constitute a transfer of purchasing power. At the timethey are paid in cash these loans and investments are included in Govern-ment transfer payments and as a receipt in the international account of theNation's Economic Budget. The difference between these receipts and netforeign investment, or "excess of investment" represents the portion of thesurplus of exports of goods and services that is financed by other meansthan Government cash loans or subscriptions and Government and privategifts.

From the standpoint of the break-down of the Government cash paymentsinto expenditures for goods and services and transfers, there is an anomalyin considering unilateral transfers or gifts as a goods and services expendi-ture rather than a transfer item. This treatment is necessary, however,because the national income accounts include net foreign investment (thesurplus of exports less gifts) rather than the total surplus of exports as acomponent item. If such gifts were not included in goods and servicesexpenditures, the national output would be understated.

Differences of concept exist between government grants and loans asincluded in the balance of payments accounts and in the goverment cashaccounts (table A-8). Surplus property credits and other aid which doesnot involve an outlay of cash by the Federal Government are not includedin cash accounts. Long-term loans and subscriptions to the InternationalMonetary Fund and the International Bank for Reconstruction and Devel-opment are included in the cash accounts when the cash is transferred.

TABLE A-4.—International account, 1948-49

[Billions of dollars, annual rates]

Receipts or investment

Receipts:Net long-term loans8 .Payments to the International Monetary Fund and International Bank 3___

Total Government loan investments abroad

Investment:Excess of exports of goods and services over imports _ - .Less:

Net unilateral transfers:Government4 _Private __

Equals: Net foreign investment _

Excess of receipts (+) or investment (—) _._ __ _ _

1948

Firsthalf

1.1.61

1.7|

7.2

3.2.7

3.3

- 1 . 6

Secondhalf

0.8.1

.9

5.4

4.3.6

.5

+.4

1949,firsthalfi

1.0.1

* 1.1

6.8

5.5.6

.6

+.5

i Estimates based on incomplete data.a Includes only cash withdrawals under loan agreements. Does not include noncash transactions such as

lend-lease and surplus property credits as shown in appendix table D-34.3 Cash payments on subscriptions.* Does not agree with unilateral aid included in table A-8 which is on a Daily Treasury Statement basis.

For a further break-down of Government unilateral transfers, see table D-34.

59


Government account

The government account reconciles cash receipts from and payments tothe public with the government revenue and expenditure estimates whichhave been incorporated in the national income and product accounts. Italso provides a break-down of government receipts and expenditures intoFederal and State and local components.1

There are several important differences between the concept of gov-ernment revenue appropriate to the national income accounts and cashreceipts from the public. In the national income accounts corporationincome taxes are included on a liability basis and personal taxes on a pay-ments basis. In the case of corporations, there is a lag of about a yearbetween the time a liability is incurred and the time payment is made tothe government. The difference between corporation tax liabilities andgovernment receipts for the same period may be substantial. Receipts ofincome taxes also lag somewhat behind payments under the withholdingsystem.

In addition, cash receipts include some items of revenue which are notderived from current production and are consequently not included in theincome and product accounts; for example, receipts from the sale of surplusproperty and various items of miscellaneous receipts. (See table A-6.)Noncash items, such as government contributions to retirement funds foremployees, are excluded. These are intragovernmental transfers ratherthan cash payments to the public.

Similarly, cash payments are more inclusive than the concept of gov-ernment expenditures appropriate to the income and product calculations.Government loans ordinarily do not appear anywhere in government ex-penditures in the income and product series. An important exception iscrop-secured loans made by the Commodity Credit Corporation. The com-modities which secure these loans are considered as an addition to govern-ment inventory or capital formation, and the loan as an expenditure forgoods and services.

1 Cash receipts from the public and payments to the public represent a consolidation ofthe United States budget with the Government trust and corporation accounts. All intra-governmental or noncash transactions have been eliminated. A detailed explanation ofthis consolidation may be found in the Budget of the United States Government for thefiscal year 1950, p. 1375. A summary of the derivation of cash receipts and payments frombudgetary receipts and expenditures for calendar year 1948 was presented in the Council'sAnnual Review of January 1949, pp. 89 and 90.

6o


TABLE A-5.—Government account {Federal, State, and local), 1948-49[Billions of dollars, annual rates, seasonally adjusted]

Receipt or expenditure

Tax and nontax payments or liabilities: *FederalState and local _

Total

Adjustment to cash basis:Noncash receipts s__ __Excess of cash receipts over tax liabilities or payments •

Cash receipts from the public

Expenditures:Purchases of goods and services:

Federal*State and local

Total _

Other Government payments:Transfers to individuals.. __Cash interest payments to the public • _ _.Loans to foreign governments and subscriptions to the International

Bank and International Monetary Fund 1 _ _All other s

Total

Cash payments to the public _

Cash surplus (+) or deficit (—)

ADDENDUMFederal:

Cash receipts -Cash payments _.

Surplus (+) or deficit (—)

State and local:Cash receiptsCash payments

Surplus (+) or deficit ( - )

1948

Firsthalf

43.514.9

58.4

—1 1+4.4

61.7

17.914.3

32.2

10.84.4

1.7.5

17.4

49.6

+12.1

47.435.1

+12.3

14.314.5

- . 2

Secondhalf

43 615.3

58.9

—1 1- . 5

57.3

23.015.9

38.8

10 14.4

.9

.1

15.5

54.3

+3.0

42.638.7

+3.9

14.715.6

— 9

1949,firsthalf*

38 715.8

54.5

—1 2+3.4

56.7

24.817.0

41.8

11 24.5

1.1.4

17.2

59.0

-2.4

41.642.5

-1.0

15.116.5

-1.4

* Estimates based on incomplete data.2 Personal and indirect business tax payments and corporation tax liabilities. Includes contributions for

social insurance.» Consists of deductions from Government employees' salaries for retirement funds, and Government

contributions to retirement funds, national service life and Government life insurance funds.* Includes excess of corporation tax receipts over liabilities and excess of personal tax receipts over pay-

ments. Cash receipts also include some items of miscellaneous internal revenue not included in tax andnontax payments, such as receipts from sales of surplus property.

« Sales of surplus property of 1 billion dollars in the first half of 1948, and 200 billion dollars in the other2 periods have been deducted from gross expenditures.

* Does not agree with net interest paid by government (table A-2) which is on an accrual basis.7 See table A-4, International Account.8 Includes all other cash payments less non-cash payments for goods and services. Other cash payments

include net payments by Government corporations (except capital formation), net prepayments, and theexcess of checks paid over checks issued. Non-cash purchases of goods and services include deductionsfrom Government employees' salaries for retirement funds and the Government contribution to such funds.


6i


In the cash payments series, the receipts of the Government corporationshave been offset against the expenditures and only the net expenditurehas been included. The same treatment is accorded the Post Office becauseof the quasi-commercial character of its operations.2 Grants-in-aid to Stateand local governments are included as a cash payment of the FederalGovernment and are not counted as either a cash receipt or payment of theStates and localities.

The major revenue sources of the Federal Government are shown intable A-6, Cash Receipts from the Public and Federal Gash Surplus. Ex-penditures according to major governmental function are shown in tableA-7, Gash Payments to the Public. In table A-8, Federal expenditureshave been classified by recipient, whether individuals, businesses, foreigncountries, or States and localities. In most cases the term "recipient"means the initial recipient. However, this classification has not been fol-lowed in the case of a considerable part of the expenditure for internationalaid. All such expenditures have here been classed under international aid,even though some relate to direct purchases by the United States Govern-ment from business, in order to show a comprehensive total for the aidprograms. The same procedure has been followed in the case of State andlocal aid programs, although the amounts of direct procurement by theFederal Government are not considerable.

A similar line of reasoning was applied to the postal deficit, the entireamount of which has been included as a subsidy to business. Wages andsalaries paid to postal employees consequently do not appear under wagesand salaries in table A-8, but have been netted against postal receipts toarrive at the total deficit.

2 The national income and product accounts include the purchases of Government enter-prises (in general the Post Office and Government corporations) on capital account, theirnet interest payments and their operating surplus or deficit. See table III, ConsolidatedGovernment Receipts and Expenditures Account, in the Survey of Current Business,July 1949.

62


TABLE A—6.—Federal cash receipts from the public other than borrowings calendaryears 1948 and 1949


Cash receipts from

Federal cash receipts from the public:Direct taxes on individuals2 _~Direct taxes on corporationsEmployment taxesExcises and customs _Surplus property receiptsDeposits by States, unemployment insuranceVeterans' life insurance premiums _Other .._ _Less: refunds of receipts

Total Federal cash receipts from the public.

1948

Firsthalf

22.811.12.47.81.8.9.4

2.42.2

47.4

Secondhalf

19.011.12.58.0.5

1.1.4

2.12.2

42.6

1949,firsthalf *

18.212.02.57.9.7.9.4

1.52.9

41.6

* Estimates based on incomplete data.2 Includes personal income taxes and estate and gift taxes.NOTE.—Detail will not necessarily add to totals because of rounding.

TABLE A-7.—Federal cash payments to the public by function, calendar years 1948and 1949


Function

1948

Firsthalf

11.15.27.02.2.4

3.95.3

- . 2+.235.1

Secondhalf

11.26.16.92.52.33.86.6

- . 3- . 5

38.7

1949,firsthain

National defenseInternational affairs and finance __.Veterans' services and benefitsSocial welfare, health, and securityAgriculture and agricultural resourcesInterest on the public debtOther _Deduction from Federal employees' salaries for retirementClearing account for outstanding checks and telegraphic reports.

Total cash payments to the public.-

12.77.37.42.62.94.06.1

- . 3- . 2

42.5

* Estimates based on incomplete data.


844384—49 7


TABLE A-8.—Federal cash payments to the public by type of recipient, calendar years1947 and 1948[Billions of dollars]

Cash payments to— 1947 1948

Individuals:Salaries and wages of Federal personnel:

Military iCivilian 2

Allowances to dependents of military personnel _.Readjustment benefits, pensions, and other payments to veterans 3_.Social insurance beneficiariesLoans to home owners * _.Interest*Others

3.04.6.3

7.01.8

- . 2.8.4

Total- 17.7

Business and farmers:Subsidies and other payments to farmersLoans and investments. __Interest5 . .Subsidy arising from postal deficit8

Home-mortgage purchases from financial institutions .Other '

.12.9.2.1

7.4

Total- 11.5

International:Loans and grants, European Recovery Program 10

Other loans to foreign governments (net withdrawals)10

Other grants10

Payments to the International Monetary Fund and International Bank io_.Other"

3.61.91.8.1

Total- 7.4

State and local governments and public agencies:Grants-in-aidInterest..Loans

1.6.1

Total

Clearing account for outstanding checks and telegraphic reports.

Total Federal cash payments to the public

1.8

.2

38.6

2.74.6.3

5.81.9

—.11.1.7

17.0

1.1I

2.8.5.2

7.7

12.3

1.8.5

2.8.4.6

6.0

1.8.1

1.9

- . 2

37.0

1 Excluding terminal leave pay.2 Civilian wages and salaries exclude pay-roll deductions for Federal employees' retirement, and post

office wages and salaries.3 Also includes cash terminal leave pay to enlisted personnel, cashing of terminal leave bonds, mustering-

out pay, and payment of Government and national service life insurance benefits to veterans' beneficiaries.* Repayments exceed loans.«Includes interest payments on the Federal debt, and a small amount of interest on tax refunds. Interest

figures in this table are not comparable with those in table A-2. Interest in that table includes payments tounincorporated business as well as to individuals and is adjusted for certain interaccount transfers.

« Consists of cash trust account payments other than payment of social insurance benefits and Governmentand national service life insurance. Such items as repayments of personal funds of military and civilianpersonnel located overseas which were deposited in trust accounts, and payments of earnings to prisonersof war are included.

7 Less than 50 million dollars.s In cash payments to the public, the Post Office is included on a net basis. The whole deficit is shown

here as a subsidy, and is included in the business category because the deficit arises primarily out of thesubsidy to mail other than first class.

» Equals the excess of Federal cash payments to the public over the sum of all other payments shown inthis table. Includes mainly Government purchases of goods and services from business.

10 Estimates are on a Daily Treasury Statement basis, which does not necessarily agree with U. S. Govern-ment aid to foreign countries as shown in appendix tables D-33 and D-34.

11 Includes other Government expenditures abroad and payments for membership in international organi-zations other than listed above.

64


Appendix BThe Distribution of Income and Liquid Assets, and

Personal Saving

TablesPage

B-l. Share of total money income received by each tenth of the Na-tion's spending units when ranked by size of income, 1947and 1948 67

B-2. Distribution of spending units by income levels, before and afterFederal income tax, 1947 and 1948 69

B-3. Distribution of spending units, by size of liquid asset holdings,in early 1947, 1948, and 1949 69

B-4. Components of net personal saving, 1946, 1947, and 1948 . . . 70B-5. Components of net personal liquid saving, 1947, 1948, and

1949 71


The Distribution of Income and Liquid Assets, andPersonal Saving

The distribution of income and liquid assets

According to information recently made available in the 1949 Surveyof Consumer Finances,1 there was no increase in the concentration ofincome between 1947 and 1948. In fact, the data indicate some decreasein the degree of concentration, but in view of various considerations men-tioned below, this conclusion cannot be accepted unreservedly.

TABLE B-l.—Share of total money income received by each tenth of the Nation'sspending units when ranked by size of income, 1947 and 1948 *

Spending units ranked from lowestto highest income

Lowest tenthSecond tenthThird tenth __. _Fourth tenthFifth tenth. .Sixth tenthSeventh tenthEighth tenthNinth tenth -..Highest tenth

Percent of total money incomebefore Federal income tax

By tenths

1947

134679

10121533

1948

135679

10121532

Cumulative

1947

148

142130405267

100

1948

149

152231415368

100

Percent of total money incomeafter Federal income tax 2

By tenths

1947

135689

10121531

1948

145789

10121529

Cumulative

1947

149

152332425469

100

1948

15

10172534445671

100

1 Income data for 1948 are based on interviews in January-March 1949; for 1947 on interviews in January-March 1948.

2 Estimated liability on Federal income tax, excluding tax on capital gains. The tax liability was notobtained directly from interviews or from tax returns, but from comprehensive data on family compositionand income obtained in connection with the Consumer Finances Surveys. Certain improvements intechniques of estimating the tax liability were made in the 1949 Survey so that the results should be some-what more reliable than in 1948. (See the Federal Reserve Bulletin, July and August 1949.)

Source: Based on data from the 1948 and 1949 Surveys of Consumer Finances, conducted for the Boardof Governors of the Federal Reserve System by the Survey Research Center of the University of Michigan.The methods used in the survey are described in the Federal Reserve Bulletin, June 1949, p . 642.

Table B-l shows the percent of total money income received by eachtenth of the Nation's spending units,2 both before and after liabilities on theFederal income tax have been deducted. In 1947 the poorest three-tenthsof the Nation's spending units received 8 percent of total income, while in1948 the percentage of income received by these groups increased slightly.In contrast, the upper two-tenths received 48 and 47 percent in the 2 years,respectively. Of course, the upper groups do not necessarily consist of thesame families in the 2 years. The effect of the Federal income tax was to

1 This survey is conducted annually for the Board of Governors of the Federal ReserveSystem by the Survey Research Center of the University of Michigan. Through thecourtesy of the Federal Reserve and the Survey Research Center these materials were madeavailable prior to their publication in the Federal Reserve Bulletin. For a more extendedtreatment of the results of the survey, see the Federal Reserve Bulletin, June 1949 andforthcoming issues.

2 A spending unit consists of related persons who live together and pool their incomesfor their major items of expense.

67


make income after tax, or disposable income, somewhat more equallydistributed than income before tax.

The liabilities for Federal income tax by income class were determined byestimating the liability for the families included in the Survey of ConsumerFinances.3 They were not obtained by direct interview or from tax returns,but are based on extensive data regarding family composition and income.Since certain improvements in estimating techniques were made between1948 and 1949, we are probably not justified in inferring from the statisticsthat the effect of the tax in reducing income inequality was greater in 1948than in 1947.

The Revenue Act of 1948 did make certain changes in the tax structurewhich affect the after-tax distribution. The provision that income of mar-ried couples may be split for tax purposes operates mainly to the advantageof those with incomes in the high surtax brackets. Its effect would not beappreciable for families below the top decile. As shown in table B-2,only 5 percent of the spending units have incomes before tax of $7,500 orover, and it is above this level that the split-income provision has a markedeffect in reducing tax liabilities. Thus the provision may not change theentire after-tax income distribution greatly because of the small proportionof families affected. The Revenue Act of 1948 also raised exemptions,thus freeing many families of moderate income from paying taxes at all.Rate reductions were also somewhat greater in the low tax brackets.

In addition to changes in the revenue structure, the upward movementin income between 1947 and 1948 must be considered. Other things beingequal, a general increase in incomes increases the effectiveness of a givenprogressive tax structure in increasing the equality of income after tax, sincemore people become subject to tax and many are taxed at higher rates.The relation between the distribution of income before and after tax is thusaffected by changes in the tax structure and by changing levels of income.

Too much emphasis should not be given to small year-to-year shifts in thepercent of income received by any decile. More data on the distribution ofincome in the postwar period will become available when the Statistics ofIncome for 1947 and 1948 are published by the Bureau of Internal Revenue.Further, the existing body of data provided by the Census Bureau and otherGovernment agencies,4 as well as the Survey of Consumer Finances, has notyet been fully analyzed.5

3 Samples of 3,000 to 3,500 spending units have been used in the consumer finance sur-veys. Owing to the dispersion of higher incomes it cannot be expected that a completelyrepresentative sample of the highest dollar incomes was obtainable, and it is possible thatthe amount of income received by the highest tenth is underestimated.

For the sampling and interview methods employed in the Survey, see the Federal ReserveBulletin, June 1949, p. 642.

4 See Current Population Reports, Series P-601, No. 1 and No. 5, U. S. Census Bureau.Also publications by the Bureau of Labor Statistics, Bureau of Agricultural Economics,and the Bureau of Human Nutrition and Home Economics.

5 For an analysis of trends in income distribution before and after Federal income taxfrom the prewar to the postwar period, see the Annual Economic Review by the Councilof Economic Advisers, January 1949, appendix B.

68


TABLE B-2.—Distribution of spending units by income levels, before and afterFederal income tax x, 1947 and 1948

Money income class

Percent of spending units

1947

Before tax Aftertax Before tax After tax

1948

Under $1,000$1,000 to $1,999$2,000 to $2,999$3,000 to $3,999$4,000 to $4,999$5,000 to $7,499$7,500 and over

All income levels.

1221251911

100 100 100 100

1 See table B-l, footnote 2.

Source: See table B-l .

Table B-2 shows the distribution of spending units by income level. Asprices and incomes rose from 1946 to 1947, and from 1947 to 1948, spendingunits moved upward along the income scale. However, even in 1948 athird of the spending units had income after taxes of less than $2,000. It isto be noted that the distribution contains many single-person spending unitswhose income is on the average lower than that of families of two or more,as well as retired families, and persons whose income is temporarily low forone reason or another.6 Total income may also be more ample than moneyincome; for example, farm families receive considerable income in the formof home-produced fuel and food.

