Economy in 1973
- Economic Problems Beginning in 1973
- The thriving economic growth of the post World War 2 boom starting in 1947 had finally ground to a halt in 1973.
Starting in February, a stock market crash and inflation increase occurred, followed by recession and unemployment.
This precipitated the lingering Stagflation issues that stifled the economy throughout the 70's.
- Stock Market
- Starting in February 1973 the value of the S&P 500 declined by over half and the Dow declined by 45% over 21 months.
- The average trailing PE ratio slumped from 17-18 to 7-11 and stayed at that level for a decade.
- The stock market was so affected that it took until August 1983 to return to the same levels of January 1973.
- Recession
- The post war boom that started in 1947 had slowed to a crashing halt in 1973.
- The annual GDP ratio dropped from a pre 1973 value of 3.6% per year to 2.8% after 1973.
- Productivity growth dropped from 2.5% to 1.5%.
- GDP growth rate dropped from 7.2% to -2.1% in 1973. Real GDP level fell 3.2%.
- Inflation
- The inflation rate ranged from 2.94% to 3.61% in 1972. In January of 1973 the inflation rate was 3.61 but increased dramatically throughout the year, to 6.8% in the Third Quarter, and to a high of 8.71% in November. The inflation rate continued to increase in 1974 to a high of 12.3%.
- Unemployment
- Unemployment was close to 5% throughout 1973 and started to rise in 1974 until it reached 7.2% in the 4th Quarter of that year, reaching a high of 9% in May 1975.
- Income growth
- A slowdown in income growth started in 1973.
- Between 1947 and 1973 family income increased over 100%, increasing at an average annual rate of 3.19%.
- Between 1973 and 2004 family income only rose 22%.
- Between 1973 and 2006 family income for the bottom 90% increased at an average annual rate of .5%.
- Between 1973 and 1987 the income of families headed by someone less than 30 years of age fell 30%.
- Factors that exacerbated the economic malaise
- Oil Crisis: The OPEC oil embargo began on October 17 which increased the price of oil
from $3 per barrel to $12 dollars per barrel. This embargo had a suppressive on the US economy
and coupled with the stock market crash was the first event since the Great Depression
to have a persistent economic effect.
- Federal Reserve Chairman, Arthur Burns (1970 - 78): Burns did not respond appropriately to the inflation
problem. He did not believe the Federal Reserve should be expected to cope with inflation single-handedly.
He backed an expansive monetary policy where the prime interest rate was left relatively high.
Burns ultimately received poor marks for his handling and control of inflation that took more than a
decade to resolve.
- The Steel crisis: A recession in the global steel market occurred in the 1970's.
Newly industrialized nations had begun producing steel and supply became greater than demand.
As a result steel prices dropped significantly driving many US steel mills out of business.
This led to a restructuring of industrial core areas in the US.
- Food Price increase: Food prices begin to increase in 1973 due to large Soviet purchases of wheat,
corn and soybeans. President Nixon freezes retail food prices and imposes a temporary embargo on soybeans
and cottonseeds.
- Prices Since 1973
- Since 1973 prices for three key areas have increased: Housing, Health Care and Education.
In 1973 these components consumed 37% of income for the average household. Currently this figure is 45%.
- Significant price increase since 1973:
- Housing
- Health Care
- Education
- Gasoline
- Automobiles
- Inflation Calculation
- An item purchased in 1973 for $10, in 2012 that same item would cost $51.26.
- Item in 1973 purchased for $100 would cost $512.
- For ballpark comparison of 1973 prices to today's prices - multiply 1973 prices by 5.
