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fomc | 1,977 | Therefore that can rise. | 5 |
fomc | 1,977 | --so that, as the Chairman points out, the reductions we are seeing really are going to prevent future increases from being as large as they would otherwise be. | 32 |
fomc | 1,977 | Are going to limit or possibly prevent-- | 8 |
fomc | 1,977 | Isn't that a favorable factor? To limit or possibly prevent the increases that otherwise would have occurred--[that's] an improvement, isn't it? | 29 |
fomc | 1,977 | Yes, in that one factor. | 7 |
fomc | 1,977 | That's correct. In that sense, Governor, I had commented that we may be getting some of the price increases clustered in the second quarter that we had anticipated might occur in the second half-- | 38 |
fomc | 1,977 | I don't know what this debate is about. I'd like to have the question clarified. Looking at the projections by our staff, the second quarter estimate on prices is a 7.1 percent annual rate, and then the figure falls in the next two quarters to 5.8 percent. | 58 |
fomc | 1,977 | I was referring, Mr. Chairman, more than anything else, to the pessimistic tone of Jerry's comments about the worsening in inflation. Simply all that the-- | 33 |
fomc | 1,977 | He was simply anticipating Mr. Eastburn's comment. | 11 |
fomc | 1,977 | If I may suggest a different explanation, it is that there has not been a deterioration in the inflation outlook that we did not previously foresee; the amount of increase, particularly in food prices, that [we] did not build in [resulted from] the winter and the early spring drought and that kind of thing--and, indeed... | 100 |
fomc | 1,977 | I think there's a certain validity in that Governor-- | 10 |
fomc | 1,977 | I would join Mr. Partee. I'm impressed by the decline that has occurred in wholesale prices of food stuffs and industrial raw materials since mid-April--I wish I understood it better--and that is a favorable development on the price front. | 49 |
fomc | 1,977 | Mr. Chairman, I find it difficult to believe that this isn't going to go into wages at some point. These CPI increases--with a lag, I suspect--are going to influence hourly earnings. | 40 |
fomc | 1,977 | Well, they could, but they haven't yet. | 10 |
fomc | 1,977 | Well, yes, but there's a lag in these-- | 11 |
fomc | 1,977 | Well, you say they haven't yet. The figures that I have in mind on wages that I try to follow relate not to average hourly earnings but to compensation per man-hour in the private nonfarm sector. The quarter-to-quarter fluctuations--these quarterly figures are unreliable. I follow [the compensation data] on the basis o... | 114 |
fomc | 1,977 | As you know, the problem that I have with that is that the last quarter in the series includes the minimum wage increase and the increase in Social Security taxes. I think it tends to give you an overly high reading for this most recent-- | 48 |
fomc | 1,977 | Yes, that may well be. The jump is largest in that quarter, Chuck, and therefore, allowing for that, perhaps you still have the acceleration, though I'm not sure. | 36 |
fomc | 1,977 | My impression is the same as yours, Mr. Chairman. There has been a slight deterioration in the wage pattern. We also, at this stage, expect to get slower growth in productivity, I think. And the wage-cost element in the economy strikes me as being less favorable than I had hoped earlier in the year--not by a major amou... | 149 |
fomc | 1,977 | Well, I don't know whether it's only fair or only necessary. | 13 |
fomc | 1,977 | Well, they certainly argue it's necessary. They're certainly not going to be willing to take a fight or strike or anything. Well, I don't think it's terribly unusual for the big negotiated settlements. It's obviously not the average increase. But the general feeling of no resistance because they think they can't presum... | 213 |
fomc | 1,977 | I'd like to say a word about that. There are businessmen complaining. And businessmen are complaining about the atmosphere of uncertainty in which they live; and they don't know what will happen to taxes, and don't know what will happen to our antipollution legislation, and don't know what kind of energy bill Congress ... | 320 |
fomc | 1,977 | As long as you are talking about this, there may be some function in age, because I happened to speak to a group of young businessmen who, by definition, had to have been president before they were 40, and they could not be over 50 and still attend this meeting over the weekend. They were all very exuberant about every... | 105 |
fomc | 1,977 | That's interesting. | 3 |
fomc | 1,977 | That is in the Southeast. I think--you were talking about the New York attitudes, and Dave, Philadelphia. It may be a reason how effective some [unintelligible]. | 37 |