TABLE B-3.—Distribution of spending units, by size of liquid asset holdings, in early1947, 1948, and 1949

None$1 to $499$500 to $1,999 -$2,000 to $4,999$5,000 and over.

All units

Amount of liquid assets lPercent of spending units

1947

242628148

100

1948

272724139

100

1949

292822129

100

i Includes all types of U. S. Government bonds, checking accounts, and savings accounts in banks,postal savings, and shares in savings and loan associations, and in credit unions.

Source: See table B-l.

A high concentration of saving and of asset holdings is one consequenceof an unequal distribution of income. The proportion of spending unitswith no liquid assets has increased from 24 percent in 1947 to 29 percent

6 An investigation of the characteristics of persons and families in the lower incomegroups is contemplated by the Joint Committee on the Economic Report. The results ofthis survey should aid in appraising the social, economic, and individual causes of low-income status.


in 1949 as is shown in table B-3. Due to the increase in the number ofspending units over the period, however, the absolute number of spendingunits with liquid assets has increased.

TABLE B-4.—Components of net personal saving, 1946, 1947, and 1948

[Billions of dollars]

Components

Liquid saving:Currency and bank deposits (net c h a n g e ) 2 . . _ .Private insurance and pension reserves (net change)Securities (net change) 3

"Liquidation of mnrtg^gp dp.bt <Liquidation of consumer debt f i _

Total liquid saving« __ _ ._

Liquidation of business debt:NonfarmFarm

Total liquidation of business debt

Investment:Nonfarm residences'Inventories:

Nonfarm _Farm .

Nonfarm plant and equipmentFarm construction and equipment __

Total gross investmentDepreciation

Total net investment

Statistical discrepancy8

Total personal saving _

1946

+11.8+3.4+.1

-3.2-3.3

+8.8

—2.4- . 2

-2 .6

+3.5

+Li+4.2+2.6

+11.1-5.3

+5.8- . 2

+11.8

1947

+4.1+3.7+3.7- 4 . 1- 3 . 3

+4.1

-3.4- . 8

-4.2

+5.4+.6

- 2 . 1+4.8+3.7

+12.4-5.9

+6.5+2.4'+8.8

19481

0+3.5+4.4—4.1- 2 . 5

+1.3

—.8—.6

- 1 . 4

+7.1+.7+.8

+4.5+4.9

+18.0-6.9

+11.1

+3.9

+14.9

* Preliminary.2 Includes saving and loan shares.3 Excludes armed forces terminal leave bonds.< Mortgage debt to institutions on l-to-4 family nonfarm dwellings.« Largely attributable to purchases of automobiles and other durable consumer goods, although includes

some debt arising from purchases of consumption goods.fi Differs from the Securities and Exchange Commission's concept of liquid saving in that it excludes

additions to Government life insurance or pension reserves and armed forces leave bonds.7 Construction of l-to-4 family nonfarm dwellings, less net acquisition of properties by nonindividuals,

plus construction of nonprofit institutions.* The statistical discrepancy arises out of the attempt to reconcile liquid saving, as estimated by the

Securities and Exchange Commission, with personal saving as estimated by the Department of Commerce.Statistical errors and omissions may be in liquid saving, personal saving, or in tne other items. However,the data underlying liquid saving are considered somewhat more satisfactory than the items of reconcili-ation. Personal saving is a residual figure obtained by deducting personal consumption expenditures fromdisposable personal income.

NOTE.—Data presented here include recently revised series of the Securities and Exchange Commission.Revisions of the Department of Commerce data will appear in the Survey of Current Business, July 1949.

Source: Securities and Exchange Commission and Department of Commerce.

Personal savingTables B-4 and B-5 present the data underlying text Charts 8 and 9.

The most conspicuous characteristic of table B-4 is the postwar growth ingross personal investment, and the decline in current saving in liquid form.Increases in expenditures for nonfarm residences and for farm constructionand equipment were substantial between 1947 and 1948. The increase ininventory accumulation is mainly due to farms, where a liquidation of over2 billion dollars in 1947 was followed by almost a billion of net accumulationin 1948. The accretion of farm inventories is included in both farm income

70


and saving, although such accumulation may not reflect a voluntary decisionto save so much as a bountiful harvest. The accumulation of nonfarminventories may also be involuntary at times and was probably so in sometypes of business toward the end of 1948. The increase in real personalinvestment in 1948, while striking, is somewhat less so when the inventorysituation is taken into account.

As table B-5 shows, there was a small amount of liquid saving in the firstquarter of 1949. In interpreting the significance of the quarterly changesin liquid saving it must be kept in mind that the figures are not adjusted forseasonal variations. Thus, it is comparisons with the same period in theprevious year that are significant. Liquid saving declined steadily through-out 1947 and the first half of 1948. This trend was interrupted in themiddle of 1948, and in the final quarter of 1948 and the first quarter of1949 net liquid saving rose above the levels of the previous year.

Net liquid saving in the first quarter is always low because currency andbank deposits are drawn down to pay taxes. The change in net liquidsaving from the first quarter of 1948 to the first quarter of 1949 is dueprincipally to the fact that in the first quarter of 1949 for the first time repay-ments on consumer debt exceeded consumer borrowing. This largelyreflects changes in the demand for consumer durables. Withdrawals ofcurrency and bank deposits were also less than last year, and the rate ofincrease in mortgage debt was less.

TABLE B-5.—Components of net personal liquid saving, 1947,1948, and 1949

[Billions of dollars,"not adjusted'for seasonal]variation]

Component

Currency and bank deposits *_Private insurance and pension re-

serves...Securities:

United States savings bondsOther U. S. Government *__State and local governmentCorporate and other

Liquidation of mortgage debt 3

Liquidation of consumer debt a

Total liquid saving'8

Net change

1947

Firstquar-

ter

-1 .6

+.9+.8+.7+.1

±:i- . 20

Secondquar-

ter

+1.0+.9+.3

0+.1+.1

- 1 . 1- . 9

+.6

Thirdquar-

ter

+2.6+.9+.3

$\

- . 5

+2.7

Fourthquar-

ter

+2.0+1.0+.3- . 3(*)+.6

—1.1- 1 . 8

+.8

1948

Firstquar-

ter

- 3 . 9

+.9+.8

t.l±:S- . 1

- 1 . 2

Secondquar-

ter

+.5+.9+.2- . 5+.2+.6

- 1 . 2- . 8

+.1

Thirdquar-

ter

+1.8+.8

is+.i+.3

- 1 . 1- . 5

+1.6

Fourthquar-

ter

+1.6+1.0+.3

i\- 1 . 0—l.i+1.0

1949first

quar-ter*

- 3 . 3

+.9+.7+.6+.4+.4—.5

+1.0

+.1

i Estimates based on incomplete data.* See footnote on corresponding item in table B-l .» Excludes armed forces terminal leave bonds.« Less than 50 million dollars,«Differs from the Securities and Exchange Commission's concept of liquid saving in that it excludes

additions to Government life insurance or pension reserves and armed forces leave bonds.


Source: Securities and Exchange Commission.


Appendix CSurveys of Actual and Intended Business Investment

ContentsPage

Business investment as measured in the Nation's Economic Budget . 75Nonfarm plant and equipment outlays 77Equipment orders and construction contracts and permits as measures

of prospective business investment activity 79Business investment surveys by the McGraw-Hill Publishing Co . . 80Business surveys by Dun & Bradstreet 81Other private investment surveys 83

Tables

C-l. Gross private domestic investment and its components,1929-49 76

G-2. Manufacturers' sales and new and unfilled orders in selecteddurable-goods industries, January-May 1948 and 1949 . . 79

C-3. Outlays for new plant and equipment, 1948-53, as estimated byMcGraw-Hill 1948 survey 81

C-4. Percentage changes in actual and expected plant and equip-ment outlays and inventories, 1948—49, as reported in Dun& Bradstreet May survey 82

73


Appendix CSurveys of Actual and Intended Business Investment

The crucial importance of business investment outlays in maintainingeconomic activity and promoting increased productivity is generally recog-nized. In recent years private and public statistical agencies have devotedincreasing effort to determining how much business investment is currentlybeing made and how much is planned.

Several fairly comprehensive reports on investment activity are nowestablished on a periodic basis, in addition to numerous one-time one-indus-try and local surveys. A variety of approaches is justifiable in a field wheremeasurement is at best rough and uncertain and the survey techniques arestill in process of experimental development.

The consensus of recent investment surveys has already been indicatedin those sections of the review referring to business investment. The totallevel of such investment in the first half of 1949 showed a considerabledecline from the 1948 levels, primarily on account of a cessation of inventorygrowth. Plant and equipment outlays exceeded those of the first half of1948. Businessmen reported plans for a somewhat lower rate of outlaysin the second half of 1949 than in the second half of 1948, and informationon their advance commitments in the form of plant construction contractsand equipment orders lends credence to that outlook. The size and dura-tion of the decline, however, are still quite uncertain. There is a substantial"shelf" of contemplated private investment for the next several years,though plans so far ahead cannot be regarded as either firm or complete.

In interpreting investment survey results it is important to be aware ofthe special features of the various approaches and their relations to oneanother. This appendix describes the nature and scope of some of the majorcomprehensive periodic surveys.

Business investment as measured in the Nation's Economic Budget

The expenditures side of the business account of the Nation's EconomicBudget (see appendix table A-3) constitutes that part of the gross na-tional product known as gross private domestic investment. Estimatesof this item are prepared quarterly by the Department of Commerce andare released about 8 weeks after the end of the quarter. Preliminary esti-mates appear somewhat earlier in the first issue of Economic Indicatorsafter the end of the quarter.

75


Gross private domestic investment includes not only business outlaysfor plant and equipment, but also private nonbusiness construction (resi-dential, institutional, etc.) and additions to the physical volume of businessinventories. The relative magnitudes of these various types of privateinvestment over the past 20 years are shown in table C-l .

It should be noted that the construction and equipment investmentoutlays, in this and all other surveys here discussed, are in gross terms. Nodeduction is made for depreciation, retirements, or obsolescence. The netaddition to the Nation's stock of private structures and equipment afterallowance for capital consumption is of course much smaller than the indi-cated gross investment, and in some prewar years was negative. However,the gross private domestic figures exclude maintenance and repair work onstructures and equipment, which may in practice involve substantial realadditions to capital.

TABLE G—1.—Gross private domestic investment and its components, 1929-49


Period

1929

193019311932 . . .19331934

19351936.193719381939_ „

1940. .194119421943.1944

194519461947 _ -1948

Annual rates, seasonally ad-justed, 1949:

First quarter 6

Second quarter 6

Totalgross

privatedomesticinvest-ment

15.8

10.25.4

. 91.32.8

6.18.3

11.46.39.0

13.017.29.34.66.4

9.226.530.340.8

38.932.4

Nonfarm producers'equipment and con-struction

Total

10.0

7.84.72.62.33.2

4.05.46.74.85.5

7.39.25.54.36.0

8.516.221.326.0

26.225.5

Equip-ment 1

5.9

4.42.91.61.62.3

3.04.14.83.54.1

5.56.94.03.24.56.2

11.315.618.9

19.418.9

Construc-tion 2

4.2

3.41.81.0.7.9

1.01.31.91.41.4

1.82.31.51.01.5

2.34.95.77.1

6.86.6

Farmequip-mentandcon-

struc-tions

0.8

.7

.4

. 2

.2

.3

.5

.7

.8

.7

.7

.81.11.0.8

1.1

1.31.82.63.0

3.03.0

Otherprivate

con-struc-tion 4

3.4

2.01.6. 7.4.4

.81.31.61.72.3

2.63.01.4.7.6

.83.75.88.1

7.57.4

Increase in busi-ness inventories

Non-farm 8

1.8

0—1.7-2 .6- 1 . 3

.2

.42.11.8

-1 .1.3

2.03.4

. 1- . 7- . 8

-1 .05.02.73.0

1.4-4 .0

Farm

- 0 . 3

- . 2. 3

0- . 3

—1.3

. 5- 1 . 1

.5

. 1

.1

.2

. 51.3

—.4—.5

- . 4- . 3

- 2 . 1. 8

.8

.5

1 Total producers' durable equipment, less "farm machinery and equipment" and "tractors." Thesefigures thus include all business motor vehicles, some of which were sold for farm use; and exclude all tractors,some of which were sold for nonfarm use.

2 Industrial, public utilities, gas and oil well drilling, warehouses, office and loft buildings, stores, restau-rants, garages, and hotels.

3 Farm construction (residential and nonresidential), plus "farm machinery and equipment" and "trac-tors." These figures thus include all tractors, some of which were sold for nonfarm use, and exclude allbusiness motor vehicles, some of which were sold for farm use.

4 Nonfarm residential, religious, educational, social and recreational, hospital and institutional, andmiscellaneous nonresidential.

6 After inventory revaluation adjustment.«Preliminary estimates based on incomplete data.

NOTE.—Deta i l will not necessarily add to tota ls because of rounding.

Source : Depar tment of Commerce.


The inventory accumulation item, on the other hand, does represent anet accretion of goods in stock—the excess of additions over withdrawalsfor the period. This difference in treatment as between fixed-capital andinventory outlays calls for caution in interpreting the total private invest-ment figures. Another difference is that the fixed-capital outlays representessentially voluntary decisions to invest, whereas inventory accumulationis frequently (as in the first quarter of 1949) involuntary.

The nonfarm inventory figures included in table C-l and in the Nation'sEconomic Budget tabulations are shown after "revaluation adjustment."That is, they show the physical change in stocks (valued at average prices forthe period) rather than the change in book values, which would reflect alsothe change in prices at which stocks were carried on the books. Farminventory changes are estimated directly in terms of changes in physicalquantities valued at average current prices, and are thus comparable with-out revaluation adjustment to the adjusted nonfarm inventory changes.

Nonfarm plant and equipment outlays

The second, third and fourth columns of table C-l show the new con-struction and equipment outlays (i. e., the gross investment in facilities)by nonfarm business, as estimated on the basis of construction contractawards and shipments of equipment and included in the totals of grossprivate domestic investment and the gross national product.

Another approach to measurement of nonfarm plant and equipmentoutlays uses a quarterly questionnaire survey addressed to a sample of non-agricultural business concerns. This survey is a joint undertaking of twoFederal agencies, the Securities and Exchange Commission canvassing mostof the corporations registered with the Commission while the Office of Busi-ness Economics of the Department of Commerce canvasses a sample ofunregistered manufacturing concerns. It is somewhat similar to the officialGovernment survey made annually in Canada, though coverage is muchmore comprehensive in the latter.

The questionnaires are filled out, for the most part, in the middle monthof each quarter; results are jointly released by the two agencies shortly beforethe end of that quarter. Questions cover (1) the expected outlays for newplant and for new equipment during the next quarter; (2) the estimatedoutlays during the current quarter, and (3) the actual outlays during theprevious quarter. For each quarter's outlays there are then three successivereports at 3-month intervals: expected outlays (released a fortnight or sobefore the quarter begins), estimated outlays (released a fortnight or sobefore the quarter ends), and reported past outlays (released about 2^4months after the quarter has ended). The latest available results are shownin appendix table D-15.

Although these surveys cover nearly the same concept of nonfarm plantand equipment as the corresponding gross national product components in

77


the second column of table C-l , above, the correspondence is not exact.The three most important conceptual differences are:

1. The SEG-Commerce survey estimates do not allow for the initialfacilities outlays of firms newly established during the period covered,whereas the GNP items do. This can be a sizable item in periods whenmany new firms are being started, particularly in the manufacturing andtrade fields where the turn-over of firms is relatively rapid.1

2. Outlays charged as current expense are omitted in the SEG-Commercesurveys but covered in the GNP series.

3. The GNP estimates of producers' durable equipment include an allow-ance for automobiles bought by individuals but used wholly or in part forbusiness purposes. Such purchases do not appear in the outlays reportedin the SEG-Commerce surveys.

In addition to the regular questions on investment outlays for the previous,current and next quarters, the SEC-Commerce questionnaire has in recentyears inquired annually as to expected investment and expected sales for awhole calendar year. These questions, last answered in February 1949,showed that nonfarm business as a whole expected virtually the same levelof dollar sales in 1949 as in 1948 and about 5 percent less dollar invest-ment.2

Discrepancies between levels of investment outlay reported in advanceas anticipations and those reported later as actually realized may arisefrom: (1) changes in business plans as to physical volume of facilities ex-pansion and improvement, (2) errors in businessmen's forecasts of the rateat which work will proceed on projects already planned, (3) errors inbusinessmen's forecasts of the cost of projects under way or planned, asconstruction costs and equipment prices change, and (4) the lack of com-plete accuracy and representativeness with which any sample survey mustreckon. It is not yet possible to evaluate each of these bases of discrepancywell enough to make definite adjustments for them in interpreting currentlyreported anticipations, though analysis of accumulated survey data willeventually throw much light on this problem. During the postwar period,actual investment outlays have tended to run moderately higher than antici-pated outlays, particularly in the case of the anticipations for a whole yearin advance. This is probably due in part to the rising trend of constructionand equipment costs through 1948, and in part to the fact that someoutlays only tentatively planned or scheduled for a following period arelikely to be omitted from reported anticipations. It remains to be seenhow these survey biases will operate during a phase of constant or declininglevels of cost and total investment.

1 For further details see Capital Requirements of New Trade Firms, Survey of CurrentBusiness, December 1948.

2 For further details of this survey, see Plant and Equipment Programs and Sales Ex-pectations in 1949, Survey of Current Business, April 1949.

78


Equipment orders and construction contracts and permits as measures ofprospective business investment activity

Equipment orders. Further light on the prospective trend of businessinvestment expenditures is afforded by sample surveys of new orders forproducers' durable equipment, as reported by makers of various equipmentitems. (See table C-2 below.) Such information is collected monthlyby the Department of Commerce and is released about 6 weeks after theend of the month to which it relates. The latest data available as of mid-year 1949 extend through May.

TABLE C-2.—Manufacturers3 sales and new and unfilled orders in selected durable-goods industries, January—May 1948 and 1949

Item1948

Jan. Feb. Mar. Apr. May Peak month

1949

Jan. Feb. Mar. Apr. May1

1939 monthly average dollar volume=100

Sales:2

Durable goodsElectrical machinery and

equipmentMachinery, other than

electrical _Iron, steel, and products..

New orders:2

Durable goodsMachinery, including

electricalIron, steel, and products..

Unfilled orders:8Durable goods4

Machinery, includingelectrical __

Iron, steel, and products.-

329

386

304325

291

312325

360

446

356336

287

299321

365

442

363345

314

329371

353

440

350325

292

309320

353

431

356338

267

284282

404 (Sept.)..

499 (Dec.)__.

381 (June) —393 (Oct.).._

314 (Mar.) . .

330 (June)...371 (Mar.). .