- Cost of Living 1973 Compared to Today
- Consumer Price Index:
- 1973: 42.6 - 44.4
- 2012: 227.7
- Inflation:
- 1973: 3.65% (Jan) - 6.16% (Dec) (peaked at 8.71%) and trending upward into 1974
- 2012: 2.87%
- Unemployment
- 1973: 4.9%, but began to increase in 1974
- 2012: 8.3%
- Misery Index (Combination of Unemployment and Inflation)
- 1973: around 15% trending upward to reach second highest peak ever at 20% in 1974
- 1981: highest peak ever 22%
- 2012: 11.17%
- Dow Jones
- 1973: 850
- 2012: 13,252
- Minimum Wage
- Minimum Wage 1973: $1.60 per hour
- Minimum Wage 2009: $7.25 per hour
- Median Household Income
- Median Household Income 1973 Actual: $9,268
- Median Household Income 1973 Adjusted for Inflation: $46,109
- Median Household Income 2010: $49,445
- WHAT THINGS COST
- Median cost of New House January 1973: $29,900
- Median cost of New House December 1973: $35,700
- Median cost of New House October 2011: $212,300
- Average monthly Rent 1973: $175
- Average monthly Rent 2008: $928
Gasoline: .39 per gallon
- Car Purchase Price for Selected Models in 1973
- AMC Javelin: $2900
- Chrysler Duster 340: $2822
- Dodge Charger: $2823
- Dodge Dart Sport 340: $2853
- Ford Galaxie 500: $3883
- Ford Thunderbird: $6437
- Jaguar Series III E Type V12 Convertible: $8470
- Lincoln Continental: $7474
- Mercury Cougar XR7: $3679
- MG MGB Roadster: $3320
- Oldsmobile Tornado: $5441
- Plymouth Satellite: $3226
- Volkswagen Beetle: $3050
- Volkswagen Thing $3150
- Miscellaneous
- Movie: $1.75
- First Class Postage Stamp .08
- Postcard Stamp .05
- Airmail Stamp .10
- GE Refrigerator 14.7': $298
- GE 19" Color TV: $299
- CB Radio: $147
- 8 Track Stereo Player: $38.99
- Rival Crock Pot: $14.88
- Bean Bag Chair: $19.99
- Garbage Disposer: $29.88
- Oil Filter: $1.79
- Pocket calculator "mini slide rule": $69.95
- Texas Instruments SR-10 calculator: $150
- Sears Jeans: $4.99
- Malibu Barbie: $1.99
- Food
- Milk: 1.31 per gallon
- .37 per quart
- Bread: .27 per loaf
- Pumpernickel: .49 per loaf
- Italian bread: .35 per loaf
- Egg noodles: .32 per pound
- Spaghetti: 3 pounds for 1.29
- Rice: 3 pounds for 1.99
- Cornmeal: .33 for 24 oz
- Lentils: .46 per pound
- Kidney beans: .41 per pound
- Flour: .20 per pound
- Canned tomatoes: .41 for 1 pound 12oz.
- Tomato sauce: .12 for 8oz. can
- Tomato juice: .10 for 5 1/2 oz. can
- Coffee: 1.00 per pound
- Sugar: .65 for 5 pounds
- Butter: 1.00 per pound
- Margarine: .36 per pound
- Cottage Cheese: .51 per pound
- Sour cream: .49 pint
- Yogurt: .31 half pint
- Eggs: .69 per dozen, medium .72, large .78
- Ground chuck: .99 per pound
- Hamburger: .66 per pound
- Bacon: 1.09 per pound
- Pork shoulder: .69 per pound
- Hot dogs: .85 for pkg of 10
- Ham: .99 per pound
- Chicken: .39 per pound
- Chicken Livers: 1.09 per pound
- Haddock: .89 per pound
- Onions: .20 per pound
- Carrots: .17 per pound
- String beans: .29 per pound
- Potatoes: .89 for 10 pounds
- Yams: .19 per pound
- Pepper: .39 per pound
- Beets: .30 per four
- Escarole: .29 per head
- Acorn Squash: .10 per pound
- Cabbage: .19 per pound
- Spinach: .32 per pound
- Cucumbers: .15 each
- Zucchini: .41 per pound
- Tomatoes: 3 for .30
- Broccoli: .39 per bunch
- Lemons: 5 for .59
- Garlic: .16 per head
- Parsley: .20 per bunch
- Dill: .20 per bunch
- Chives: .18 per bunch
- Basil: .17 for 1/2 oz
- Oregano: .39 for 2 5/8 oz
- Cinnamon: .89 for 4 oz
- Salt: .16 for 32 oz
- Pepper: .85 for 8 oz
- Red wine vinegar: .29 per pint
- White vinegar: .47 per quart
- Vegatable oil: .63 per pint
- Olive oil: 1.89 per quart
- Miracle Whip: $1.09
- Corn Flakes: .25 for 12 oz box
- Oreos: .49 for 15 oz pkg
- Hershey bar: .10
- Pepsi: .77 for 6 pack
- Company Startups 1973
- Apollo Group
- B&H Photo
- Billabong
- Cablevision
- Center for UFO Research
- Compuware
- Crabtree & Evelyn
- Deckers Outdoor
- Federal Express
- Godfather's Pizza
- LexisNexis
- Lipper
- MBIA
- Men's Warehouse
- Python (Monty) Pictures
- RE/MAX
- Tandy
- The Abington Shoe Company becomes Timberland
- In 1973, the brand name "Timberland" was introduced for the waterproof leather boots produced by the company. Because the boot proved to be very popular, the company name was officially changed to The Timberland Company.
