1955: Link Page

The following are pages on the 1955 US economy

GDP
PCEs
Investment
Industrial Production
Interest rates and inflation
Employment
Balance of Payments
Government Finances

1955: Balance of Payments

This is part of the Bonddad Economic History Project.  For more information, please see the right side of the blog.

The above chart from the 1955 Federal Reserve Report shows that the US was a net exporter for the year, with total exports of about $20 billion (SAAR) and imports of about $18 billion (SAAR).  This was largely due to Europe getting back on its feet after WWII, but also due to developments in Latin America.

The above chart shows the same information, but also includes US military expenditures.  This is important to remember; by this time the cold war was heating up, so the US would spend a fair amount of money on military exports.  Total military expenditures were a little over $2.6 billion, so they accounted for about 10% of exports.

The above table gives us total imports and exports for the year on a BoP basis.

The following excerpts are from the annual Federal Reserve report and the Economic Report to the President:

1955: Employment

Let's start with a look at the overall level of unemployment:

Remember that in the 1950s, the economy was operating at a very high capacity.  In addition, the economy as far less automated.  As a result, we see a very low unemployment rate -- dropping from 4.9% at the beginning of the year to 4.2% by year's end.

All three sectors of the economy -- manufacturing, service and government employment -- saw increases.  The manufacturing sector was growing because of the mammoth increase in consumer demand -- hence the increase of nearly 1 million jobs.  As households were formed -- and as incomes increased -- the demand for services naturally increased as well.  This explains the increase of over 1 million service jobs over the year.  And finally, the decrease in government employment at the beginning of the year was the result of the end of the Korean War.  However, by year end, the increased demand for government services (education, public works etc..) led to an increase in government employment.

The above chart from the Economic Report to the President, shows a nice slice of population, employment and unemployment.

As for wages, the level of employment led to strong wage growth:

The Federal Reserve Described the Situation Thusly:

The chart below (from the ERP) graphically depicts hours worked and wages.

1955: Industrial Production

This post is part of the Bonddad  Economic History Project.  For more information, please see the right side of the blog

In 1955, the US was an island in the world.  Countries that would eventually become our international competitors were still rebuilding from WWII.  As such, the explosion in consumer demand was satiated by goods produced domestically.  Consider the following table of consumer goods:

US consumer demand was booming; US industry was the primary source of goods sold to US consumers.  As such, we see that overall industrial production rose for 1955:

The top chart shows that overall IP was at record levels in 1955.  The second chart shows that total mineral production was the first sector to hit multi-year highs.  But by the end of the year, durable, non-durable and total manufacturers production had reached multi-year levels.

The above table puts the charts into numerical perspective, as does the following excerpts from the Federal Reserves Annual Report and the Economic Report to the President, 1956.

1955: Interest Rates, Inflation and Fed Policy

 

Remember that during 1955,  the economy was growing at very strong rates.  As the economy expanded, businesses increased their borrowings.  In addition, as the economy expanded, the Fed became more and more concerned with inflation.  This is the reason for the increase in the discount rate during the year.  Consider the following excerpts from various rate decisions by the Fed:

From April 13: 

August 3:

November 17:

However, prices were in fact pretty contained:

The bottom whole sale price chart shows that crude goods were decreasing in price.  The real price pressure was coming at the intermediate price level, but producers were able to absorb that cost, as evidenced by the slow rise of finished goods prices.  The top chart shows that food prices were dropping sharply, while other prices were moving higher.

Consumer prices were also pretty contained.  The primary area where we see an increase are in services, which is to be expected; this year -- and this decade -- saw a tremendous increase in service usage on the part of consumers.  As the US started to form households, they purchased more and more goods such as dry cleaners, yard services etc....

1955: Industrial Production

The above FRED chart shows that industrial production grew throughout the year.  We see production increase in the first quarter, sow its rise in the second and third, and then continue to rise in the fourth.

The above chart from the ERP shows that both durable, minerals and non-durable manufacturing contributed to the rise.

Steel production rose for most of the year, while auto production saw a mid-year dip and a tailing off at year end.

The annual report of the Federal Reserve explains the industrial production situation like this:

Essentially, industrial production was the beneficiary of consumer demand.  As the US consumer wanted more and more "stuff" the industrial sector obliged with products.

1955: Investment

This post is part of the Bonddad economic history project. The purpose of this is to go back through the US' economic history, year by year, to see what happened and why it happened.

In 1955, investments occurred on a variety of fronts.  The first quarter saw a huge increased in private inventories, while equipment and software contributed to the second and third quarter growth.  Inventories and business investment was largely responsible for investment growth in the fourth quarter.

The above chart from the Economic Report to the President shows the importance of a variety of construction to overall growth.  Industrial capacity was hitting its maximum, which required businesses to increase structural investment.  The housing boom was underway, leading to the increase in residential investment.

The above chart puts the early-mid 1950s construction boom into perspective.  Notice the incredible ramping up we see in 1954 in the residential area, but also how a variety of sectors contributed to overall growth. 

The above chart shows that real estate mortgages grew strongly for the four years of 1952-1055, but great an an especially strong rate in the 1955.

The Federal Reserve explained the mortgage market situation like this:

The overall state of business investment was explained like this in the ERP:

1955: PCEs

The chart above shows the percentage contributions that PCEs contributed to GDP growth and the contribution of various PCE sub-categories to overall growth.  Notice the large increase in durables in the first two quarters of the year.  This number decreased a bit in the third quarter and went negative in the fourth.  Non-durables contributed in the second and fourth quarters while services picked-up in the third and fourth.

The above chart shows the importance of pent-up consumer demand.  As the US moved into the heart of the 1950s expansions, jobs were plentiful, leading  to more income.  This in turn led to people buying more things.  The table below really shows the growth:

The above chart shows the relationship between disposable personal income and PCEs.  DPI increased strongly in the year, largely thanks to collective bargaining agreements with various unions throughout the year. The low rate of unemployment also helped.  From the Economic Report to the President, 1955:

Notice the durables goods rose a bit, but remained at a lower percentage of total PCEs. This is the natural development of the economy becoming more centered around the home.  As people moved into more and more houses, they wanted more and more non-durable goods (clothes, etc...) and services (repairmen etc..).  This is one of the primary reasons why housing is so important to an economic expansion -- it creates a tremendous number of ancillary benefits.

The Economic Report to the President Explained it thusly:

The above two charts show that consumer credit was an important part of the expansion.  The top chart shows the importance of mortgage credit outstanding, along with the government's promotion of home ownership as a policy goal.  The lower chart shows other consumer credit, and also shows a tremendous amount of growth.