276 253

383

485

350372

243

300220

206

365

460

334328

206

266166

Percentage change in dollar volume during month

+2

+2+4

- 3 - 3

- 4

- 5

- 5

1 Prelimary estimates.2 Indexes are adjusted for differences in length of months, but not otherwise adjusted for seasonal variation.3 Percentage changes based on unweighted aggregates of reported data.4 All durable goods industries reporting unfilled orders.

Source: Department of Commerce.

Construction contracts and permits. These sources of information areuseful for projecting investment because contracts are let and permitssecured considerably in advance of the bulk of actual expenditures. Touse an extreme case, a dam built for a private power company may require2 or 3 years for completion. Once it is reported that the dam has beenor will be started, it is possible to calculate with a relatively small marginof error what the rate of expenditure will be throughout the constructionoperation.

Contracts are reported by the F. W. Dodge Co. for 37 Eastern Statesand on a somewhat less comprehensive basis by the Engineering NewsRecord for the United States as a whole. Other sources are used by theDepartment of Commerce to supplement data from these two major sur-

844384—49 79


veys, and adjustments are made for undercoverage and errors in report-ing. The resulting material is then translated into a forecast of nonresi-dential private construction activity 6 to 12 months in advance. The scopeof these estimates is wider than that of the SEG-Commerce survey dis-cussed in the section on nonfarm plant and equipment in this appendix,since it includes private institutional building contracts. Equipment out-lays, however, are not covered.

The Department of Commerce construction expenditures figures as shownin appendix table D-14 are not strictly comparable by categories with theSEG-Gommerce survey figures because of different classification procedure.One series reports according to function, the other according to ownership.If a utility company, for example, lets a contract for a residential or com-mercial structure, the contract series will report that activity as residentialor commercial, while the SEG-Commerce series will report it as utilityinvestment.

Figures for private nonfarm residential construction are derived by theDepartment of Labor principally from reported building permits (adjustedfor lapses, for time lags between permit issuance and start of work, and forunderreporting of permit evaluation), supplemented by sample fieldsurveys in nonpermit-issuing areas.

Projections of rates of residential activity from these sources are made in afashion similar to that for nonresidential construction. These figures arecurrently more reliable than the historical series for 1930 through 1944, be-cause of improvements in sources of data and methods of collection. Thisshould be borne in mind in comparing the current series with the publisheddata for this 15-year period. The series does not include data for housingactivity in the field of conversions or remodeling. In some periods in thebusiness cycle, or during wartime, conversion or remodeling may account fora sizable proportion of the total volume of residential units provided.

The construction forecasts are reliable for one quarter in advance. Theirreliability diminishes beyond that point. The margin of error for the thirdquarter ahead has been as much as 20 percent. The magnitude of the errorwill vary first with any divergence from the assumptions regarding the busi-ness cycle and second with unforeseen changes in the rate of expenditures inthe construction field itself.

Business investment surveys by the McGraw-Hill Publishing Co.

Late in 1948 the economic staff of the McGraw-Hill Publishing Go. con-ducted a sample interview study of larger concerns in the fields of manufac-turing, mining, and transportation. This was combined with similar surveysin the electric and gas utility fields by the Electrical World magazine andthe American Gas Association to yield a set of estimates of total plant andequipment investment plans for business in general (exclusive of farming,trade, and services). The results were released in January 1949.

8o


A similar survey had been undertaken a year previous, and it is under-stood that another is planned in late 1949.

As to investment levels in 1949, the McGraw-Hill survey gave indicationsin close correspondence with the one made by the SEC and the Departmentof Commerce during the first quarter of this year. The McGraw-Hill surveyalso inquired as to investment plans for future years through 1953, actualand expected increases in manufacturing capacity, replacement value ofplant and equipment in place, and policies followed in planning moderniza-tion of facilities. The significance of findings on this range of questions willbe better subject to evaluation as surveys of this nature are repeated and thereports given thorough comparative analysis.

Table G-3 summarizes the findings of the McGraw-Hill survey as toactual plant and equipment outlays in 1948 and contemplated outlays forthe succeeding 5 years.

TABLE G-3.—Outlays for new plant and equipment, 1948-53, as estimated byMcGraw-Hill 1948 survey

[Millions of dollars]

Industry group

Total, all industry groups covered

Manufacturing _SteelChemicalsPetroleum refiningMachinery, other than electricalElectrical machinery _ _ _ _ _ _AutosTransportation equipmentFoodOther manufacturing

Mining __ __.Electric utilities2

Gas utilities 3 . . . . . .RailroadsOther transportation and communications

1948

14,850

8,160685

1,400740900310630135595

2,765765

1,800880

1.3451,900

1949

14,130

7,200600

1,220720650220570165525

2,530760

2,050820

1,5201,780

1950

11,970

6,120490

1,310680620160510130535

1,775740

1,830665

1,0001,525

1951

10,460

5,395400

1,21055065015050090

5151,330

5901,620

580880

1,395

1952

9,630

4,975345

1,12052060014050070

3701,310

5201,630

395900

1,210

1953

18,995

4,850330

1,10050058013050060

3401,310

5151,560(*)

8901,180

1 Exclusive of gas utilities outlays.2 Electrical World survey.3 American Gas Association survey.* Not available.

Source: McGraw-Hill Publishing Company.

Business surveys by Dun & Bradstreet

This firm, which had previously made a number of Nation-wide samplesurveys of business expectations, inaugurated recently a frequent periodicschedule of inquiries. The questionnaires are distributed by Dun & Brad-street representatives to a sample of the approximately 54,000 major con-cerns on whom regular calls are made for other purposes. The concernsare nearly all engaged in manufacturing and trade, with net worth of$50,000 or more. The questionnaire is designed for speedy response andtabulation, and results are released within a few weeks after the interviews.

The scope of material covered in these surveys is still subject to changeas further tests are made. The most recent survey, made in May 1949,

8i


included questions on sales, new and unfilled orders, volume of production,plant and equipment outlays, employment, and inventories. For each item,respondents were asked to compare (1) the previous 4 months, (2) thecurrent month, and (3) the next 6 months with the corresponding periodsof last year. In addition to these percentage changes, respondents alsostated their 1948 sales and tangible net worth, and their plant and equip-ment outlays in 1948 and in the second half of that year.

The latest results relating to investment items (plant and equipmentoutlays and inventories) are summarized in table C-4.

TABLE C-4.—Percentage changes in actual and expected plant and equipment out-lays and inventories, 1948—49, as reported in Dun & Bradstreet May survey

All concerns (manu-facturing and trade)

ManufacturingDurable goodsNondurable goods

WholesaleRetail....

All concerns (manu-facturing and trade)

ManufacturingDurable goodsNondurable goods

WholesaleRetail...

Plant and equipment outlays

January-April May July-De-

cember

Inventories'(book value at end ofmonth)

April May December

Median percentage change from period in 1948 to corresponding period in 1949

+0.1

+.4+.6+.1+.2—.1

-0.3

- . 4- . 2- . 80

- . 3

-0.3

- . 6- .4- . 9+.1+.1

-1.4

+.2+2.8-2.6-2.9-3.5

-1.9

-1.1+1.5-3.8-2.3-4.5

-6.4

-5.7-4.9-6.5-6.3

-10.5

Range of percentage changes covered by middle 50 percent of replies

- 5 to +5

- 5 to +6- 5 to +6- 5 to +5-4 to +4- 5 to +4

- 5 to +4

- 5 to +4- 5 to +4- 5 to +4-4 to +4-4 to +4

- 5 to +4

- 6 to +5- 5 to +5- 6 to +4-4 to +4- 4 to +4

-13 to +9

-12 to +14-9 to +7

-16 to +9-14 to +6-14 to +6

-12 to +6

-13 to +9- 8 to +15-16 to +5-12 to +5-15 to +4

-17 to +2

-17 to +3-17 to +3-18 to +2-16 to +2

-18 to 0

Source: Dun & Bradstreet.

In interpreting these results, two technical features of the survey shouldbe taken particularly into account, though it is not yet possible to indicatethe amount of error or bias involved:

1. The tabulated results are unweighted medians and quartiles ofreported percentage changes. Although the degree of coverage ishigher for larger concerns, it does not appear to be sufficiently higher togive their replies a weight corresponding to the relative importance ofsuch concerns in investment outlays. The result is an emphasis on theposition of concerns at the small end of the range covered. However,an opposite bias is presumably introduced by the omission of concernswith net worth less than $50,000.

2. A substantial proportion of concerns presumably reported nochange in plant and equipment outlays because such outlays in both


of the two periods compared were zero or negligible. Inclusion ofthese reports inflates the middle group in the distribution and reducesthe median change in either direction.

Other private investment surveysInterest in current and prospective business investment trends is so

lively that a considerable number of independent surveys have been maderecently, most of them covering only certain lines of business. The greatestsignificance attaches to some of those which are made on a regular periodicbasis, with relatively full coverage, and which inquire as to expected futureinvestment outlays as well as those of the past year. Among those worthyof mention are the surveys conducted by trade associations in the electricpower, gas, and steel industries. In the industries just named (but in fewothers), related capacity estimates are also obtainable.


Appendix DStatistical Tables Relating to Employment, Production,

and Purchasing Power

Contents

National income or expenditure: P ag e

D - 1. Gross national product or expenditure, 1929-49 87D - 2. National income by distributive shares, 1929-49 88D - 3. Personal income, 1929-49 89D - 4. Disposition of personal income, 1929-49 90D - 5. Per capita disposable income in current and 1948 dollars,

1929-49 91D - 6. Personal consumption expenditures, 1929-49 92

Employment and wages:D - 7. Labor force, employment and unemployment, 1929-49. 93D - 8. Number of wage and salary workers in nonagricultural

establishments, 1929-49 94D - 9. Average gross weekly earnings in selected industries,

1929-49 95D-10. Average hourly earnings in selected industries, 1929-49. . 96D - l l . Average weekly hours in selected industries, 1929-49. . . . 97

Production and business activity:D-12. Physical production index of goods and utilities, 1929-49. 98D-13. Industrial production index, 1929-49 99D-14. New construction activity, 1929-49 100D-15. Business expenditures for new plant and equipment,

1929-49 101D-16. Inventories and sales in manufacturing and trade,

1939-49 102D-17. Manufacturers' inventories by stage of fabrication and

as ratios to sales, 1939-49 103D-18. Sales, stocks, and outstanding orders at 296 department

stores, 1939-49 104Prices:

D-19. Consumers' price index, 1929-49 105D-20. Wholesale price index, 1929-49 106D-21. Indexes of prices received and prices paid by farmers

and parity ratio, 1929-49 107


Money, banking, and credit: PageD-22. Consumer credit outstanding, 1929-49 108D-23. Loans and investments of all commercial banks and

weekly reporting member banks, 1929-49 109D-24. Adjusted deposits of all banks and currency outside

banks, 1929-49 110D-25. Estimated ownership of Federal securities, 1939-49. . . . I l lD-26. Bond yields and interest rates, selected years, 1929-49. . 112

Corporate profits and finance:D-27. Profits before and after taxes, all private corporations,

1929-49 113D-28. Sales and profits of large manufacturing corporations,

1939-49 114D-29. Relation of profits before and after taxes to investment,

private manufacturing corporations, by industrygroups, 1947-49 115

D-30. Relation of profits before and after taxes to sales, privatemanufacturing corporations, by industry groups,1947-49 116

D-31. Relation of profits before and after taxes to investmentand to sales, all private manufacturing corporations,by size classes, 1947-49 117

D-32. Sources and uses of corporate funds, 1947-49 117International transactions:

D-33. The international transactions of the United States,1946-49 118

D—34. United States Government aid to foreign countries,1946-49 119

D-35. United States merchandise exports, including reexports,by areas, 1936-38 quarterly average, and 1947-49.. 120

D-36. United States domestic merchandise exports, by economicclasses, 1936-38 quarterly average, and 1947-49. . . . 121

D-37. Indexes of quantity and unit value of United States do-mestic merchandise exports, by economic classes, 1936-38 quarterly average, and 1947-49 122

D-38. United States general merchandise imports, by areas,1936-38 quarterly average, and 1947-49 123

D-39. United States merchandise imports for consumption, byeconomic classes, 1936-38 quarterly average, and1*947-49. . . . . . . . . . . ; . . . . . . . . . 124

D-40. Indexes of quantity and unit value of United States mer-chandise imports for consumption, by economic classes,1936-38 quarterly average, and 1947-49 125

Summary:D-41. Changes in selected economic series since 1939 and 1948. 125

86


TABLE D—1.—Gross national product or expenditure, 1929—49


Period

1929.

1930-1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941-1942.1943.1944.

1945.1946.1947.1948.

1948—First half.Second half

1949—First half i

1948—First quarter..Second quarterThird quarter.Fourth quarter

1949—First quarterSecond quarter

Grossnationalproduct

103.8

90.975.958.355.864.9

72.282.590.284.790.4

100.5125.3159.6192.6212.2

213.4209.3231.9255.9

Personalconsump-tion ex-

penditures

249.3262.7

253.9

245.2253.4259.8265.6

257.3250.5

78.8

70.861.249.246.351.9

56.262.567.164.567.5

72.182.390.8

101.6111.4

122.8147.4164.8177.7

Grossprivate

domesticinvestment

15.8

10.25.4.9

1.32.8

6.18.3

11.46.39.0

13.017.29.34.66.4

9.226.530.340.8

Net foreigninvestment

0.8

.7

.2

.2

.2

.4

- . 1- . 1

.11.1

1.51.1

- . 2- 2 . 2- 2 . 1

-1 .44.78.91.9

Govern-ment pur-chases of

goods andservices

Annual rates, seasonally adjusted

174.9180.6

175.8

172.5177.3180.1181.0

176.6175.0

42.8

35.7

38.539.342.043.6

38.932.4

3.3.5

3.72.9

- . 51.5

.7

8.5

9.29.28.18.09.8

9.911.711.612.813.1

13.924.759.788.696.5

82.830.828.035.5

32.238.8

41.8

30.5

38.239.5

41.242.4

i Estimates based on incomplete data; second quarter by Council of Economic Advisers.

NOTE.—Detail will not necessarily add to totals because of rounding.Published revised estimates for net foreign investment (1948-49) and construction (1946-49) have been

substituted for those included in the national income and product series of the Department of Commerce.Further revisions of these and other components of national income and product series will be publishedin the Survey of Current Business, July 1949.

Source: Department of Commerce (except as noted).


TABLE D-2.—National income by distributive shares, 1929-49


Period

a

Proprietors' and rentalincome

Corporate profits and inventoryvaluation adjustment

Corporate profits

1929.

1930.1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.1948.

1948—First half

Second half

1949—First half •

1948—First quarterSecond quarter . . .Third quarterFourth quarter . . .

L949—First quarter«. . .Second quarter «_

87.4

75.058.941.739.648.6

56.864.773.667.472.5

81.3103.8136. 5168.3182.4

181.7179.3202.5224.9

50.8

46.539.530.829.334.1

37.142.747.744.747.8

51.864.384.7

109.1121.1

122.9117.3127.5139.4

19.7

15.711.87.47.28.7

12.112.615.414.014.7

16.320.828.132.134.1

36.041.846.050.9

8.3

7.05.33.22.94.3

5.06.16.66.36.8

7.79.6

12.114.115.4

16.820.423.225.2

5.7

3.92.91.72.32.3

4.93.95.64.44.5

4.96.9

10.611.811.9

12.314.615.618.2

5.8

4.83.62.52.02.1

2.32.73.13.33.5

3.64.35.46.26.7

7.06.77.17.4

10.3

6.61.6

-2 .0-2 .0

1.1

3.04.96.24.35.8

9.214.619.823.724.0

19.816.824.729.8

3.3- . 8

-3 .0.2

1.7

3.25.76.23.36.5

9.317.221.124.524.3

20.421.829.832.8

1.4

.5

.4

.5

.7

04505

2.97.8

11.714.213.5

11.69.0

11.712.8

8.4

2.5- 1 . 3-3 .4- . 41.0

2.34.34.72.35.0

6.49.49.4

10.410.8

8.712.818.120.1

0.5

3.32.41.0

- 2 . 1

- . 2- . 7(5)1.0

- . 7

- . 1-2.6-1.3- . 8- . 3

-5.0-5.1-3.0


218.1231.9

224.5

213.9222.3228.2235.6

228.0221.0

135.2143.6

140.4

134.0136.3142.4144.7

141.9139.0

50.851.0

48.8

49.951.650.651.4

50.047.5

25.025.4

24.6

24.825.325.225.6

24.924.2

18.218.3

16.8

17.618.918.118.4

17.716.0

7.47.4

7.4

7.57.47.47.4

7.47.3

27.432.2

29.8

25.329.630.234.3

30.729.0

31.334.4

27.2

30.532.134.034.7

28.825.5

12.213.4

10.9

11.812.513.313.5

11.610.2

19.221.0

16.2

18.719.620.821.2

17.215.3

- 3 . 9- 2 . 2

+2.7

—5.3- 2 . 5- 3 . 9- . 4

+1.9+3.5

6.5

6.25.95.45.04.7

4.54.54.44.34.2

4.14.13.93.43.1

3.03.44.34.9

4.85.1

5.4

4.74.85.05.2

5.35.4

1 National income is the total net income earned in production by individuals or businesses. The conceptof national income currently used differs from the concept of gross national product in that it excludesdepreciation charges and other allowances for business and institutional consumption of durable capitalgoods.

2 Includes wage and salary receipts and other labor income (see appendix table D-3), and employer andemployee contribution for social insurance.

3 Net income after inventory valuation adjustment, which amounted to —600 million dollars in 1948 andto +750 million dollars (annual rate) in the first half of 1949.

4 Federal and State income and excess-profits taxes.« Less than $50,000,000.• Estimates based on incomplete data; profits and total national income for first quarter and all items

for second quarter by Council of Economic Advisers.

NOTE.—Detail will not necessarily add to totals because of rounding.Revised estimates of the national income and product series will be published in the Survey of Current

Business, July 1949.


88


TABLE D-3.—Personal income, 1929-49[Billions of dollars]

PeriodTotal

personalincome

85.1

76.264.849.346.653.2

59.968.474.068.372.6

78.395.3

122.2149.4164.5

170.3178.1195.2213.6

Salaries,wages,

and otherlabor

income !

50.5

46.339.230.529.033.8

36.842.145.942.845.7

49.561.581.2

104.4116.1

116.8111.4121.9134.3

Proprie-tors' and

rentalincome 2

19.7

15.711.8

7.47.28.7

12.112.615.414.014.7

16.320.828.132.134.1

36.041.846.050.9

Divi-dends andpersonalinterestincome 3

13.3

12.611.19.18.28.6

8.610.110.38.79.2

9.49.99.7

10.010.6

11.413.515.617.3

Transferpayments

1.5

1.52.72.22.12.2

2.43.52.42.83.0

3.13.13.23.03.6

6.211.411.711.1

Nonagri-culturalpersonalincome 4

1929.

1930.1931.19321933.1934

1935.1936193719381939

1940.19411942.19431944

194519461947.1948.

