A CASE STUDY
There is, however, at least one optimistic conclusion which some
have drawn from our postwar inflationary experience. This is the
thesis that the degree of inflation has been remarkably moderate
considering the strains that have been put upon the economy. With-
out the impact of war, our economy when operating with full em-
ployment would show remarkably little propensity to inflation. I
have a great deal of sympathy with this thesis but its test is yet to
come.
THE SALIENT FEATURES OF
THE DECLINE
The
year 1949 was one of recession, although as pointed out
earlier, the major impact on gross national product came in the
first quarter while the second half of the year was primarily a
leveling-off period. Let us now examine, still briefly, but in more
detailed fashion, the salient features of that decline.
The percentage declines from respective peaks to respective bot-
toms for selected series were: GNP, 4; consumption, less than 1;
consumers' durables, 5; nondurables, 3; gross private domestic in-
vestment, 32; producers' durables, 12; new construction, 8; total
business sales, under 10; manufacturers' sales, 18; retailers' sales, 4;
manufacturers' new orders, 18; total business inventories (book
value), 7; manufacturers' inventories, 11; retailers' inventories, less
than 4; industrial production, 10.5; manufacturing, 9; durable manu-
facturing, 13; nondurable manufacturing, 6. On the income side
the percentage declines were: national income, 7; private wages
and salaries, 5; personal income, 4; disposable income, under 4;
personal savings, 71; corporate profits before taxes, 29. In prices the
percentage declines were: all wholesale prices, 8; farm products,
22; processed foods, 14; industrial prices, 5; consumers' prices, 4; re-
tail food prices, 10. (See Table 2 for additional details.)
Unemployment averaged slightly over 2 million in 1948 or 8.4
per cent of the civilian labor force, 3.2 million in the first half of
1949 or 5.2 per cent, 3.6 million in the second half of 1949 or 5.7
per cent, and 3.9 million in the first half of 1950 or 6.2 per cent.
In February 1950 it reached 4.7 million or 7.6 per cent of the civilian
labor force. Non-agricultural employment declined about 3.1 mil-
lion or about 6 per cent between August 1948 and May 1949. The
decline in manufacturing employment was 1.8 million or 11 per
cent between September 1948 and July 1949. (These figures are
not seasonally adjusted.)
Since this was an inventory recession, let us look more closely at
what happened in that area. The bulk of the change in inventories
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