fomc | 1,977 | What about New England? | 5 |
fomc | 1,977 | Well, I think in general we are more optimistic than Paul suggests [for] New York. I think we have seen our capital goods industries continue to rise in orders--a feeling that capital spending is about to get going. I think New England is pretty optimistic at the moment. Not bullish. No one has been looking for a boom,... | 94 |
fomc | 1,977 | Well, I think, Mr. Chairman, these things need to be interpreted in the light of what we have heard about investment predictions. If [the estimate is] correct, despite our belief that investment is peculiarly low, then we don't need to attribute this to business pessimism if the objective facts as embodied in the model... | 115 |
fomc | 1,977 | I don't know what goes into that equation, but I would have said, and I still say, that objective factors, putting aside uncertainty about legislation, point to increased capital investment. | 36 |
fomc | 1,977 | That's been my intuitive interpretation, too, and I am surprised at what the equation says, but I think one has to pay attention to it to some degree. | 32 |
fomc | 1,977 | Well, maybe you do. Everyone has to speak for himself. I have managed to get to my present age without paying much attention to what these equations have to say. And I haven't done too badly in judging the business situation. I see no reason for learning these things at the present time. However, if our staff can teach... | 90 |
fomc | 1,977 | I think, when you listen to businessmen comment, you forget that they look at you as "Washington," and it's an opportunity for them to sound off on what they think is the matter with the government and their state of affairs. I think lot of what you hear is being addressed to trying to correct the situation in Washingt... | 79 |
fomc | 1,977 | Well, you talk to-- | 6 |
fomc | 1,977 | --let's not kid ourselves. | 7 |
fomc | 1,977 | --yes, you talk to a lot of businessmen. You have been devoting a good part of your energy [to that]. What is your sense of the thinking of the business community? | 38 |
fomc | 1,977 | Well, they just hate Washington. All of the regulations are driving them up the wall. The biggest problem they have is that, instead of having no energy policy, we have a non-energy policy now. No one has been able to make any plans in terms of where to put a plant because they just don't know what's going to happen in... | 143 |
fomc | 1,977 | Of course, Dave, they never have and they never will. I think that's part of the-- | 20 |
fomc | 1,977 | I'm not speaking of any specific government, I'm just saying-- | 12 |
fomc | 1,977 | No, the government. But I think this is a characteristic of the business community. | 17 |
fomc | 1,977 | I do, too. | 5 |
fomc | 1,977 | We have to evaluate [it] in terms of degree of decibels--it's a little different. And I guess I basically come out much as the Chairman does. That businessmen are paid to complain, and you have to--this is very sensitive--we do not have any index of businessmen's complaints. We have to judge it by what they are doing i... | 181 |
fomc | 1,977 | Another thing you should also be concerned about--as a concern about the future--and that's the farmer. And I do not agree with Jerry in terms of the estimated price increases. In farm products, I think you got a situation where you are going to have a bumper crop--that's certainly the way it looks today--and it's goin... | 82 |
fomc | 1,977 | Mr. Chairman? | 4 |
fomc | 1,977 | Let me just interrupt for a second. The consumer price index has just been released, and it shows an increase in the seasonally adjusted figure for May, of the overall index, of 6 tenths of 1 percent. Yes. | 48 |
fomc | 1,977 | We have continuing meetings with major heads and treasurers of our major corporations in the area. They are optimistic, but I think we are overlooking, at least from my point of view, one issue there--they are certainly disturbed about regulation, they are certainly disturbed about uncertainties--but the one underlying... | 196 |
fomc | 1,977 | Well, that's a very important observation [unintelligible], that the high rate of inflation means a deterioration in business profits. And partly because of the behavior of wages and raw materials prices, and partly because of our tax laws and our accounting practices, businessmen in periods of inflation have to pay in... | 164 |
fomc | 1,977 | I have a couple of questions concerning rather minor aspects of the data you present. One has to do with corporate profits. I see that some of the inventory valuation adjustment and the capital consumption allowances in the first quarter was $40 billion, which is more than one-quarter of profits before tax; in other wo... | 131 |