1948—First halfSecond half

1949—First half s

1948—First quarterSecond quarterThird quarter..Fourth quarter

1949—First quarterSecond quarter

76.8

70.060.146.243.049.5

53.462.866.562.166.3

71.586.1

108.7134.3149.0

154.3159.4174.9190.6


208.9218.0

214.0

207.0210.8216.3219.6

216.6211.5

130.0138.6

135.4

128.9131.1137.4139.8

136.7134.0

50.851.0

48.8

49.951.550.651.4

50.147.5

16.717.7

18.2

16.616.817.318.1

18.318.1

11.410.7

11.8

11.611.310.910.5

11.711.9

185.9195.4

184.6187.2194.4196.4

194.0()

1 Differs from "compensation of employees" in appendix table D-3, in that it excludes employer andemployee contributions to social insurance. Includes wage and salary receipts and other labor income-compensation for injuries, employer contributions to private pension and welfare funds, pay of militaryreservists not on full-time active duty (pay for full-time active duty included in military wages and salaries),directors' fees, jury and witness fees, compensation of prison inmates, Government payments to enemyprisoners of war, marriage fees to justices of the peace, and merchant marine war-risk life and injury claims.

2 See appendix table D-3, for major components.3 See appendix table D-28, for dividend payments.4 Equals personal income exclusive of net income of unincorporated farm enterprises, farm wages, agri-

cultural net rents, agricultural net interest, and net dividends paid by agricultural corporations.s Estimates based on incomplete data; second quarter by Council of Economic Advisers.• Not available.





TABLE D-4.—Disposition of personal income, 1929-49

Period Personalincome

Less:Personaltax andnontax

payments

Equals:Dispos-

ablepersonalincome

Less:Personalconsump-

tion Iexpendi-

tures

Equals:Personal

netsaving

Netsaving aspercentof dis-

posableincome

Billions of dollars

1929

19301931 _ _ _193219331934

1935193619371938 __„.1939

19401941 ._.194219431944

1945. _ _194619471948

85.1

76.264.849.346.653.2

59.968.474.068.372.6

78.395.3122.2149.4164.5

170.3178.1195.2213.6

2.6

2.51.91.51.51.6

1.92.32.92.92.4

2.63.36.017.818.9

20.918.921.621.0

82.5

73.763.047.845.251.6

58.066.171.165.570.2

75.792.0116.2131.6145.6

149.4159.2173.6192.6

78.8

70.861.249.246.351.9

56.262.567.164.567.5

72.182.390.8101.6111.4

122.8147.4164.8177.7



1949—First half i

1948—First quarterSecond quarter-Third quarter...Fourth quarter. .

1949—First quarterSecond quarter V

208.9218.0

214.0

207.0210.8216.3219.6

216.6211.5

21.820.1

18.6

23.020.620.020.2

18.818.5

187.1197.8

195.4

183.9190.2196.2199.4

197.8193.0

174.9180.6

175.8

172.5177.3180.1181.0

176.6175.0

3.7

2.91.8

- 1 . 4-1 .2- . 2

1.83.63.91.02.7

3.79.8

25.430.034.2

26.611.88.8

14.9

12.217.2

19.6

11.412.916.118.4

21.218.0

4.5

3.92.9

- 2 . 9- 2 . 7- . 4

3.15.45.51.53.8

4.910.721.922.823.5

17.87.45.17.7

6.5

8.7

10.1

6.26.88.29.2

10.79.3

1 Estimates based on incomplete data; second quarter by Council of Economic Advisers.





TABLE D-5.—Per capita disposable income in current and 1948 dollars, 1929-49

Period

1929.

1930.1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.1948.


1949— First half *

1948—First quarterSecond quarter..Third quarter. _.Fourth quarter..

1949—First quarterSecond quarter *.

Disposablepersonalincome

(billions ofdollars)

82.5

73.763.047.845.251.6

58.066.171.165.570.2

75.792.0

116.2131.6145.6

149.4159.2173.6192.6

Annualrates,

seasonallyadjusted

187.1197.8

195.4

183.9190.2196.2199.4

197.8193.0

Population(thou-

sands) *

121,770

123,077124,040124,840125,579126,374

127, 250128,053128,825129,825130,880

131,970133,203134,665136,497138,083

139,586141, 235144,034146,571

146,018147,280

148, 527

145, 716146, 298146,914147, 631

148, 232148,806

Consumers'price index,1948=100

71.6

69.763.557.054.055.9

57.357.960.058.958.1

58.561.4

3 68.73 73.83 75.8

3 77.93 83.43 93.1100.0

Not ad-justed forseasonalvariation

98.8101.2

99.1

98.099.6

101.8100.7

99.2

Per capita disposablepersonal income

Currentdollars

678

599508383360

456516552505536

574691863964

1,054

1,0701,1271,2051,314

1948dollars2

947

859800672667730

796891920857923

9811,1251,2561,3061,391

1,3741,3511,2941,314

Annual rates, season-ally adjusted

1,2811,343

1,316

1,2621,3001,3351,351

1,3341,297

1,2971,327

1,328

1,2881,3051,3111,342

1,3451,311

1 Estimated population of continental United States, including armed forces overseas; annual data as ofJuly 1 and quarterly and semiannual data as of middle of period, interpolated from published monthlyestimates.

2 Current dollars divided by the consumers' price index on the base 1948=100 to give a rough measure ofchanges in buying power of disposable income.

3 The consumers' price index has been roughly adjusted to take account of the understatement during theprice control period. This adjustment is in line with the report of the Technical C ommittee (better knownas the Mitchell Committee) on the consumers' price index. The unadjusted index will be found in ap-pendix table D-19.

* Estimates based on incomplete data; second quarter by Council of Economic Advisers.

NOTE.—Revised estimates of the national income and product series will be published in the Surveyof Current Business, July 1949.

Sources: Department of Commerce (disposable income and population) and Department of Laborconsumers' price index).


TABLE D-6.—Personal consumption expenditures, 1929-49


PeriodTotal

expend-itures

Dur-able

goods

Nondurable goods

Total Food i Cloth-ing Other

Services

Total Hous-ing 2 Other

1929.

1930.1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.1948.

1948—First half....Second half .

1949—First half 3_.

1948—First quarter....Second quarter..Third quarter. _.Fourth quarter .

1949—First quarterSecond quarter3

78.8

70.861.249.246.351.9

56.262.567.164.567.5

72.182.390.8

101.6111.4

122.8147.4164.8177.7

9.4

7.35.63.73.54.3

5.26.47.05.86.7

7.99.86.86.56.9

8.316.221.022.7

37.7

34.129.022.722.326.7

29.432.935.234.035.3

37.644.053.061.267.5

75.487.596.5

103.6

19.7

18.114.811.411.514.3

16.318.522.019.019.3

20.724.430.535.639.3

43.451.657.961.9

9.4

8.06.95.14.65.7

6.06.66.86.87.1

7.58.9

11.314.115.4

17.218.819.220.3

8.6

8.07.36.26.26.7

7.17.86.48.28.9

9.410.711.211.512.8

14.817.119.421.4

31.7

29.526.622.820.620.9

21.723.324.924.725.5

26.628.531.033.937.0

39.243.647.351.4


11.4

11.010.29.07.87.5

7.67.98.48.78.9

9.29.9

10.611.111.7

12.213.214.416.0

174.9180.6

175.8

172.5177.3180.1181.0

176.6175.0

22.023.3

21.8

21.322.823.722.9

21.522.0

102.6104.7

100.2

101.4103.7104.3105.1

101.499.0

61.562.4

(4)

61.361.662.162.6

61.1(4)

20.020.7

(4)

19.220.720.520.9

19.1(4)

21.221.7

(4)

20.921.421.721.6

21.2(4)

50.352.6

53.8

49.850.852.153.0

53.754.0

15.716.3

(4)

15.515.816.216.4

16.6(4)

20.3

18.516.413.812.813.4

14.115.416.516.016.6

17.418.620.422.825.3

27.030.432.935.4

34.736.3

34.335.035.936.6

37.1(4)

1 Includes alcoholic beverages.2 Includes imputed rental value of owner-occupied dwellings.3 Estimates based on incomplete data; second quarter by Council of Economic Advisers.* Not available.

NOTE: Detail will not necessarily add to totals because of rounding.Revised estimates of the national income and product series will be published in the Survey of Current




TABLE D—7.—Labor force, employment and unemployment, 1929—49[Thousands of persons, 14 years of age and over]

Period

Monthly average:1929

1930193119321933 . . .1934

19351936193719381939

19401941194219431944 . . . _

1945194619471948 .

1948—First halfSecond half _

1949—First half

1948—JanuaryFebruaryMarch . .AprilMayJune . _ _ _JulyAugustSeptemberOctober. . . . . . .NovemberDecember

1949—January..FebruaryMarch _. .AprilMay.. _.June

Totallaborforce

(includ-ing

armedforces) l

49,440

50,08050, 68051, 25051,84052,49G

53,14053, 74054,32054,95055,600

56,03057,38060,23064,41065,890

65,14060,82061.60862,748

[61,77163,726

62,732

60,45561,00461,00561,76061,66064,74065,13564,51163,57863,16663,13862,828

61,54661,89662,30562,32763,45264,866

Armedforces i

260

260260250250260

270300320340370

3901,4703,8208,870

11,260

11, 2803, 3001,4401,307

1,2401,374

1,483

1,2411,2261,2361,2361,2381,2611,2931,3251,3661,3911,4141,453

1,4681,5081,4911,4921,4691,468

Civilian labor force

Totalcivilian

laborforce

49,180

49,82050,42051,00051, 59052,230

52, 87053,44054,00054,61055, 230

55,64055, 91056,41055, 54054,630

53,86057, 52060,16861,442

60,53162,352

61,249

59,21459,77859,76960,52460,42263,47963,84263,18662,21261, 77561,72461,375

60,07860,38860,81460,83561,98363,398

Employment2

Total

47,630

45,48042,40038,94038,76040,890

42,26044,41046,30044, 22045,750

47, 52050,35053,75054,47053,960

52,82055, 25058,02759,378

58,31760,439

58,060

57,14957,13957,32958,33058,66061,29661,61561,24560,31260,13459,89359,434

57,41457,16857,64757,81958,69459,619

Nonagri-cultural

37,180

35,14032,11028,77028, 67030,990

32,15034,41036, 48034,53036,140

37,98041, 25044, 50045,39045,010

44,24046, 93049,76151,405

50,75452,057

50,120

50,08950,36850,48250,88350,80051,89952,45252,80151,59051,50651,93252,059

50,65150,17450,25449,99949,72049,924

Agricul-tural

10,450

10,34010,29010,17010,0909,900

10,11010,0009,8209,6909,610

9,5409,1009,2509,0808,950

8,5808,3208,2667,973

7,5648,382

7,940

7,0606,7716,8477,4487,8619,3969,1638,4448,7238,6277,9617,375

6,7636,9937,3937,8208,9749,696

Unem-ployment

1,550

4,3408,020

12,06012, 83011,340

10, 6109,0307,700

10,3909,480

8,1205,5602,6601,070

670

1,0402,2702,1422,064

2,2141,914

3,189

2,0652,6392,4402,1931,7612,1842,2271,9411,8991,6421,8311,941

2,6643,2213,1673,0163,2893,778

1 Data for 1940-49 exclude about 150,000 members of the armed forces who were outside the continentalUnited States in 1940 and who were therefore not enumerated in the 1940 census. This figure is deductedby the Census Bureau from its current estimates for comparability with 1940 data.

2 Includes part-time workers and those who had jobs but were not at work for such reasons as vacation,illness, bad weather, temporary lay-off, and industrial disputes.


Sources: Department of Labor (1929-39) and Department of Commerce (1940-49).

93


TABLE D—8.—Number of wage and salary workers in nonagricultural establishments,1929^9 x

[Thousands of employees]

Period


1930 _1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.1948-

1948—First half-Second half.

1949—First half3. -

1948—JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptember _ _OctoberNovember... .December.._

1949—JanuaryFebruaryMarch 3AprilsMay3

Totalwageand

salarywork-

ers

31.041

29,14326,38323,37723,46625,699

26,79228,80230, 71828,90230, 287

32,03136,16439, —42.04241,480

40, 06941, 49443,97045,131

44, 56845, 695

43, 910

44,60344,279'44,60044,29944, 61645, 00945, '45,47845,88945,87745,739

44,35044,01943,89343,93743,655

Manufacturing

Total

10,534

9,4018,0216,7977,2588,346

8,9079,65310, 6069,25310,078

10,78012,97415,05117,38117, 111

15,30214,51515,90116,277

16,11316> 442

15,424

16, 26716,18316, 26915,95015,89216,11516,17216,44116,69716,59716,46116, 283

15,89015, 77715,62515,33815,017

Dura-ble

goods

()4,3574,9756,4858,17910, 29710, 200

8,4777,1808,0558,214

8,1808,248

7,713

8,2568,1678,2588,1648,1148,1228,1658,1888,2948,3188,3038,222

8,0057,8987,8077,6657,444

Non-dura-ble

goods

()5,720

5,8056,4886,8737,0846,912

6,8257,3357,8468,063

7,9338,194

7,704

8,0118,0168,0117,7867,7787,9938,0078,2538,4038,2798,1588,061

7,8857,8797,8187,6737,573

Min-ing

1,078

1,000864722735874

9371,006882845

916947983917

852911925

910940

905

922914924817935950922952948941938939

925922914919902

Con-tractcon-

struc-tion

1,497

1,3721,214970809862

9121,1451,1121,0551,150

1,2941,7902,1701,5671,094

1,1321,6511,9212,060

1,9282,193

1,.939

1,8711,7311,8051,9332,0522,1732,2192,2532,2392,2062,1622,079

1,9061,8201,8411,9372,010

Trans-porta-tionand

publicutilities

3,907

3,6753,2432,8042,6592,736

2,7712,9563,1142,8402,912

3,0133,2483,4333,619

3,8724,0234,0604,065

4,0324,G~~

3,956

4,0204,0194,0323,9744,0424,1054,1364,1394,0924,0914,0664,066

3,9783,9563,9123,9293,959

Trade

6,401

6,0645,5314,9074,9995,552

5,6926,0766,5436,4536,705

7,0557,5677,4817,3227,r~7,6858,8209,4509,746

9,6019,891

9,584

9,6229,5209,5989,5769,6179,6709,6469,6609,7339,889

10,03410,381

9,6259,5139,5259,6859,557

Fi-nance

1,431

1,3981,3331,2701,2251,247

1,2621,3131,3551,3471,382

1,4191,4621,4401,4011,374

1,3941,5861,6561,719

1,7021,735

1,727

1,680L,6901,697L, 704L,7161,726,754

1,7611,7321,7231,7201,722

1,7161,7121,7171,728] ,740

Service

3,127

3,0842,9132,6822,6142,784

2,8833,0603,2333,1963,228

3,3623,5543,7083,7863,795

3,8914,4304,6224,681

4,7254,637

4,596

4,7234,7304,7294,7684,7384,6634,6454,6224,6474,6414,6444,624

4,5494,5604,5974,6284,650

Gov-ern-ment(Fed-eral,State,and

local)

3,066

3,1493,2643,2253,1673,298

3,4773,6623,7493,8763,987

4,1924,6225,4316,049

5,9675.6075,4495,658

5,5575,759

5,779

5,498S4925,5465,5775,6245,6075,6045,6505,8015,7895,7145,994

5,7615,7595,7625,7735,820

* Includes all full- and part-time wage and salary workers in nonagricultural establishments who workedor received pay during the pay period ending nearest the 15th of the month. Excludes proprietors, self-employed persons, domestic servants, and personnel of the armed forces. Not comparable with estimatesof nonagricultural employment of the civilian labor force reported by the Department of Commerce(appendix table D-7) which include proprietors, self-employed persons, and domestic servants; whichcount persons as employed when they are not at work because of industrial disputes, bad weather, or tempo-rary lay-offs and which are based on an enumeration of population, whereas the estimates in this table arebased on reports from employing establishments.

2 Not available.3 Preliminary estimates based on incomplete data.


Source: Department of Labor.

94


TABLE D-9.—Average gross weekly earnings in selected industries, 1929-49

Period

Manufacturing

Total

$25.03

23.2520.8717.0516.7318.40

20.1321.7824.0522.3023.86

25.2029.5836.6543.1446.08

44.3943.7449.2553.15

52.06

54.24

53.60

52.0751.7552.0751.7951.8652.8552.9554.0554.1954.6554.5655.01

54.5154.1253.5952.7053.08

Dura-ble

goods

$27. 22

24.7721.2816.2116.4318.87

21.5224.0426.9124.0126.50

28.4434.0442.7349.3052.07

49.0546.4952.4556.76

55.23

58.28

57.61

55.4654.7755.2554.9654.8156.1356.2158.1957.9559.4158.7159.23

58.6958.2157.3756.8656.93

Non-durablegoods

$22.93

21.8420.5017.5716.8918.05

19.1119.9421.5321.0521.78

22.2724.9229.1334.1237.12

38.2941.0245.8749.34

48.67

50.01

49.42

48.4548.5648.6648.3348.6549.3749.4949.7950.3749.7050.1850.52

50.0450.0149.7248.3548.98

Bitumi-nouscoal

mining

$25.72

22.2117.6913.9114.4718.10

19.5822.7123.8420.8023.88

24.7130.8635.0241.6251.27

52.2558.0366. 86 j72.57

70.51

74.60

71.15

75.7870.5474.84

7 49.5374.0873.8767.6278.1075.5176.4073.5275.79

76.8474.3168.4172.70(2)

Build-ing con-struc-tion

(2)

(2)(2)(2)(2)

$22.97

24.5127.0130.1429.1930.39

31.7035.1441.8048.1352.18

53.7356.2463.30

5 68.85

66.82

70.93

70.38

65.5165.1665.8766.4567.2269.5370.4770.9171.2970.5969.3972.33

70.8870.5369.8370.28(2)

Class Isteamrail-

roads

$28.49

27.7626.7623.3423.0924.32

26.7628.0129.2030.2630.99

31.5534.2538.6543.6846.06

45.69< 51. 22

54.1759.14

58.70

59.57

60.62

59.6060.5458.9456.8657.2459.0558.2259.1759.4859.9260.4260.19

60.2161.6460.00

(2)(2)

Tele-phone

(2)

(2)(2)(2)(2)(2)

(2)(2)

$29.8131.5331.94

32.4432.7433.9736.3038.39

(3)44.0444.9648.88

48.06

49.65

50.63

48.2047.8247.3147.5648.8248.6749.1948.3549.2149.8151.3749.95

49.9151.0251.0050.59(2)

TTT-U - 1 .

w noie-saletrade

(2)

(2)(2)

$27. 7226.1126.37

26.9328.5329.9429.4829.85

30.3932.3235.5639.4042.29

44.0748.0652.405,6.57

55.64

57.42

57.98

54.3655.8755.1755.8456.6156.0056.5457.5157.6757.5457.6057.69

58.4157.9157.4858.12(2)

Retailtrade

(2)

(2)(2)

$20.7119.1819.86

19.9620.6821.7321.1421.17

21.1721.9423. 2424.8826.58

28.3132.5536.6739.98

39.08

40.58

41.66

37.6238.3338.8939.2739.8440.5241.1941.1940.4840.3239.6740.62

41.7941.5641.4841.81(2)

Hotels(year

round) *


1930._._ _19311932 .._.19331934.. _..