- US Dependency on Foreign Oil
- US dependency on foreign oil has been a key topic during political statements and discussion.
However, despite the rhetoric US dependency on foreign oil has continued to increase. In 1973
US foreign oil provided 35% of US consumption, but after several statements by the presidents,
this figure was 60% in 2006. Though to be fair that figure has dropped to 47% recently.
- Statements by Presidents Regarding US Dependency on Foreign Oil
- President Nixon, January 30, 1974: "Let this be our national goal: At the end of this
decade, in the year 1980, the United States will not be dependent on any other country for
the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving."
- President Ford, May 27, 1975: "We are now paying out $25 billion a year for foreign oil.
Five years ago we paid out only $3 billion annually. Five years from now, if we do nothing,
who knows how many more billions will be flowing out of the United States. These are not just
American dollars, these are American jobs."
- President Carter, April 18, 1977: "Tonight I want to have an unpleasant talk with you
about a problem unprecedented in our history. With the exception of preventing war, this is
the greatest challenge our country will face during our lifetimes. The energy crisis has not
yet overwhelmed us, but it will if we do not act quickly."
- President Reagan, July 17, 1981: "Given our continued vulnerability to energy supply
disruptions, certain emergency preparations - such as rapid filling of the Strategic
Petroleum Reserve - remain principally a government responsibility. But our basic role is to
provide a sound and stable economic and policy environment that will enable our citizens,
businesses, and governmental units at all levels to make rational decisions on energy use
and production."
- President George H.W. Bush, Sept. 11, 1990: "As I've pointed out before, conservation
efforts are essential to keep our energy needs as low as possible. And we must then take
advantage of our energy sources across the board: coal, natural gas, hydro, and nuclear.
Our failure to do these things has made us more dependent on foreign oil than ever before."
- President Clinton, Feb. 16, 1995: "The nation's growing reliance on imports of oil ...
threatens the nation's security."
- President George W. Bush, Jan. 31, 2006: "Keeping America competitive requires affordable
energy. And here we have a serious problem: America is addicted to oil, which is often
imported from unstable parts of the world."
- President Obama, May 7, 2011: "But over the long term, the only way we can avoid being
held hostage to the ups and downs of oil prices is if we reduce our dependence on oil --
That means investing in clean, alternative sources of energy, like advanced biofuels and
natural gas. And that means making cars and trucks and buses that use less oil."
- Dow Jones then / now
- The Dow Jones Industrial Average provides a good benchmark of the entire stock market. It is
comprised of 30 giant companies that are periodically reviewed. The laggards are eliminated
and market leaders added on a regular basis. Only one company, General Electric, remains from
when the DJIA was first published in the Wall Street Journal in 1896.