fomc | 1,977 | I'm just searching for them. I'm sorry. | 9 |
fomc | 1,977 | On page I-7 of the green pages in the Greenbook. And a little below the middle of the page. | 24 |
fomc | 1,977 | I'm a little surprised at the rate of growth of the IVA in the first quarter that you cite, Governor. I thought it was somewhat below that in the--actually below $30 billion. We would anticipate a more moderate rate of increase in the IVA because we do have some moderation in the rate of price increase later in '77, as... | 97 |
fomc | 1,977 | The first quarter could have had a lot of oil in it. | 13 |
fomc | 1,977 | Do you think it's oil? | 6 |
fomc | 1,977 | It could have, I don't know. I'll have to look into it. | 15 |
fomc | 1,977 | You know, I have not studied these figures on profits, but I am surprised. Figures that I've seen indicate that, during the first and second quarters, the improvement in profits has been negligible. | 39 |
fomc | 1,977 | Very small increase in the first quarter. | 8 |
fomc | 1,977 | And that surprises me, and I haven't tried to analyze it. You have these very sharp increases in physical volume of business activity, accompanied by virtually stable profits. | 32 |
fomc | 1,977 | Well, the first quarter is partly influenced by the winter weather, which presumably affected costs more than it did sales and profits. And on a quarterly average basis, the pickup that you are talking about really occurred later in the quarter. So I think there's a lag phenomenon at work there that would affect the fi... | 136 |
fomc | 1,977 | Well, the figures I've seen for the second quarter look remarkably low. | 14 |
fomc | 1,977 | We have a very moderate rate of increase in profits projected for the second quarter. | 16 |
fomc | 1,977 | That's [why it seems so odd]. Even those profits that we see are deceptive, that is, the result of inventory and underdepreciation. | 30 |
fomc | 1,977 | We'll have to look at this a little more carefully, Governor, and report to you. | 18 |
fomc | 1,977 | I think that an interpretation of these profits figures is very important. That may help to explain the phenomenon that Mr. Eastburn described in his area. The acceleration in inflation that you commented on may possibly be reflected in these profits figures. And your estimates for profits later on in the year look rem... | 61 |
fomc | 1,977 | Well, it's in part this lag effect, believing that the first half is an understatement of the underlying trend and that we have got special factors at work. We are not as high on corporate profits as we were several months ago, [and the change] reflects, in part I guess, the somewhat less optimistic view on corporate c... | 79 |
fomc | 1,977 | Of course, the level of '76 was much higher than the level of '75. | 18 |
fomc | 1,977 | Oh, yes. | 4 |
fomc | 1,977 | [Unintelligible] $40 billion in total profits [unintelligible]. | 18 |
fomc | 1,977 | You have a very sharp increase in '76, you know. | 13 |
fomc | 1,977 | My second question, Mr. Chairman--in the federal budget, I see that from the first to the third quarter, we have a massive swing in the high-employment surplus or deficit going from plus 10 in the first quarter to minus 10 in the third. And I wonder whether this plays a significant role in your evaluation of the stimul... | 74 |
fomc | 1,977 | We have a rapid increase in federal grants to states, which are coming into play in this period, so in a real sense this will underlie the increase in state and local spending that we anticipate in this period. You've got a number of pieces of legislation that relate to public service employment and other support progr... | 124 |
fomc | 1,977 | I might also note, early in the year we had a high-employment surplus of about $10 billion. And, in part, a transitory effect [is] reflected in that number, that is, gift taxes shot up to something like a $6 billion annual rate in the first quarter. And that particular number, of course, works into higher receipts. And... | 91 |
fomc | 1,977 | Is that a consequence of returns filed in the first quarter for gifts made in the last quarter of the term? | 22 |
fomc | 1,977 | It's a consequence of the change in the tax law last September, which in effect changed the rules on gift taxes. And apparently a lot of gifts were made in December to avoid the higher taxation implicit in January. And those were paid largely in the month of February. And [in] the first quarter, it's about a $5-1/2 bil... | 122 |
fomc | 1,977 | All right, thank you, Mr. Wallich. Mr. Black now. | 16 |
fomc | 1,977 | Mr. Chairman, I have a question about the revision in your inventory projections for the balance of the year. You reduced these for the second, third, and fourth quarters relative to what you thought a month ago. Is this largely a result of the larger increase than anticipated in inventory building in the first quarter... | 171 |