193519361937._ _.__19381939____

19401941194219431944

1945194619471948

1948—First half.Second

half..-,

1949—First half*.

1948—JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptember...OctoberNovember...December

1949—JanuaryFebruaryMarch6

April«._May 8

()$14. 2512.7913.17

13.5713.9714.7814.9315.25

15.5216.0917.6220.2122.65

24.5326,9529.6531.88

31.31

32.44

33.13

30.5531.1930.9631.5931.7031.8832.0432.3432.2132.4532.5233.06

33.3033.2232.8833.11

1 Money payments only; additional value of room, board, uniforms, and tips is not included.2 Not available.3 Not available. New series, beginning April 1945; includes only employees subject to provisions of the

Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.* Annual average includes retroactive pay increases not included in the monthly averages.5 Not strictly comparable with previous data.6 Preliminary estimates based on incomplete data.7 Data reflect work stoppages.

NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in rail-roads, and for all nonsupervisory employees in other industries. Data are for payroll periods ending closestto the middle of the month except in railroads where monthly payroll and employment figures are used.


844384—49 95


TABLE D-10.—Average hourly earnings in selected industries, 1929-49

Period

Manufacturing

Total Durablegoods

Non-durablegoods

Bitumi-nouscoal

mining

Build-ing con-struc-tion

Class Isteamrail-

roads

Tele-phone

Whole-sale

tradeRptailtrade

Hotels(year

round)!

Monthly average:1929.

19301931193219331934...

1935.193619371938.1939

19401941-...-194219431944

194519461947—.1948

1948—First half.S e c o n d

half....

1949—First half«.

1948—JanuaryFebruaryMarchAprilMayJuneJuly.. . .AugustSeptember. __OctoberNovemberDecember

1949—JanuaryFebruaryMarch 6

April«May 6

$0.566

.552

.515

.446

.442

.532

.550

.556

.624

.627

.633

.661

.729

.853

.9611.019

1.0231.0841.2211.327

1.295

1.359

1.376

1.2851.2871.2891.2921.3011.3161.3321.3491.3621.3661.3721.376

1.3801.3771.3741.3761.375

()$0.497

.472

.556

.577

.586

.674

.724

.808

.9471.0591.117

1.1111.1561.2921.401

1.361

1.441

1.458

1.3551.3521.3521.3571.3661.3851.4071.4311.4481.4521.4541.456

1.4601.4591.4561.4581.456

8$0,420

.427

.515

.530

.529

.577

.584

.582

.602

.640

.723

.803

.861

.9041.0121.1451.247

1.223

1.270

210217220220230242252262272271282287

293

$0,681

.684

.647

.520

.501

.673

.745

.794

.856

.878

.883

.9931.0591.1391.186

1.2401.4011.6331.899

1.839

1.938

1.8471.8261.8421.8211.8411.8501.9361.9671.9701.9591.9511.960

1.9491.9431.9411.932

()

8(2)$0.795

.815

.824

.903

.908

.932

.9581.0101.1481.2521.319

1.3791.4781.681

• 1. 848

1.809

1.929

1.7661.7911.7861.8041.8151.8361.8621.8741.8951.8921.9061.915

1.9181.9301.9331.933

$0,636

.644

.651

.600

.595

.602

.651

.659

.676

.712

.714

.717

.751

.824

.897

.942* 1.1161.1701.284

1.272

1.295

1.331

1.2791.3021.2621.2581.2721.2591.2631.2781.2931.2971.3221.320

1.3331.3431.318

)$0.774.816.822

.827

.820

.843

.870

.911

(*)1.1241.1991.248

1.233

1.262

1.320

1.2411.2381.2231.2251.2401.2321.2371.2291.2501.2631.3051.290

1.3011.3211.3281.323

()(2)

8$0,648

.667

.698

.700

.715

.739

.793

.860

.933

.985

1.0291.1441.2581.360

1.341

1.378

1.401

1.3091.3431.3341.3461.3631.3531.3651.3791.3781.3811.3831.380

1.4021.3971.3951.404

()$0,528

.521

.522

.551

.543

.536

.542

.568

.614

.670

.724

.773

.878

.9911.067

1.054

1.106

1.0441.0501.0441.0551.0641.0701.0771.0801.0861.0801.0841.072

1.1101.1041.1021.106

<*>

(2)

8(2)$0,273

.279

.287

.308

.315

.324

.332

.348

.386

.451

.505

.550

.612

.661

.712

.700

.724

.742

.700

.707

.711

.714

.709

.725

.726

.734

.739

.748

.746

.739

.739

1 Money payments only; additional value of room, board, uniforms, and tips is not included.2 Not available.3 Not available. New series, beginning April 1945; includes only employees subject to provisions of the

Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.4 Annual average includes retroactive pay increases not included in the monthly averages.8 Not strictly comparable with previous data.• Preliminary estimates based on incomplete data.NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in rail-

roads, and for all nonsupervisory employees in other industries. Data are for pay-roll periods ending closestto the middle of the month except in railroads where monthly pay roll and employment figures are used.



TABLE D—11.—Average weekly hours in selected industries, 1929-49

Period

Manufacturing

Total Durablegoods

Non-durablegoods

Bitumi-nouscoal

mining

Build-ing

con-struc-tion i

Class Isteamrail-

roads

Tele-phone

Whole-sale

tradeRetailtrade

Hotels(year

round.


19301931193219331934

19351936193719381939

194019411942..__19431944

1945194619471948

1948—First half.Second

half....

1949—Firsthalff

1948—JanuaryFebruaryMarchAprilMayJune.. _.JulyAugustSeptember...OctoberNovember...December

1949—JanuaryFebruaryMarch*April *May *

44.2

42.140.538.338.1

36.639.238.635.637.7

38.140.642.944.945.2

43.440.440.340.1

40.2

38.9

40.540.240.440.139.940.239.840.139.840.039.840.0

39.539.339.038.338.6

(0

0 )C1)32.634.833.9

37.341.040.035.038.0

39.342.145.146.646.6

44.140.240.640.5

40.6

40.4

39.5

40.940.540.940.540.140.540.040.740.040.940.440.7

40.239.939.439.039.1

0)

C1)0 )41.940.035.136.137.737.436.137.4

37.038.940.342.543.1

42.340.540.139.6

39.8

39.4

38.3

40.039.939.939.639.639.839.539.539.639.139.139.3

38.738.838.637.638.0

38.4

33.528.327.229.527.0

26.428.827.923.527.1

28.131.132.936.643.4

42.341.640.638.0

38.3

37.7

36.8

40.95 38.7

40.65 27.0

40.339.9

5 34.239.437.938.637.138.5

39.338.036.337.4

28.9

30.132.833.432.132.6

33.134.836.438.439.6

39.038.137.6

«37.3

36.9

37.4

36.5

37.136.436.936.737.037.937.837.837.637.336.437.8

37.036.536.136.3(

44.8

43.141.138.938.840.4

41.142.543.242.543.4

44.045.646.948.749.1

48.545.946.346.1

46.2

46.0

45.5

46.646.546.745.245.046.946.146.346.046.245.745.6

45.245.945.5(

C1)

0)

88838.838.939.139.540.140.541.942.3

()39.437.339.2

39.0

39.4

38.5

38.938.738.738.839.439.539.839.439.439.539.438.7

38.438.738.438.3(

0)

0)

8841.342.642.842.241.7

41.241.041.342.242.9

42.741.841.241.1

41.0

41.2

40.9

41.041.140.941.041.241.141.241.341.241.041.241.3

41.140.840.740,9()

0)

80)41.5

41.843.543.342.643.0

42.942.541.640.540.3

40.340.540.240.1

39.9

40.2

40.0

39.840.039.839.839.940.340.841.040.239.739.540.2

40.040.039.940.1

0)

0)0)0)0)

47.2

47.848.347.746.46.

46.345.645.344.744.5

44.243.944.544.2

44.2

44.2

43.9

43.944.644.044.244.244.144.044.943.944.244.144.1

43.943.843.943.8

1 Not available.2 Average for the year not available because new series was started in April.3 Not comparable with previous data.* Preliminary estimates based on incomplete data.« Data reflect work stoppages.

NOTE.—Data are for production workers in manufacturing and mining, hourly-rated employees in rail-roads, and for all nonsupervisory employees in other industries. Data are for pay-roll periods endingclosest to the middle of the month except in railroads where monthly pay-roll and employment figures areused.


97


TABLE D-12.—Physical production index of goods and utilities, 1929-A9

[1935-39=1001]

Period

Weights:2

TotalNonagricultural . . .

1929

19301931 -19321933 -- .-1934 -

1935 . _1936193719381939

1940 . __194119421943 -1944

1945194619471948


1949—First n a if s

Totalpro-

duction

100.0

112

9786707375

8799

11194

109

122152185207203

183167179187

00(3)eo

Agri-cultur-al pro-

duction

19.2

97

951041019379

9685

108105106

110114128125130

129134129140

(4)

w(4)

Nonagricultural production

Total

80.8100.0

116

9882636975

8510211191

110

124162198226220

196174191198

198198

189

Industrial production

Total

55.468.5

110

9175586975

8710311389

109

125162199239235

203170187192

192192

181

Manu-factures

50.662.6

110

9074576874

8710411387

109

126168212258252

214177194198

199198

187

Miner-als

4.85.9

107

9380677680

8699

11297

106

117125129132140

137134149155

153157

144

Con-struc-tion

7.69.4

180

153124795358

69101106101123

13318220211260

68128146174

171179

171

Trans-porta-tion

12.916.0

117

10489737683

88101no95

106117146185220230

222200212209

208210

195

Elec-tricandgas

utili-ties

4.96.1

82

8278717278

8597

106100112

123141158184193

190192219243

243243

253

1 All half year data have been seasonally adjusted except the electric and gas utilities for which no satis-factory adjustment factor is available.

2 Computed from the Department of Commerce national income data. The weight factors are per-centages of the national income for each industry to the total for the 6 industries. The weight for con-struction has been adjusted to include force account and other construction done outside of the contractconstruction industry, the weights for other industry groups to exclude such construction.

3 Not available. See footnote 5.* Because of the extreme seasonal nature of agricultural crop production, only an annual index has been

computed.« Preliminary estimates based on incomplete data.

Sources: Based on the following data:Agricultural production: Department of Agriculture index of farm output which measures the phy-

sical volume of farm production for human use.Minerals: Federal Reserve index of mineral production.Manufactures: Federal Reserve index of manufacturing production.Construction: Department of Commerce value of new construction activity deflated by their index

of construction costs and converted into relatives with 1935-39 as 100.Transportation: Department of Commerce index of transportation. The figures for 1948 and 1949

are estimated by the Board of Governors of the Federal Reserve System on the basis of transpor-tation data.

Electric and gas utilities: Based on the following series: Electric power generated for public use asreported by the Federal Power Commission, and sales of gas to consumers as reported by theAmerican Gas Association. The two series are converted into relatives with the average for theperiod 1935-39 as 100. The relative series are combined into an index of public utility productionwith electric power given a weight of 73 and gas 27, the respective percentages of the revenues ofeach of the utilities to the total revenues produced by both in the base period 1935-39.


TABLE D-13.—Industrial production index, 1929-49

[1935-39=100, seasonally adjusted]

Period


193019311932 _ -19331934 _ _.

1935 __- _1936193719381939

1940 .1941 ._-19421943. _.1944

1945194619471948


1949— First half *

1948—January. _ _FebruaryMarchApril _MayJuneJulyAugustSeptember _October _NovemberDecember

1949—January. _ . .FebruaryMarchAprilMayJune'

Totalindustrialproduction

110

9175586975

8710311389

109

125162199239235

203170187192

192192

181

193194191188192192186191192195195192

191189184179174169

Manufacture

Total

110

9074576874

8710411387

109

126168212258252

214177194198

199198

188

201201200195197198192197199202201199

198196193185179175

Durable

132

9867415465

8310812278

109

139201279360353

274192220225

224226

214

229226229217221222219223225231229231

227226223213201194

3

Nondurable

93

8479707981

9010010695

109

115142158176171

166165172177

178176

166

178180177177178179169177178179178173

175173168162161159

Minerals

107

9380677680

8699

11297

106

117125129132140

137134149155

153157

144

154155142147162159153159156158161156

149149136148146134

1 Preliminary estimates based'on incomplete data.Source: Board of Governors of the Federal Reserve System.

99


TABLE D-14.—New construction activity, 1929^-9

[Value put in place, millions of dollars]

Period

Totalnew

. con-struc-tion i

Private construction

Totalpri-vate

Resi-den-tial

build-ing

(non-farm)

Non-resi-den-tial

build-ing 2

Pub-lic

utili-ty

andfarm

Public construction

Totalpub-lic

By source offunds

Feder-al

Stateandlocal

By type of con-struction

Mili-tary

and fed-erally fi-nancedindus-trial

High-ways

Otherpub-lic

929

930— _ .931932933934

19351936193719381939

1940 . . .19411942.. _19431944

1945194619471948

1948-FirsthalL.

9,873

8,0425,9673,2902,3762,805

3,2304,8365,4875,1866,307

7,04210,49013,4127,7844,136

4,80810,46414,32418, 775

7,476

5,2653,3751,4671,0121,235

1,6762,5503,3903,0763,808

4,3905,4263,0071,7441,823

2,7168,25311,17914,563

2,797

1,4461,228462278361

6651,1311,3721,5112,114

2,3552,7651,315650535

6843,1835,2607,223

2,822

2,0991,104499404455

472712

1,088764785

1,0281,486635232350

1,0143,3463,1313,578

1,857

1,7201,043

506330419

539707930801

1,0071,1751,057862938

1,0181,7242,- 7883,762

2,397

2,7772,5921,8231,3641, 570

1,5542,2862,0972,1102,499

2,6525,06410, 4056,0402,313

2,0922,2113,1454,212

237

338451510552720

1,2621,154989

1,257

1,3973.8539,5445,6141,912

1,5581,0961,1811,339

2,160

2,4392,1411,313812850

7261,024943

1,1211,242

1,2551,211861426401

5341,1151,9642,873

19

2940343858

39333974148

5492,9008,4534,2181,344

1,160272229157

1,254

1,5051, 351961809826

709927902858867

800616420

7781,3001,585

Totals for period, not adjusted for seasonal variation

Second half

1949—First half 3

1948—JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember. __

1949—January. _February.March _._._AprilMay a.—June 3

8,15910,616

8,453

1,1801,0491,2261,3781,5721,7541,8741,9341,9011,8141,6461,447

1,2931,1721,2671,3781,5841,759

1,124

1,2431,201828517

1,3261,1561,1781,484

1,2211,3641,3361,402623

5461,1611,6162,470

6,5198,044

6,213

974875

1,0011,0991,2221,3481,4231,4541,4271.3551,2561,129

1,002905951997

1,1171,241

3,2573,966

2,870

500410490550625682707720707670615547

475400420445530600

1,6401,938

1,596

270263266263275303321329331327325305

285271262251257270

1,6222,140

1,747

204202245286322363395405389358316277

242234269301330371

1,6402,572

2,240

206174225279350406451480474459390318

291267316381467518

521818

650

67547187

112130143154156146123

96

817291

113139154

1,1191,754

1,590

139120154192238276308326318313267222

210195225268328364

8176

52

141213151413131413131310

77

109

109

5591,026

648

54405789

140179206220200186131

83

685268

100160200

1,0001,470

1,540

138122155175196214232246261260246225

216208238272297309

1 Excludes construction expenditures for crude petroleum and natural-gas drilling, and, therefore doesnot agree with the new construction expenditures in the gross national product.

2 Excludes farm and public utility; for 1929-32 includes negligible amount of public industrial and com-mercial building not segregable.

3 Preliminary estimates based on incomplete data.


Sources: Departments of Commerce and Labor.

xoo


TABLE D-15.—Business expenditures for new plant and equipment, 1929-49


Period Total

Manufacturing and mining

Total

3,596

2,5411,435

930992

1,460

1,7902,4503,3301,8302,310

3,1404,0803,1702,6102,890

3,6506,4708,1509,140

Manu-factur-

ing

(3)

(3)

8(3)(3)(3)(3)(3)(3)1,930

2,5803,4002,7602,2502,390

3,2105,9107,4608,340

Mining

(3)

(3)

(3)(3)(3)(3)

(3)

(3)(3)

(3)380

560680410360500

440560690800

Transportation

Rail-road

840

865360164101218

166306525238280

440560540460580

550570910

1,320

Other

(<)

(4)(4)

(*)

8(4)<«)(4)(4)280

390340260190280

320660800700

Hiiectricand gasutilities

(4)(4)

(4)

(4(4(4

. (4480

550710680540490

6301,0401,9002,680

Com-mercial

andmiscel-laneous 2

1929.

1930.1931.1932.1933.1934.

1935.1936.1937-1938.1939.

1940.1941.1942..1943.1944..

1945..1946..1947..1948..

9,165

7,6104,7122,6082,1373,080

3,7385,0776,7304, 5205,200

6,4908,1906,1104,5305,210

6.63012,04016,18019,230

Annual rates, not adjusted for seasonal variation

1948—First half

Second half

1949—First half 8_

1948—First quarterSecond quarter..Third quarter...Fourth quarter..

1949—First quarter 8__.Second quarter J.Third quarter.5..

17,98020,480

18,560

16,68019,28019,32021,640

17,84019,28018, 520

4,729

4,2042,9171,5141,0441,402

1,7822,3212,8752,4521,850

1,9802,4901,470730970

1,4803,3004,4305,390

8,6409,660

8,400

7,9209,3609,160

10,160

8,1608,6408,120

7,8808,820

7,620

7,2008,5608,3609,280

7,4007,8407,360

760840

780

720800800880

760800760

1,1601,480

1,540

1,0801,2401,3201,640

1,4401,6401,240

740680

540

720760680680

5205fi0680

2,2803,080

2,980

2,0002,5602,7603,400

2,7203,2403,320

5,1605,600

5,120

4,9605,3605,4405,760

5,0405,2005,120

iExcludes agriculture.* Commercial and miscellaneous includes trade, service, finance, and communication for all years shown.

Prior to 1939, miscellaneous also included transportation other than railroad, and electric and gas utilities.which are not available separately for these years.

3 Not available separately for years prior to 1939.4 Included in commercial and miscellaneous prior to 1939.J Estimates for first and second quarter 1949 are preliminary actual expenditures; the third quarter o

1949 is based on anticipated capital expenditures of business.

NOTE.—These figures do not agree with the totals included in the gross national product estimates of theDepartment of Commerce, principally because the latter cover agricultural investment and also certainequipment and construction outlays chareed to current expense. Figures for 1929-44 are Federal ReserveBoard estimates based on Securities and Exchange Commission and other data.

Detail will not necessarily add to totals because figures are rounded to the nearest $10,000,000.

Sources: Securities and Exchange Commission and Department of Commerce (except as noted).