Dow Jones Companies in 1973 and how they've fared since
(Bold = The company is still in the Dow Jones Industrial Average as of 2012)
- Allied Chemical - Defunct as a brand, merged with Signal, acquired Honeywell and assumed the name; no longer in the Dow
- Aluminum Company of America (Alcoa) - Now Alcoa and still in the Dow
- American Can - Defunct as a brand, renamed as Primerica in 1987, divested the manufacturing arm
- ATT - Acquired by SBC which assumed the ATT name, still in the Dow
- American Tobacco Company - Defunct, became subsidiary of American Brands which divested the tobacco business
- Anaconda Copper - Defunct, purchased by Atlantic Richfield, exists now only as an environmental liability
- Bethlehem Steel - Defunct, bankrupt in 2003, assets sold to International Steel
- Chrysler - No longer in the Dow, still in business after US Government bailout
- DuPont - Still in the Dow
- Eastman Kodak - No longer in the Dow, still in business but filed for Chapter 11 bankruptcy in January 2012
- Esmark - Defunct, Holding Company for Swift, ultimately acquired by ConAgra
- Exxon - Now Exxon Mobile, still in the Dow
- General Electric - Still in the Dow
- General Foods - Defunct as a brand, acquired by Phillip Morris, now part of Kraft
- General Motors - Still in business, Chapter 11 Bankruptcy in 2009, no longer in the Dow
- Goodyear Tire and Rubber - Still in business, no longer in the Dow
- International Harvester - Defunct, renamed Navistar International in 1986, then sold off its agricultural division
- International Nickel - Defunct, changed name to Inco in 1976, sold to Special Metals Corp, bankrupt in 2002
- International Paper - Still in business, no longer in the Dow
- Johns-Manville - Still in business, no longer in the Dow
- Ownens-Illinois - Still in business, no longer in the Dow
- Proctor and Gamble - Still in the Dow
- Sears Roebuck and Company - Still in business, no longer in the Dow
- Standard Oil of California (Chevron) - Merged with Texaco, changed name to Chevron, still in the Dow
- Texaco (Chevron) - Merged with Standard Oil and now named Chevron, still in the Dow
- Union Carbide - Defunct as a brand, now wholly owned subsidiary of the Dow Chemical Company
- United Aircraft (United Techologies) - Changed name to United Technologies, still in the Dow
- US Steel - Still in business, no longer in the Dow
- Westinghouse Electric - Still in business, no longer in the Dow
- Woolworth - Defunct in 1997
- Changes to the Dow since 1973
- Companies still in the Dow Jones: 9
- Companies Defunct either by bankruptcy or acquisition: 11
- Companies still in business, no longer in the Dow Jones: 10
-
Dow Jones Industrial Average Today
(Bold = The company was in the Dow Jones in 1973)
- 3M
- Alcoa
- American Express
- ATT - comprised of 4 "Baby Bells" of the old AT&T
- Bank of America
- Boeing
- Caterpillar
- Chevron - merger of Standard Oil and Texaco
- Cisco
- Coca-Cola
- DuPont
- Exxon Mobile - merger of Exxon and Mobile
- General Electric
- Hewlett Packard
- Home Depot
- Intel
- IBM
- Johnson and Johnson
- JP Morgan Chase
- Kraft Foods
- McDonald's
- Merck
- Microsoft
- Pfizer
- Proctor and Gamble
- Travelers
- United Technology
- Verizon - comprised of 2 "Baby Bells" of the old AT&T
- Wal-Mart
- Walt Disney
- Changes to the Dow Jones reflect changing technologies, demographics, consumer tastes, consolidation,
foreign competition and macro economic forces.
- In by 2012 - Companies new to the Dow Jones by Industry
- Computer: Cisco, Hewlett Packard, Intel, IBM, Microsoft
- Financial and Insurance: American Express, Bank of America, JP Chase Morgan, Travelers
- Pharmaceutical: Johnson & Johnson, Merck, Pfizer
- Food and Beverage: Coca-Cola, Kraft, McDonald's
- Broadcast and Entertainment: Walt Disney
- Home Improvement Retail: Home Depot
- Retail: Wal-Mart (replacing Sears and Woolworth)
- Aerospace and Defense: Boeing
- Construction and Mining: Caterpiller
- Conglomerate: 3M
- Out by 2012 - Companies no longer in the Dow Jones by Industry
- Auto Manufacturers: Chrysler, General Motors
- Tire Manufacturer: Goodyear
- Basic Materials: Anaconda Copper, International Nickel
- Steel: Bethlehem Steel, US Steel
- Chemical: Allied, Union Carbide
- Farm Machinery: International Harvester
- Paper: International Paper
- Photography: Eastman Kodak
- Tobacco: American Tobacco
- Building Materials: Johns Manville
- Packaging: Owens-Illinois, American Can
- Food: Esmark, General Foods
- Retail: Sears, Woolworth
- Energy: Westinghouse