fomc | 1,977 | Well, we haven't changed our view of the likely rates of inventory investment of this--what you note is a reflection of the fact that we got a larger inventory adjustment in the first quarter than we had been expecting. And rather than a moderate rate of growth sustaining through the year, we now tend to have a slower ... | 106 |
fomc | 1,977 | I assumed [that's] what it was, but I didn't know. These constant-dollar ratios are very interesting, I think. | 25 |
fomc | 1,977 | Yes, that's right. They do show a very different picture. | 13 |
fomc | 1,977 | They sure do. | 4 |
fomc | 1,977 | All right, thank you, Mr. Black. Mr. Baughman now, please. | 19 |
fomc | 1,977 | Mr. Chairman, I guess I feel obliged to report that in the Southwest we do continue to see a strong and growing demand for most everything, and the list of activities-- that is, types of labor that are in short supply--is growing. And we're seeing indications, of course, of a rather rapid rise in wage rates, in part re... | 139 |
fomc | 1,977 | To move what? | 4 |
fomc | 1,977 | Produce. Specifically, a lot of melons apparently being permitted to spoil in the fields because transportation could not be acquired to move them out to market. And it's reported, largely as a suspicion or an assertion rather than a fact, that there's been some lack of interest shown by the so-called independent truck... | 75 |
fomc | 1,977 | Lack of interest in expanding their operations? | 9 |
fomc | 1,977 | Well, not so much expanding, but even coming in, in the usual volume, into this area to move these products at this point in time. I don't have more on that. I've undertaken to learn more about just what's involved. It appears to be a fact that the produce has been permitted to spoil in the field in substantial volume ... | 354 |
fomc | 1,977 | What kind of construction projects? Commercial-- | 8 |
fomc | 1,977 | I'm speaking primarily of office building structures, but also multi-unit residential and hotel. | 16 |
fomc | 1,977 | What about large industrial construction? Any of that? | 10 |
fomc | 1,977 | There is some of it. Largely in the petrochemicals area. And that tends to be concentrated in a fairly small geographic area down along the coast. Aside from that, both indicated in the figures and just from observation as one travels around, it seems to be large numbers of fairly small developments, largely in suburba... | 297 |
fomc | 1,977 | Thank you, Mr. Baughman. Mr. Partee now, please. | 17 |
fomc | 1,977 | Well, Mr. Chairman, I just wanted to set the record straight. Although I was a little critical of the comments on inflation that Jerry had, I think that the staff projection is very defensible; and in general terms, the 5-1/2 percent increase in real GNP looks to me quite supportable on the basis of the sector. The sta... | 174 |
fomc | 1,977 | Also foreign trade. | 4 |
fomc | 1,977 | Well, I think probably most of the deterioration is over in foreign trade. It may not be that there [will] be much improvement, but probably there won't be much [further] deterioration at this point. But we should expect to see car sales level off or even decline after this period of extremely strong demand, and that w... | 361 |
fomc | 1,977 | You know, I think one needs to look at what goes into it and what are the factors that produce this result. That's why I say--when I spoke of a particular equation--see if it's the stock market, or excess capacity, or orders, or some other variable. | 56 |
fomc | 1,977 | The stock market, I think, is probably having quite an effect-- | 14 |
fomc | 1,977 | The survey results are not particularly encouraging, either. | 10 |
fomc | 1,977 | Pardon? | 3 |
fomc | 1,977 | I say, the survey results are somewhat in the same direction, are they not? | 17 |
fomc | 1,977 | Yes, except that that looks so unreasonable, doesn't it, to see that the first half has been going on at a very substantial pace, and then all of a sudden you have this slump. It just doesn't seem very likely, you know, that it would be the way things would work out--especially since, as the Chairman said, none of the ... | 111 |
fomc | 1,977 | Thank you, Mr. Partee. Mr. Guffey now. | 15 |
fomc | 1,977 | A couple of comments with respect to the level of optimism in the High Plains area. It's been sort of divided, up to this point, in the sense that in the metropolitan areas there have been, for the early part of this year, fairly high levels of optimism. But there have been a couple of things that have occurred that ar... | 515 |
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