I O I


TABLE D-16.—Inventories and sales in manufacturing and trade, 1939-49


Period

1939

19401941194219431944

1945194619471948


1948—JanuaryFebruaryMarch.AprilMayJuneJulyAugustSeptemberOctoberNovemberDecember...

1949—JanuaryFebruaryMarchAprilMay,4

Manufacturing

Millions ofdollars

Inven-tories i

11,516

12,87317,02419, 22119,89719,122

17,92423,43528,02031,713

29, 72731,713

28, 50128,76829,06429,16129,43729, 72730,23630,42930, 71030,84831,22531,713

32,06232,07031,79331, 26630,823

Sales 2

5,112

5,8598,17210,34612,60313,402

12,37112,02015,67117, 587

17,12818,045

16,55216,22518,11717, 22916,77717, 87116,403

18, 78118,80717,98018,130

16,69116,42418,10716,76316,190

Ratio ofaverageinven-

tories tomonthly

sales8

2.11

2.061.781.781.521.46

1.501.681.671.70

1.701.71

1.711.761.601.691.751.661.831.671.631.641.731.74

1.911.951.761.881.92

Wholesale

Millions ofdollars

Inven-tories i

3,200

3,3574,1513,7023,5773,686

4,2165,8237,5458,315

7,9538,315

7,8507,8857,8697,7777,8017,9537,9308,1008,2438,4008,5178,315

8,5278,5678,4458,1527,884

Sales 2

2,505

2,7903,6504,0164,3304,505

4,7776,1387,3047,867

7,5588,176

7,6927,1217,7267,6527,3897,7667,7968,1618,2868,3768,2428,196

7,1636,8027,4896,9597,094


tories tomonthly

1.21

1.171.041.01.82.83

.79

.78

.951.02

1.041.01

1.001.101.021.021.051.011.02.98.99.99

1.031.03

1.181.261.141.191.13

Retail trade

Millions ofdollars

Inven-tories i

5,285

5,7677,2627,3076,8726,906

7,04910,59112,42613,938

13,63713,938

12, 77913,62514,28014,16413,99213,63713,49813,97214, 69515,28415,65213,938

13, 53813,85514, 53414, 34413,831

Sales 2

3,504

3,8664,6244,8035,3105,798

6,3878,3999,86010,829

10,28811,371

9,6848,94810, 73410, 70510,78210,87410,73810,67411,05811,54211,01913,194

9,4168,91810, 52511,11710,805


tories tomonthly

sales 8

1.53

1.481.481.721.371.29

1.191.101.221.30

.34

.28

.30

.48

.30

.33

.31

.27

.26

.291.301.301.401.12

1.461.541.351.301.30

1 Book value end of period.2 Monthly average shown for year and half year and total for month.3 Book value based on centered averages of month-end figures.4 Preliminary estimates based on incomplete data.NOTE.—The inventory figures in this table do not agree with the estimates of "change in business inven-

tories" included in the gross national product since they cover only manufacturing and trade rather thanall business, and show inventories in terms of current book value without adjustment for revaluationor seasonal variation.

Detail will not necessarily add to totals because of rounding.Source: Department of Commerce.

IO2


TABLE D-17.—Manufacturers' inventories by stage of fabrication and as ratios tosales, 1939-49


Period

Materialsand goodsin process

Durable goods industries

Book value of in-ventories at endof period (mil-lions of dollars)

Finishedgoods


Ratio of averageinventories tomonthly sales l

Finishedgoods


Nondurable goods industries

Book value of in-ventories at endof period (mil-lions of dollars)

Finishedgoods


Ratio of averageinventor ies tomonthly sales *

Finishedgoods

1939..

1940..1941..1942..1943..1944..

1945..1946.1947.1948.

1948—First half--Second half—

1948—JanuaryFebruary-MarchApril -MayJuneJulyAugustSeptember-OctoberNovember. _December..

1949—JanuaryFebruary...MarchApril.Maya

3,224

4,0736,3218,0738,7877,886

6,3918,6159,794

10,631

9,89810,631

9,7949,7779,6919,7649,8469,89810,07310,21210,40510,46310,51110,631

10,78210,78510,63710,37710,142

1,948

2,0542,0312,0001,9422,021

1,9462,5183,5414,204

3,9514,204

3,6623,7483,8753,9283,9343,9513,8943,8203,8473,8714,0694,204

4,3604,4944,6434,7454,678

1.63

1.521.411.461.301.22

1.241.661.491.44

1.441.40

1.531.511.321.421.481.371.541.421.361.351.401.37

1.541.551.381.471.50

1.06

.84

.55

.41

.30

.29

.34

.49

.49

.55

.56

.53

.56

.57

.52

.57

.59

.55

.61

.54

.51

.50

.53

.54

.62

.64

.59

.65

3,725

4,0345,9196,3836,7056,720

6,9178,75510,26110,445

10,30110,445

10,39410,14810,33210,31510,27710,30110,51510,57610,47710,45510,47010,445

10,37010,2109,9029,5729,322

2,619

2,7122,7532,7652,4632,495

2,6703,5474,4246,433

5,5776,433

4,6515,0955,1665,1545,3805,5775,7545,8215,9816,0596,1756,433

6,5506,5816,6116,5726,682

1.07

1.121.111.131.071.02

1.031.041.00

1.00

1.021.05.95

1.001.01.96

1.05.96.94.95

1.001.00

1.071.09.97

1.021.01

0.83

.77

.61

.51

.43

.38

.39

.41

.42

.52

.49

.56

.45

.50

.48

.50

.52

.51

.57

.53

.53

.54

.58

.67

.69

.64

.69

.71

1 Inventories based on centered averages of month-end figures.2 Preliminary estimates based on incomplete data.Source: Department of Commerce.

IO3


TABLE D—18.—Sales, stocks, and outstanding orders at 296 department stores,1939-49

Period

Millions of dollars i

Sales(total formonth)

128

136156179204227

255318337353

317389

303

272264356333339338270298360390414599

267255320347328

Stocks(end ofmonth)

344

353419599509535

563715826916

896937

873

799890954943921866834897948

1,0621,058

821

790852918907897

Out-standingorders(end ofmonth)

(2)

108194263530560

729909552466

462469

304

629571416357338462551545539507379292

388378310236210

Ratio ofstocksto sales

2.69

2.602.693.352.502.36

2.212.252.452.59

2.832.41

2.90

2.943.372.682.832.722.563.093.012.632.722.561.37

2.963.342.872.612.73

Ratio oforders

to sales

(2)

0.791.241.472.602.47

2.862.861.641.32

1.461.21

1.04

2.312.161.171.071.001.372.041.831.501.30

.92

.49

1.451.48

.97

.68

.64

Ratio oforders

to stocks


1940-194119421943. „.1944

19451946.—19471948

1948—First half._.Second half.

1949—First half»..

1948—JanuaryFebruaryMarchAprilMayJune—JulyAugust-.SeptemberOctoberNovemberDecember

1949—JanuaryFebruaryMarchAprilMay»._ _.

(*)

0.31.46.44

1.041.05

1.291.27.67.51

.52

.50

.35

.79

.64

.44

.38

.37

.53

.66

.61

.57

.48

.36

.36

.49

.44

.34

.26

.23

1 Not adjusted for seasonal variation.2 Not available.• Preliminary estimates based on incomplete data.

NOTE.—These figures represent retail sales, stocks, and outstanding orders as reported by a sample of 296of the larger department stores located in various cities throughout the country and are not estimates of totalsales, stocks, and outstanding orders for all department stores in the United States. Data are not availableprior to 1939.

Detail will not necessarily add to totals because of rounding.

Source: Board of Governors of the Federal Reserve System.

IO4


TABLE D-19.—Consumers' price index, 1929-49

For moderate-income families in large cities

[1935-39=100]

Period Allitems

122.5

119.4108.797.692.495.7

98.199.1

102.7100.899.4

100.2105.2116.5123.6125.5

128.4139.3159.2171.2

169.1173.3

169.7

168.8167.5166.9169.3170.5171.7173.7174.5174.5173.6172.2171.4

170.9169.0169.5169.7169.2

Food

132.5

126.0103.986.584.193.7

100.4101.3105.397.895.2

96.6105.5123.9138.0136.1

139.1159.6193.8210.2

208.3212.1

202.3

209.7204.7202.3207.9210.9214.1216.8216.6215.2211.5207.5205.0

204.8199.7201.6202.8202.4

Apparel

115.3

112.7102.690.887.996.1

96.897.6

102.8102.2100.5

101.7106.3124.2129.7138.8

145.9160.2185.8198.0

195.7200.2

193.9

192.1195.1196.3196.4197.5196.9197.1199.7201.0201.6201.4200.4

196.5195.1193.9192.5191.3

Rent

141.4

137.5130.3116.9100.794.4

94.296.4

100.9104.1104.3

104.6106.2108.5108.0108.2

108.3108.6111.2117.4

116.4118.4

120.1

115.9116.0116.3116.3116.7117.0117.3117.7118.5118.7118.8119.5

119.7119.9120.1120.3120.4

Fuel,elec-

tricity,and re-friger-ation

112.5

111.4108.9103.4100.0101.4

100.7100.2100.299.999.0

99.7102.2105.4107.7109.8

110.3112.4121.1133.9

130.8137.1

137.7

129.5130.0130.3130.7131.8132.6134.8136.8137.3137.8137.9137.8

138.2138.8138.9137.4135.4

Housefur-

nish-ings

111.7

108.998.085.484.292.8

94.896.3

104.3103.3101.3

100.5107.3122.2125.6136.4

145.8159.2184.4195.8

193.9197.7

193.4

192.3193.0194.9194.7193.6194.8195.9196.3198.1198.8198.7198.6

196.5195.6193.8191.9189.5

Miscel-laneous

1929

19301931193219331934

1935._._ __..1936193719381939

19401941194219431944

1945194619471948—_ -

1948—First half—Second half

1949—First half K

1948—JanuaryFebruary._MarchAprilMay __JuneJulyAugustSeptember.OctoberNovember.December _.

1949—JanuaryFebruary. _MarchAprilMay

104.6

105.1104.1101.798.497.9

98.198.7

101.0101.5100.7

101.1104.0110.9115.8121.3

124.1128.8139.9149.9

147.0152.9

154.3

146.4146.4146.2147.8147.5147.5150.8152.4152.7153.7153.9154.0

154.1154.1154.4154.6154.5

* Average of data for January through May.


105


TABLE D-20.—Wholesale price index, 1929-49

[1926=100]

Period

Other than farm products and foods

11.103

1929..

19301931193219331934... - .

19351836....1937...19381939

1940 __194119421943.—1944....

1945194619471948

1948—First half

Second half

1949—First half»

1948—JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovember ._December

1949—JanuaryFebruaryMarchAprilMayJune 1

95.

86.473.064.865.974.9

80.080.886.378.677.1

78.687.398.8

103.1104.0

105.8121.1152.1165.1

163.7166.6

157.3

165.9161.0161.163.0164.2166.4168.8169.8168.9165.4164.0162.4

160.6158.1158.4156.9155.7154.0

104.9

64.848.51.465.3

78.880.986.468.565.3

67.782.4

105.9122.6123.3

128.2148.181.2188.3

190.4186.4

170.4

199.2185.3186.0186.7189.1196.0195.2191.5189.9183.5180.8177.3

172.5168.3171.5170.5171.2168.5

99.9

90.574.661.060.570.5

83.82.185.573.670.4

71.382.799.6

106.6104.9

106.2130.7168.7179.1

176.9181.3

163.3

179.8172.4173.8176.7177.4181.4188.3189.8186.9178.2174.3170.2

165.8161.5162.9162.9163.9163.0

91.6

85.275.070.271.278.4

77.979.685.381.781.3

83.089.095.596.998.5

99.7109.5135.2151.0

148.8153.1

149.3

148.6147.9148.1149.0149.5149.9151.4153.3153.6153.4153.6153.1

152.9151.150.7148.8146.7145.0

109.1

100.086.172.980.986.6

89.695.4

104.92.895.6

100.8108.3117.7117.5116.7

118.1137.2182.4188.8

190.1187.0

180.9

200.9193.3186.3187.0188.4187.7189.2188.4187.4185.5186.2185.3

184.8182.3180.4179.9179.3178.5

90.4

80.366.354.964.872.9

70.971.576.366.769.7

73.884.896.997.498.4

100.1116.3141.7149.8

150.9148.!

142.7

149.4150.0151.1151. 7152.1151.4150.8150.4149.3148.3147.4146.7

146.1145.2143.8142.2140.5138.5

83.0

78.567.70.366.373.3

73.76.277.76.573.1

71.776.278.580.883.0

84.090.1

108.7134.2

131. 5136.9

133.3

130.0130.9130.9131.5132.6133.1135.9136.4136.9137.3137.6137.2

137.1135.9134.3132.0130.1130.5

100.5

92.184.580.279.886.9

86.487.095.795.794.4

95.899.4

103.8103.8103.8

104.7115.5145.0163. 6

156.4170.8

171.9

154.3155.3155.9157.2157.1158.6162.2171.0172.0172.4173.3173.8

175.6175.5174.4171.4168.0166.5

95.4

89.979.71.477.0

85.386.795.290.390.5

94.8103. 2110.2111.4115.5

117.8132.6179.7199.1

195.3202.8

197.6

194.1193.5193.9195.7197.0197.4200.0203.8204.1203.7203.1202.2

202.3201.5200.0196.5194.0191.5

94.0

88.779.373.972.175.3

79.078.782.677.076.0

77.084.495.594.995.2

95.2101.4127.3135.7

137.3134.1

120.6

139.9135.7137.2137.5136.3137.2135. 7133.2134.5135.5134.4131.1

126.3122.8121.1117.7118.2117.5

94.3

92.784.975.175.881.5

80.681.789.786.886.3

88.594.3

102.4102.7104.3

104.5111.6131.1144.5

142.2146.7

147.1

141.3141.8142.0142.3142.143.2144. 5145.4146.6147.5148.2148.4

148.1148.3148.0147.0146.2145.0

82.6

77.769.864.462.569.7

68.370.577.873.374.8

77.382.089.792.293.6

94.7100.3115.5120.5

121.6119.4

114.6

123.6120.1120.8121.8121. 5121.5120.3119.7119.9119.0119.2118.5

117.3115.3115.7115.6113.6110.0

1 Preliminary estimates based on incomplete data.Source: Department of Labor.

IO6


TABLE D-21.—Indexes of prices received and prices paid by farmers and parity ratio,1929-49

Monthly average:1929 .

1930 . .19311932 .19331934

19351936 .19371938 . . .1939

19401941 .1942 _19431944

1945194619471948 .


1949—First half.

1948—JanuaryFebruaryMarchAprilMayJuneJuly .AugustSeptemberOctober. .NovemberDecember

1949—JanuaryFebruaryMarchApril . . .M a yJune __ __

Period Pricesreceived

August 1909-July 19U=100

149

12890687290

1091141229795

100124159192195

202233278287

291283

259

307279283291289295301293290277271268

268258261260256252

Pricespaid

(includinginterest

and taxes)

1910-1^100

167

160141124120129

130127133126124

125132150162169

172193231249

250249

246

251249248249250251251251250249247247

248245246246245245

Parityratio l

89

8064556070

8490927777

8094

106119116

117121120115

116114

105

122112114117116118120117116111109108

108105106106104103

1 Ratio of prices received to prices paid (including interest and taxes).

Source: Department of Agriculture.

107


TABLE D-22.—Consumer credit outstanding, 1929-49


End of periodTotal

consumercredit

Installment credit

TotalAutomobilesale credit Other i

Chargeaccounts

Otherconsumer

credit 2

1929

1930193119321933.1934 ...

193519361937. _..19381939

19401941194219431944

1945194619471948-

1948—First half-..Second half.

1949—First half *..

1948—JanuaryFebruary. _.MarchAprilMay __.JuneJulyAugust-, . . .September-OctoberNovember,.December..

1949—JanuaryFebruary...MarchAprilMay *June 3

7,628

6,8215,5184,0853,9124,389

5,434

7,4807,0477,969

9,1159,8626,5785,3785,803

6,63710,19113, 67316,319

14, 66916,319

16,150

13,37413,30213, 80514,05914,31114, 66914,72314, 91615, 23115, 51815, 73916,319

15, 74915, 33215,36115,62215,84716,150

3,158

2,6882,2041,5181,5881,860

2,6223,5183,9603,5954,424

5,4175,8873,0482,0012,061

2,3644,0006,4348,600

7,5338,600

9,150

6,4686,5486,8217,0947,3187,5337,7387,9728,1908,2338,3228,600

8,4258,3398,4288,6318,8849,150

1,318

928637322459576

9401,2891,384970

1,267

1,7291,942482175[200

227544,̂151,961

,602,961

2,550

,202,254,367,468,536,602,689,781

,922,961

,965,996

2,1052,2412,3862,550

1,840

1,7601,5671,1961,1291,284

1,6822,2292,5762,6253,157

3,6883,9452,5661,8261,861

2,1373,4565,2836,639

5.9316,639

6,600

5,2665,2945,4545,6265,7825,9316,0496,1916,3326,3446,4006,639

6,4606,3436,3316,3926,4986,600

1,749

1,6111,3811,1141,0811,203

1,2921,4191,4591,4871,544

1,6501,7641,5131,4981,758

1,9813,0543,6123,854

3,3523,854

3,300

3,2403,0613,2753,2363,2453,3523,1853,1303,2273,4573,5573,854

3,4573,1763,1483,2583,2493,300

2,721

2.5221,9331,4531,2431,326

1,5201,8512,0611,9652,001

2,0482,2112,0171,8791,984

2,2923,1373,6273,865

3,7843,865

3,700

3,6663,6933,7093,7293,7483,7843,8003,8143,8143,8283,8603,865

3,8673,8173,7853,7333,7143,700

1 Includes other sale credit and repair and modernization loans insured by Federal Housing Administra-tion.

2 Includes single-payment loans of commercial banks, and pawnbrokers and service credit.3 Preliminary estimates by Council of Economic Advisers.4 Preliminary estimates based on incomplete data.


Source: Board of Governors of the Federal Reserve System (except as noted).

IO8


TABLE D-23.—Loans and investments of all commercial banks and weekly report-ing member banks, 1929-49


End of period 1

1929—June2-

1930—June 2 _ .1931—June2 _1932—June 2 _.1933—June2

1934—June2 _ .

1935—June 3

1936 . ._ . . .193719381939 . - .

19401941 _ _194219431944 .

19451946 .19471948

1948—JanuaryFebruary _MarchApril .May._JuneJuly . .AugustSeptember. .OctoberNovemberDecember.-. . _

1949—January 8

February 'March fi.April5

May fi.__ .June 6_

All commercial banks

Totalloansand

invest-ments

49.4

48.944.936.130.432.7

34.639.538.338.740.7

43.950.767.485.1

105.5

124.0114.0116.3114.3

116.6115.5113.6114.3114.6113.9114.8115.1113.6114.1114.2114.3

114.5113.4112.5112.5113.4

Loans

35.7

34.529.221.816.315.7

14.916.417.116 417.2

18 821.719.219.121.6

26 131.138.142.5

38.238.738.938 839.539.940.140 641.741.642.342.5

42.442.042.441.340.941.0

Total

13.7

14.415.714.314.017.0

19.723.121.222.323.4

25.129.048.266.083.9

97.982.978.271.8

78.476.974.775.575.074.074.674.571.972.571.971.8

72.071.470.171.272.6

Investments

U. S. Gov-ernmentobliga-tions

4.9

5.06.06.27.5

10.3

12.715.314.215.116.3

17.821.841.459.877.6

90.674.869.262.6

69.467.965.566.365.964.865.365.162.563.362.862.6

63.062.260.962.063.2

Othersecuri-

ties

8.7

9.49.78.16.56.7

7.07.87.17.27.1

7.47.26.86.16.3

7.38.19.09.2

9.09.09.39.29.29.29.39 49.49.29.19.2

9.19.19.29.29.3

Weekly reportingmember banks

U

Total

16.7

16.914.511.38.98.5

8.09.29.48.48.8

9.411.410.310.813.0

15.816.723.325.6

23.423.623.523.223.623.723.924.124.924.625.225.6

25.324.925.024.023.723.9

)ans

Commer-cial, indus-trial, and,agricul-

tural

(3)

(3)(3)(8)

4.63.84.4

5.06.76.16.46.5

7.310.314.615.6

14.714.614.414.214.2

* 14.314.514.815.215.415.515.6

15.415.214.914.213.613.2

1 Reporting date nearest end of period.2 June data are used because complete end-of-year data prior to 1936 are not available for U. S. Government

obligations.3 Not available prior to May 12, 1937, when the loan classification was revised.* Beginning June, reported gross, i. e., before deduction of valuation reserves, instead of net as previously

reported.5 Preliminary estimates based on incomplete data.6 Preliminary estimates by Council of Economic Advisers.7 Not available.



log


TABLE D-24.—Adjusted deposits of all banks and currency outside banks, 1929-49


End of period *

1929 _

193O._._ __.1931193219331934

1935. ._1936-.._193719381939.

1940-. .1941194219431944

1945194619471948 -

1948—First half—Second half.

1949—First half *.

1948—JanuaryFebruary..MarchAprilMayJuneJulyAugustSeptember.OctoberNovember.December.-

1949—January 6-_February 5_March 5

April*May 8

June 4

Total depos-its adjustedand curren-cy outside

banks

54.6

53.247.944.941.546.3

51.356.455.858.163.3

70.076.391.3

112.4130.2

150.8164.0170.0169.1

165.7169.1

165.9

168.9167.1164.0165.0165.1165.7166.0166.7166.9168.1168.1169.1

168.2166.3164.2165.5165.7165.9

Demanddeposits

adjustedJ

22.8

21.017.415.715.018.5

22.125.524.026.029.8

34.939.048.960.866.9

75.983.387.185.5

82.785.5

82.5

86.684.681.582.782.882.783.383.883.985.185.285.5

85.483.481.182.482.682.5

Timedeposits *

28.2

28.726.024.521.723.2

24.225.426.226.327.1

27.727.728.432.739.8

48.554.056.457.5

57.457.5

58.3

56.556.856.956.956.957.457.357.357.357.357.057.5

57.657.858.058.158.258.3

Currencyoutsidebanks

3.6

3.64.54.74.84.7

4.95.55.65.86.4

7.39.6

13.918.823.5

26.526.726.526.1

25.626.1

25.1

25.825.725.625.425.425.625.525.625.725.725.926.1

25.225.125.124.925.025.1

i Reporting date nearest end of period.»Includes demand deposits, other than interbank and 17. S. Government, less cash items in process of

collection.3 Includes deposits in commercial banks, mutual savings banks, and Postal Savings System.4 Estimates by Council of Economic Advisers.5 Preliminary estimates based on incomplete data.



I I O


TABLE D-25.—Estimated ownership of Federal securities, 1939-49

[Billions of dollars—par values *]

End of period

193919401941 __1942.-.1943.1944-. _.194519461947 __1948-

1948—First half _Second half

1949—First half •

1948—JanuaryFebruary.. _MarchApril __May_JuneJuly _August __ _ .SeptemberOctober-November _ _.December

1949—JanuaryFebruary. _ __MarchApril _.May 6 _.June6

Gross debt and guaranteed obligations outstanding

Total

47.650.964.3

112.5170.1232.1278.7259 5257.0252.9

252.4252.9

252.8

256 7254.7253.1252.3252.3252 4253.4253.1252.7252.5252.6252.9

252.7252.7251 7251.6251.9252.8

Held byU. S.

Govern-ment

agenciesand trust

funds

6.57.69 5

12.216.921.727.030 934.437.3

35.737.3

38.3

34 634.935.034.834.935 736.436.536.836.837.037.3

37.437.537.737.537.538.3

Total

41.143.354.7

100.2153.2210.5251.6228 6222.6215.5

216.6215.5

214.5

222.1219.8218.1217.5217.4216 6217.1216.6215.9215.7215.5215.5

215.3215.2214.0214.0214.4214.5

Stateand localgovern-ments *

0.4.5.7

1.02.14.36.56.37.37.9

7.87.9

8.1

7 37.47.87.87.77.87.98.07.87.87.97.9

7.97.98.08.18.18.1

Held bj

Com-mercialbanks 3

15.917.321.441.159.977.790.874.568.762.5

64.662.5

63.5

69.067.465.166.165.664.665.164.862.463.062.462.5

62.762.260.661.963.263.5

r public

FederalReservebanks

2.52.22.36.2

11.518.824.323.322.623.3

21.423.3

19.3

21.921.020.920.320.721.421.321.623.423.023.223.3

22.122.321.721.119.719.3

Nonbankprivatecorpo-rations

andassoci-ations *

12.012.516.327.441.256.065.359.557.554.3

55.954.3

54.9

57.357.257.556.456.655.955.455.054.854.454.654.3

54.754.655.254.654.854.9

Indi-viduals •

10.410.914.124.538.453.564.864.966.667.6

67.067.6

68.7

66.666.766.866.866.967.067.367.467.467.567.567.6

67.968.268.668.468.668.7

1 United States savings bonds, series A-D, E, and F, are included at current redemption values.2 Includes trust, sinking, and investment funds of State and local governments and their_agencies, and

Territories and insular possessions.3 Includes commercial banks, trust companies, and stock savings banks in the United States and in

Territories and insular possessions. Figures exclude securities held in trust departments.4 Includes insurance companies, mutual savings banks, savings and loan associations, dealers and brokers

and foreign accounts in this country. Beginning with December 1946, the foreign accounts include invest-ments by the International Bank for Reconstruction and Development and the International MonetaryFund in special noninterest bearing notes issued by the U. S. Government. Beginning with June 30,1947, includes holdings of Federal land banks.

8 Includes partnerships and personal trust accounts.• Preliminary estimates by Council of Economic Advisers.


Source: Treasury Department (except as noted).

844384—49 I I I


TABLE D-26.—Bond yields and interest rates} selected years, 1929-49

[Percent per annum]

Period

U. S. Government securityyields

9-12monthcertifi-cates of

indebted-ness1

Bonds

Long- Iterm par-tially tax-exempt 2

15 yearsand over,

taxable

High grade cor-porate bond

yields(Moody's)

Aaabonds

Baabonds

Bankrates onshort-term

businessloans

(3)(3)(3)(3)2.1

2.02.62.22.12.1

2.5

2.42.472.602.64

2.70(3)

Bankersaccept-ances 90d a y s -NewYork

5.03.63.13.43.44

.44

.44

.44

.61

.87

1.11

1.061.061.131.19

1.191.19

FederalReserve

Bankdiscountr a t e -NewYork

1929 average.1933 average .1935 average .1937 average .1939 average.

1941 average .1943 average.1945 average.1946 average.1947 average .

1948 average .

3.603.31

1948—First quarterSecond quarter.Third quarterFourth quarter.

1949—First quarter....Second quarter e

0.75.81.82

1.14

1.091.091.141.22

1.221.22

2.792.742.41

2.051.981.66

82.472.372.192.25

2.44

2.452.422.452.44

2.402.38

4.734.493.603.263.01

2.772.732.622.532.61

2.82

2.852.772.832.82

2.712.70

5.907.765.755.034.96

4.333.913.293.053.24

3.47

3.533.403.423.52

3.463.45

5.162.561.501.291.00

1.00* 1.00<1.00U.00

1.00

1.34

.22

.25

.38

.50

.50..50

1 Tax exempt prior to March 1,1941; taxable thereafter.2 Average of yields on all outstanding partially tax-exempt Government bonds due or callable after 8 years,

from 1919 to 1925; after 12 years, from 1926 to 1934; and after 15 years, from 1935.3 Not available.* From October 30,1942 to April 24, 1946, a preferential rate of 0.50 percent was in effect for advances se-

cured by Government securities maturing in 1 year or less.* No partially tax-exempt bonds due or callable in 15 years.* Average of April and May data.Sources: Treasury Department, Moody's Investors Service, and Board of Governors of the Federal

Reserve System.

1 1 2


TABLE D-27.—Profits before and after taxes, all private corporations, 1929-49[Billions of dollars]

PeriodCorporate

profitsbeforetaxes

Corporatetax

liability l

Corporate profits after taxes

Total Dividendpayments

Undis-tributedprofits

1929.

1930193119321933.1934.

19351936193719381939

19401941194219431944

1945194619471948

1948—First half.Second half

1949—First half 3

1948—F irst quarter. _.Second quarter.Third quarter..Fourth quarter.

1949—First quarter *_.Second quarter

3.3- . 8

-3 .0.2

1.7

3.25.76.23.36.5

9.317.221.124.524.3

20.421.829.832.8

31.334.4

27.2

30.532.134.034.7

28.825.5

1.4

.5

.4

.5

.7

1.01.41.51.01.5

2.97.8

11.714.213.5

11.69.0

11.712.8

8.4

2.5- 1 . 3- 3 . 4- . 41.0

2.34.34.72.35.0

6.49.49.4

10.410.8

8.712.818.120.1

5.8

5.54.12.62.12.6

2.94-64.73.23.8

4.04.54.34.54.7

4.75.66.97.8


12.213.4

10.9

11.812.513.313.5

11.610.2

19.221.0

16.2

18.719.620.821.2

17.215.3

7.48.0

8.2

7.47.47.78.3

8.38.0

2.6

- 3 . 0-5 .4- 6 . 0-2 .4- 1 . 6

- . 6- . 3

1.2

2.44.95.15.96.1

4.07.2

11.212.3

11.813.0

8.1

11.312.213.112.9

8.97.3

3 Federal and State corporate income and excess profits taxes.2 Minus 8 million dollars.3 Estimates based on incomplete data; by Council of Economic Advisers.




TABLE D-28.—Sales and profits of large manufacturing corporations3 1939-49


Period

1939 _. .-

19401941 _.194219431944 .

1945 . _ _194619471948


1948—First quarter ___Second quarterThird quarter.Fourth quarter

1949—First quarter

Durable goods industries(106 corporations) i

Sales

6,748

8,75012,80615,36220,63322,085

18,16112,62319, 83623,818

Profits

Before taxes

734

1,2262,1752,3262,3892,192

1,288607

2,3123,107

After taxes

597

830982782755726

574295

1,3551,836

Nondurable goods industries(94 corporations) *

Sales

3,843

4,2575,4856,4087,6078,263

8,3718,940

11,31313,364

Profits

Before taxes

476

617980

1,0691,2931,339

1,1331,4261,7882,208

After taxes

400

443538438506529

555908

1,1671,474

Totals for period, not adjusted for seasonal variation

11,15412,664

5,4405,7145,9916,673

6,160

1,3601,746

672688788958

841

8031,034

395408470564

498

6,5086,856

3,2193,2893,3223,534

3,221

1,0991,108

546553543565

502

718756

356362362394

327

1 Revised series: See Federal Reserve Bulletin, June 1949, for similar data for the following industry groups;primary metals and products, machinery, automobiles and equipment, foods and kindred products, chem-icals and allied products, and petroleum refining.

Source: Compiled by the Board of Governors of the Federal Reserve System and based on published re-ports of various industrial corporations.

" 4


TABLE D-29.—Relation of profits before and after taxes to investment, privatemanufacturing corporations, by industry groups, 1947—49

Industry groups

Ratio of profits (annual rate) to stockholders'equity

Total

1947 1948

Selected quarters

1948

Firstquarter

Fourthquarter

1949,first

quarter

All private manufacturing corporations

Food .-- -_.Tobacco manufacturesTextile mill products - _Apparel and finished textiles.Lumber and wood products

Furniture and fixtures. -Paper and allied products _Printing and publishing (except newspapers)Chemicals and allied products.Products of petroleum and coal -

Rubber products..-Leather and leather products..Stone, clay, and glass productsPrimary nonferrous metal industriesPrimary iron and steel industries

Fabricated metal productsMachinery (except electrical and transportation) __Electrical machineryTransportation equipment (except motor vehicles)Motor vehicles and parts

Instruments; photographic and optical goods; watchesand clocks

Miscellaneous manufacturing (including ordnance)

All private manufacturing corporations...

Food _Tobacco manufactures, _ _ -Textile mill products _Apparel and finished textilesLumber and wood products

Furniture and fixturesPaper and allied productsPrinting and publishing (except newspapers)Chemicals and allied products..Products of petroleum and coal

Rubber productsLeather and leather productsStone, clay, and glass productsPrimary nonferrous metal industries. _Primary iron and steel industries

Fabricated metal products _Machinery (except electrical and transportation)Electrical machineryTransportation equipment (except motor vehicles)Motor vehicles and parts



Before Federal taxes

24.7

29.516.230.631.434.9

28.933.828.825.118.8

24.223.822.719.319.2

28.025.830.5

4.828.2

22.624.3

24.7

20.921.730.020.529.3

27.326.423.625.224.9

21.017.523.720.822.7

26.826.326.814.433.3

22.520.1

26.8

18.416.039.231.638.8

32.831.225.627.632.8

20.020.018.421.620.8

28.028.828.812.030.8

19.621.2

25.2

20.825.623.69.2

19.2

22.422.818.024.422.4

21.614.025.224.830.0

28.027.632.018.842.0

26.819. 6

After Federal taxes

15.1

17.49.8

18.418.522.0

17.320.817.415.514.0

12.213.813.711.611.7

17.015.418.4

.415.8

14.114.0

15.5

12.513.418.412.118.7

16.216.214.415.918.4

12.010.314.613.213.9

16.615.915.68.4

19.0

13.911.8

16.8

10.810.024.018.824.8

19.619.215.617.223.2

11.212.011.214.012.8

17.217.616.86.8

17.6

12.412.4

15.6

12.415.614.45.2

12.4

13.214.010.016.018.0

12.87.6

15.215.218.4

17.216.818.010.822.8

16.811.2

20.4

16.818.416.817.614.8

16.019.623.222.818.0

13.611.618.821.625.6

20.023.622.015.2

20.816.0

12.8

9.611.610.010.48.8

9.212.014.414.013.2

8.06.4

11.213.614.8

12.014.012.49.6

19.6

12.410.0

Sources: Federal Trade Commission and Securities and Exchange Commission.


TABLE D-30.—Relation of profits before and after taxes to sales, private manufactur-ing corporations, by industry groups, 1947-49

Industry groups

Profits in cents per dollar of sales

Total

1947 1948

Selected quarters

1948

Firstquarter

Fourthquarter

1949,first

quar-ter


All private manufacturing corporations

FoodTobacco manufactures.Textile mill productsApparel and finished textilesLumber and wood products

Furniture and fixtures...Paper and allied productsPrinting and publishing (except newspapers)Chemicals and allied products...Products of petroleum and coal

Rubber products.Leather and leather productsStone, clay, and glass productsPrimary nonferrous metal industriesPrimary iron and steel industries

Fabricated metal products.Machinery (except electrical and transportation)Electrical machineryTransportation equipment (except motor vehicles)Motor vehicles and parts



11.0

7.16.7

13.77.8

18.1

10.117.410.114.214.6

8.77.4

13.114.610.9

12.112.110.42.8

10.7

12.510.8

11.1

5.68.3

13.55.2

15.5

9.213.88.5

13.917.4

8.25.6

14.014.212.4

11.512.010.17.0

12.1

12.59.5

11.5

5.06.6

15.17.6

19.4

11.215.99.1

15.119.1

7.75.9

11.014.611.3

12.012.610.46.9

11.1

12.19.5

10.8

5.510.111.32.3

11.0

7.512.06.2

13.315.2

8.44.5

14.116.214.2

11.212.010.78.6

13.7

13.08.7

9.9

4.67.78.94.8

10.4

6.511.59.1

13.213.8

6.24.1

12.315.213.4

9.811.89.07.2

12.0

12.08.4

After Federal taxes

All private manufacturing corporations..

FoodTobacco manufactures-Textile mill products ._Apparel and finished textiles..Lumber and wood products..

Furniture and fixturesPaper and allied productsPrinting and publishing (except newspapers).Chemicals and allied productsProducts of petroleum and coal __

Rubber products _Leather and leather products.Stone, clay, and glass productsPrimary nonferrous metal industriesPrimary iron and steel industries. _

Fabricated metal productsMachinery (except electrical and transportation)...Electrical machineryTransportation equipment (except motor vehicles).Motor vehicles and parts

Instruments; photographic and optical goods; watches andclocks

Miscellaneous manufacturing (including ordnance).

6.7

4.24.18.24.6

11.4

6.010.76.18.7

10.9

4.44.37.98.86.6

7.47.26.3

. 36.0

7.86.2

7.0

3.35.28.33.19.9

5.58.55.28.8

12.8

4.73.38.69.07.6

7.17.35.94.16.9

7.85.6

7.2

2.94.19.24.5

12.3

6.79.75.69.4

13.5

4.33.56.69.46.9

7.37.76.13.86.4

7.55.5

6.8

3.36.16.91.37.2

4.47.43.48.7

12.2

4.92.58.7

10.08.7

7.07.26.04.97.4

8.25.0

6.1

2.74.85.32.96.4

3.77.05.78.1

10.3

3.72.27.29.57.9

5.87.15.14.57.1

7.25.2


n6


TABLE D—31.—Relation of profits before and after taxes to investment and to sales,all private manufacturing corporations, by size classes, 1947—49

Assets class(thousands of

dollars)

All sizes—.

1 to 249250 to 9991,000 to 4,9995,000 to 9P,999100,000 and over.-

All sizes

1 to 249250 to 9991,000 to 4.9995,000 to 99,999100,000 and over..


Total

1947 1948

Selected quarters

1948

Firstquarter

Fourthquarter

1949,first

quarter

After Federal taxes

Total

1947 1948

Selected quarters

1948

Firstquarter

Fourthquarter

1949,first

quarter

Ratio of profits (annual rate) to stockholders' equity

24.7

24.429.230.627.320.3

24.7

16.123.524.525.724.7

26.8

14.428 028.027.226.8

25.2

2.816.419.626.027.6

20.4

14.417.217.220.022.4

15.1

14.816.918.216.512.9

15.5

9.214.014.715.816.0

16.8

7.216.416.416.417.2

15.6

- . 89.2

11.616.018.0

12.8

8.49.6

10.012.014.4

Profits in cents per dollar of sales

11.0

6.58.8

10.711.911.4

11.1

4.17.49.0

11.313.2

11.5

4.08.4

10.011.613.5

10.9

.75.27.1

11.114.1

9.9

4.06.27.09.7

12.2

6.7

3.95.16.37.27.2

7.0

2.34.45.47.08.6

7.2

2.04.96.07.18.7

6.8

- . 23.04.26.89.2

6.1

2.43.54.05.97.8


TABLE D-32.—Sources and uses of corporate funds, 1947-49 1


Use or source of funds 1947

28.015.0

7.25.9

- . 1

28.915.410.64.5

.313.5

2.62.4

.72.6

o4.43.11.3

- . 9

1948

25.117.2

5.42.5

(3)

26.416.511.64.9

- . 19.91.01.1

(3)1.1

Q

5.94.71.2

- 1 . 3

1949, firsthalf 2

UsesPlant and equipment outlaysInventories (change in book value)Changes in customer receivablesOther current assets

SourcesInternal

Retained profits and depletion allowancesDepreciation allowancesReduction in cash and U. S. Government securities

ExternalChange in trade debtChange in Federal income tax liability..Other current liabilitiesChange in bank loansChange in mortgagesNet new issues _

BondsStocks

Discrepancy (uses less sources) _.

3.88.4

- 1 . 7- 3 . 1

.2

4.06.8

<4.22.6

00- 2 . 9- 3 . 5- . 8- . 2

- 2 . 1.4

3.32.6.7

- . 2

1 Excludes banks and insurance companies.2 Preliminary estimates based on incomplete data. Not adjusted for seasonal variation.3 Less than 50 million dollars.4 Preliminary estimates by Council of Economic Advisers.


Source: Department of Commerce estimates based on Securities and Exchange Commission and otherfinancial data.

117


TABLE D-33.—The international transactions of the United States, 1946-49


Exports of goods and services:Recorded coods'Other goods3

Total goodsServices --Income on investments

Total exports.

Imports of goods and services:Recorded goodsOther goods3

Total goodsServicesIncome on investments

Total imports.—

Surplus of exports of goods and serv-ices:

Recorded goodsOther goods

Total goodsServices _Income on investments

Total surplus of exports

Means of financing surplus of exportsof goods and services:5

Liquidation of gold and dollarassets by foreign countries

Dollar disbursements by:International Monetary Fund.International Bank

United States Government sources:«Grants .._ _.Long and short term loans

United States private sources:RemittancesLong and short term capital._

Total means of financingErrors and omissions

1946total

10,1871,687

11,8742,272

820

14,966

4,933235

5,1681,783

216

7,167

5,2541,452

6,706489604

7,799

1,968

2,2792,774

598335

7,954-155

1947total

15,340716

16,0562,6111,074

19,741

5,755316

6,0712,165

227

8,463

9,585400

9,985446847

11,278

4,513

464297

1,8123,901

568727

12, 282-1,004

1948

Total

12,615830

13,4452,0831,263

16,791

7,124573

7,6972,493

291

10,481

5,491257

5,748-410

972

6,310

857

196176

3,761897

6481,017

7,552-1,242

Firstquar-ter

3,317326

3,643540230

4,413

1,810118

1,92853263

2,523

1,507208

1,7158

167

1,890

353

132101

786490

176253

2,291-401

Secondquar-ter

3,237154

3,391537303

4,231

1,710149

1,859616

59

2,534

1,5275

1,532- 7 9244

1,697

538

2256

81044

159346

1,975-278

Thirdquar-ter

2,935170

3,105526315

3,946

1,729153

1,88277584

2,741

1,20617

1,223-249

231

1,205

158

620

1,190—160

139273

1,626-421

Fourthquar-ter

3,126180

3,306480415

4,201

1,875153

2,02857085

2,683

1,25127

1,278- 9 0330

1,518

-192

36—1

975523

174145

1.660-142

1949

Firstquar-ter

3,268153

3,421475236

4,132

1,789137

1,92655870

2,554

1,47916

1,495- 8 3166

1,578

- 2 7

328

1,289279

151145

1,877-299

Sec-ondquar-ter i

3,350

14,270

1,650

82,460

1,700

I1,810

100

1,485265

} 300

2,185-375

» Preliminary estimates based on incomplete data.2 Figures for recorded exports of goods in 1946 and 1947 have been adjusted to include goods shipped to

United States armed forces abroad for distribution to civilians in occupied areas in order to make themcomparable with figures for 1948. Such shipments are included in exports as recorded by the Bureau of theCensus in 1948 but were not so included in prior years.

»Includes goods sold to or bought from other countries that have not been shipped from or into the UnitedStates customs area and other adjustments.4 Not available.

• All figures for means of financing are on a net basis.• For detail see table D-34.NOTE.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce.

118


TABLE D-34.—United States Government aid to foreign countries, 1946-49


Type of aid

A. Unilateral payments:Lend-leaseUNRRA and post-UNRRA...Civilian supplies distributed

by the armed forcesTransfers to PhilippinesChinese aidGreek-Turkish aidInternational Refugee Organ-

izationsInterim aid- _ _European Recovery Program..Other

Total unilateral payments.—Less unilateral receipts

Equals net unilateral pay-ments

B. Long-term loans and investments:Lend-lease creditsSurplus property including

ship salesExport-Import Bank loansUnited Kingdom loanSubscription t o -

International BankInternational Monetary

FundEuropean Recovery ProgramOther —

Total.Less repayments

Equals net long-term loansand investments, includingInternational Bank and In-ternational Monetary Fund.

Less subscriptions to Inter-national Bank and Inter-national Monetary Fund

Equals net long-term loansand investments, excludingInternational Bank and In-ternational Monetary Fund.

0. Short-term loans (net)Total net unilateral pay-

ments, loans, and invest-ments, excluding Inter-national Bank and Inter-national Monetary Fund(A+B+C)

1946total

2091,524

5396015

170

2,517238

2,279

600

841945600

317

5

12

3,32090

3,230

322

2,908

-134

5,053

1947total

761

98096

74

1712

332

2,272460

1,812

2

274796

2,850

318

2,745

80

7,065174

6,891

3,063

3,828

73

5,713

1948

Total

85

1,280130168349

89546

1,388115

4,150389

3,761

2

210454300

48622

1,474332

1,142

1,142

-245

4,658

Firstquar-

ter

57

34611

91

33301

35

87488

786

1

156170300

5

63252

580

580

- 9 0

1,276

Secondquar-

ter

21

31223

195

21195204

35

90797

810

1

40145

4

19028

162

162

-118

854

Thirdquar-

ter

6

420457888

1247

56718

1,28191

1,190

1170

16

88210

-122

-122

- 3 8

1,030

Fourthquar-

ter

1

202518975

233

61727

1,088113

975

369

4857

56442

522

522

1

1,498

1949

Firstquar-

ter

250605150

18

92727

1,38394

1,289

450

28010

34465

279

279

1,568

Sec-ond

quar-ter i

(2)

(2)

1,166

1,57590

1,485

200

27535

240

240

25

1,750

1 Preliminary estimates based on incomplete data.2 Not available.Source: Department of Commerce.


TABLE D—35.—United States merchandise exports, including reexports, by areas,1936-38 quarterly average, and 1947-49

PeriodTotal

exports,includingreexports

CanadaOther

WesternHemi-sphere

E R Pcountries1

OtherEurope Asia*

Australiaand

OceaniaAfrica

Millions of dollars

Quarterly average:1936-3819471948

1948—First quarter.. _Second quarter.Third quarter..Fourth quarter.

1949—First quarter.._Second quarter 2


1948—First quarter...Second quarter.Third quarter..Fourth quarter.

1949—First quarter...

7423,8353,154

3,3173,2372,9353,126

3,2683,350

113519476

425493485511

463(8)

1381,027

848

914901738839

840(3)

2821,3241,046

1,1411,061

9641,017

1.120(3>

3111849

84333840

41(3)

122562498

513507486486

588(3)

238038

42343047

54(3)

Percentage of total

100100100

100100100100

100

15.213.515.2

12.815.216.516.3

14.2

18.626.826.9

27.627.825.126.8

25.7

38.034.533.2

34.432.832.932.5

34.3

4.23.11.6

2.51.01.31.3

1.3

16.414.715.8

15.515.716.615.6

18.0

3.12.11.2

1.31.11.01.5

1.7

32205196

197207195186

163

4.35.36.2

5.96.46.66.0

5.0

1 Turkey is included with ERP countries and excluded from Asia. Exports to Germany in the postwarperiod relate almost wholly to exports to the three western zones.

2 Preliminary estimate based on incomplete data.8 Not available.

NOTE.—Data in this table cover all merchandise, including reexports, shipped from the United Statescustoms area to foreign countries including, in 1947 to 1949, goods destined to United States armed forcesabroad for distribution in occupied areas as civilian supplies.



I 2 O


TABLE D-36.—United States domestic merchandise exports, by economic classes,1936-38 quarterly average, and 1947-49

Period


1948—First quarterSecond quarterThird quarterFourth quarter



1948—First quarterSecond quarter _Third quarterFourth quarter

1949—First quarter. . . . _.

Totaldomesticexports

Crudematerials

Crudefoodstuffs

Manu-factured

foodstuffs

Semi-manu-

factures

Finishedmanu-

factures

Millions of dollars

7313,7913,124

3,2853,2052,9073,097

3,232

167400372

329327373458

466

34337316

322245357340

396

42439329

341371309296

251

130446342

381357314316

385

3582,1681,764

1,9121,9051,5531,687

1,735

Percentage of total

100100100

100100100100

100

22.810.611.9

10.010.212.814.8

14.4

4.78.9

10.1

9.87.6

12.311.0

12.3

5.711.610.5

10.411.610.69.6

7.8

17.811.810.9

11.611.110.810.2

11.9

49.057.256.5

58.259.453.454.5

53.7

NOTE.—Data in this table cover all domestic merchandise shipped from the United States customs areato foreign countries including, in 1947 to 1949, goods destined to United States armed forces abroad fordistribution in occupied areas as civilian supplies.



1 2 1


TABLE D-37.—Indexes of quantity and unit value of United States domestic mer-chandise exports, by economic classes, 1936-38 quarterly average, and 1947-49

[1936-38=100]

PeriodTotal

domesticexports

Crudematerials

Crudefoodstuffs

Manu-factured

foodstuffs

Semi-manu-

factures

Finishedmanu-

factures

Quarterly average:1936-381947...1948

1948—First quarter. .Second quarter.Third quarter..Fourth quarter

1949—First quarter..

Quarterly average:1936-3819471948 -

1948—First quarter. _.Second quarter.Third quarter..Fourth quarter

1949—First quarter. _

100275213

220217197216

229

100123100

8786100124

129

Quantity indexes

100397362

323265407429

494

100478351

353390319335

314

100203143

160149130131

161

100332256

275275225246

254

Unit value indexes

100188200

204202201196

193

100195223

227229223220

216

100248255

290269256231

234

100218223

230226230209

190

100169184

184185186186

184

100182193

194194193191

191

NOTE.—The indexes of quantity are a measure of the volume of trade after the influence on value of changesin average prices has been eliminated. The indexes of unit value provide a measure of change in the averageprices at which trade transactions are reported in official foreign trade statistics, including change in averageprices that result from changes in the commodity composition of trade. The indexes for 1947 to 1949 arebased on data which include goods destined to the United States armed forces abroad for distribution tocivilians in occupied areas.


1 2 2


TABLE D-38.—United States general merchandise imports, by areas,1936-38 quarterlyaverage, and 1947-49

PeriodTotal

generalimports

CanadaOther

WesternHemi-sphere

E R Pcoun-tries l

OtherEurope Asia1

Australiaand

OceaniaAfrica

Millions of dollars


1948—First quarter.._Second quarter-Third quarter. _Fourth quarter.

1949—First quarter - _ _Second quarter 2


1948—First quarter...Second quarter.Third quarter..Fourth quarter.

1949: First quarter....

6221,4391,781

1,8101,7101,7291,875

1,7891,650

86274388

328355410461

366(3)

145576637

705630586625

674(3)

152174244

232233234280

250(3)

304548

53484943

3400

183249324

328321301346

328(3)

103941

48344834

34(3)

1782

1169010285

102

Percentage of total

100100100

100100100100

100

13.819.021.8

18.120.823.724.6

20.5

23.340.035.8

39.036.833.933.4

37.7

24.412.113.6

12.813.613.514.9

14.0

4.83.12.7

2.92.82.82.3

1.9

29.417.318.2

18.118.817.418.5

18.3

1.62.72.3

2.72.02.81.8

1.9

2.75.75.5

6.45.35.94.5

5.7

1 Turkey is included with ERP countries and excluded from Asia. Imports from Germany in the post-war period relate almost wholly to imports from the three Western zones.

2 Preliminary estimate based on incomplete data.3 Not available.

NOTE.—Data in this table cover all merchandise received in the United States customs area from foreigncountries. General imports include merchandise entered immediately upon arrival into merchandisingchannels, plus entries into bonded customs warehouses.



123


TABLE D-39.—United States merchandise imports for consumption, by economicclasses, 1936-38 quarterly average, and 1947-49

PeriodTotal

imports forconsump-

tion

Crudematerials

Crudefoodstuffs

Manufac-tured

foodstuffsSemimanu-

facturesFinishedmanufac-

tures

Millions of dollars


1948—First quarter. _Second quarter.Third quarter-.Fourth quarter.



1948—First quarter. _Second quarterThird quarter .Fourth quarter


6151,4161,770

1,7761,6781,7541,870

1,756

190441537

578506543520

502

85254318

346287271367

340

95164183

161180199190

181

126311408

396385419433

397

120246324

295319322360

336

Percentage of total

100100100

100100100100

100

30.931.130.3

32.530.231.027.8

28.6

13.817.918.1

19.517.115.519.6

19.4

15.411.610.3

9.110.711.310.2

10.3

20.522.023.1

22.322.923.923.2

22.6

19.517.418.3

16.619.018.419.3

19.1

NOTE.—Imports for consumption include merchandise entered immediately upon arrival into merchan-dising or consumption channels, plus withdrawals from bonded customs warehouses for consumption.



124


TABLE D-40.—Indexes of quantity and unit value of United States merchandiseimports for consumption, by economic classes, 1936-38 quarterly average, and1947-49

[1936-38=100]

Period


1948—First quarter _.Second quarterThird quarterFourth quarter


Quarterly average:1936-3819471948 —

1948—First quarterSecond quarter. _Third quarterFourth quarter.


Totalimports forconsump-

tion

Crudematerials

Crudefoodstuffs

Manufac-tured

foodstuffs

Semimanu-factures

Finishedmanufac-

tures

Quantity indexes

100108123

126117119128

121

100129139

154132136132

128

10096

109

11710091

127

121

1008391

81899995

93

100130149

153142151152

139

10084

103

96101102113

105

Unit value indexes

100213235

230234239238

236

100180203

197202210206

206

100311343

347338349338

330

100208212

210214212212

206

100191217

206215221227

227

100245266

266268265267

267

NOTE.—The indexes of quantity are a measure of the volume of trade after the influence on value of changesin average prices has been eliminated. The indexes of unit value provide a measure of change in the averageprices at which trade transactions are reported in official foreign trade statistics, including changes in aver-age prices that result from changes in the commodity composition of trade.


TABLE D-41.—Changes in selected economic series since 1939 and 1948

Source:Appendixtable No.

Economic series

1939=100

1948

Year Firsthalf

Secondhalf

1949,firsthalf

Percentagechanges,

1948 secondhalf to 1949first half1

D-2..

D-3-.

D-5-.

D-7..

Gross national productPersonal consumption expenditures...Gross private domestic investmentNet foreign investmentGovernment purchases of goods andservices.

National income ___Compensation of employees

Personal incomeDisposable personal income-Personal net saving

Per capita disposable personal income:Current dollars1948 dollars

Labor force, including armed forces..Civilian labor force

EmploymentNbnagriculturalAgricultural

Unemployment

283263453211271

310292

294274552

245142

1131111301428322

276259432367

301

267452

239141

1111101271407923

29126847656296

320300

300282637

251144

1151131321448720

28126039767319

310294

295278726

246144

1131111271398334

-3.4-2.7

-16.6+20.0+7.7

-3 .2-2 .2

- 1 . 8- 1 . 2

+14.0

-2.0+.1

-1.6-1.8-3.9-3.7-5.3

+66.6See footnotes at end of table, p. 126.

125


TABLE D-41.—Changes in selected economic series since 1939 and 1948—Continued

Source:Appendixtable No.

Economic series

1939=100

1948

YearFirsthalf

Secondhalf

1949,firsthalf

Percentagechanges,

1948 secondhalf to 1949first half

D-9.

D-12

D-l?

D-14

D-15-.

D-16.

D-19

D-20-.

D-21

D-22..

D-27.

D-35..

D-38-

Average gross weekly earnings:Manufacturing...Bituminous coal miningBuilding construction.Retail trade

Physical production index of goods andutilities: totalAgricultureNonagriculture-.

1 pr<Durable manufacturesNondurable manufactures..Minerals.

New construction: totalPrivateResidential—NonresidentialPublic utility and farm.

Public

Business expenditures for new plant andequipment

Inventories:Manufacturing..WholesaleRetail

Sales:Manufacturing..WholesaleRetail

Consumers' price index: All items.FoodApparelRent

Wholesale price index: All commodities. __Farm productsFoodsOther than farm products and foods...

Prices received by farmersPrices paid by farmers (including interest

and taxes).Parity ratio.

Consumer credit outstanding, end ofperiod.

Corporate profits:Profits before taxes-Profits after taxes

Dividend payments.._Undistributed profits .

Merchandise exports, including reexports]3

General merchandise imports3

223304227189

172132180

176206162146

382342456414169

370

276260263

344314309

172221197113

214288254186

302

201149

205

505402205

1,025

425

286

218295220185

()180

176206163144

259342308418357131

346

258249258i.

335302294

170219195112

212292251183

306

202151

184

482384195983(*•"442

283

227312233192

180

176207161148

337422375494471206

394

275260264

353326325

174223199114

216285258

201148

205

529420211

1,083

408

290

225306232197

()172

166196152136

268326272407384179

357

()

8171212193115

204261232184

273

136

203

418324216675

446

277

- 1 . 2- 2 . 0- . 8

+2.9

)-4.6- 5 . 7- 5 . 3- 5 . 7- 8 . 3

-20.4-22.8-27.6-17.7-18.4-12.9

-9 .4

- 2 . 1- 4 . 6-3 .2+1.4

- 5 . 6- 8 . 6- 9 . 9- 2 . 5

- 8 . 5

- 1 . 2- 7 . 9

- 1 . 0

-20.9-22.9+2.5

-37. 7

+9.2

- 4 . 6

1 Changes are computed from data as reported and therefore may aiffer slightly from changes computedfrom the indexes shown here.

2 Not available.31936-38 average=100.

For sale by the Superintendent of Documents, U. S. Government Printing OflQceWashington 25, D. C. • Price 50 cents

126
