and producers would have freedom of choice, even though that would lead inevitably to temporary maladjustments in some places and in some industries between the jobs to be had and the men and women seeking work. Moreover, there would be some unemployables whose productivity was too low to qualify for the wages which prevailed for the jobs they sought. At the optimum level of employment, the labor market would not be so tight as to prevent the maintenance of a reasonably stable price level . . . . In normal times frictional unemployment would be higher [than during the war], probably from 2 percent to 5 percent [of the labor force].5

The National Planning Association's estimate of a postwar (1950) labor force makes allowances for 1.5 million frictionally unemployed or 21⁄2 percent in a total labor force of 61.5 million."

The London Economist suggested that in Great Britain 500,000 unemployed-including transitional, seasonal, and some structural unemployment is consistent with "full employment" so long as any pockets of continuing unemployment in particular areas or industries are quickly drained away.' This represents an unemployment rate of 21⁄2 percent of the British labor force.

Fortune magazine, analyzing frictional unemployment, stated that in the immediate post-conversion period, "4 million unemployed may be too few," depending on the distribution and the mobility of the labor force. But later, "if things are managed skillfully, 4 million idle men and women may be absurdly too many. Then we should approach the rock-bottom minimum of 1 or 2 million willing employables who are unemployed only because they are changing jobs."

Karl T. Schlotterbeck in a publication of the Brookings Institution wrote:

We are inclined to believe that even under generally favorable conditions there would perhaps be out of work on the average over a period of years as many as 4 million (7 percent of the total labor force). In the best years-under boom conditions-the level might fall as low as 3 million (5 percent of the total labor force). In other years it might rise as high as 5 million (81⁄2 percent of the total labor force). Only when the number out of work exceeded 4 million need the employment situation occasion real concern. It should be clearly understood that this total does not represent a permanent army of unemployed-seeking jobs in vain."


As indicated above, there is a fairly wide range in the several estimates of the amount of unemployment consistent with "full employment" in the postwar world. The variation results in part from differences in the conception of the components to be included in frictional unemployment, and in part from inability to measure

'Theodore O. Yntema: Full Employment in a Private Enterprise System, in American Economic Review, March 1944, Supplement (p. 107).

National Planning Association, National Budgets for Full Employment, Washington, April 1945. 7 Full Employment: The Aim, in The Economist, October 3, 1942 (p. 408).

• Transition to Peace, in Fortune, January 1944 (p. 190).

Karl T. Schlotterbeck, Postwar Reemployment, The Brookings Institution, 1943 (p. 19).

the size of these components. In the following analysis an attempt is made to eliminate value judgments as to the nature or the size of the components to be included. The discussion is concerned only with the amount of measurable unemployment actually found in past periods characterized by general economic prosperity and the absence of serious labor shortages. It is believed that such periods, in general, reflect the concepts defined in this article and, in addition, provide some statistical evidence for quantitative analysis.

Unemployment estimates for New York City during 1943 and for the United States during the period of the 1920's are examined as indicative of the level of unemployment under conditions of satisfactory employment opportunity.

However, a particular volume of unemployment should not be defined as frictional unless something is known about the nature and causes of unemployment. A constantly changing group of unemployed averaging 2 million workers moving between jobs might be compatible with a condition of satisfactory employment opportunity. But a stagnant pool of 1 million workers unemployed continuously for a long period of time would not.

The New York City Experience

New York City was relatively slow in responding to the defense-war boom because of its concentration of production in consumer-goods industries and comparative lack of war industry. The ratio of unemployment to total labor force in New York City in November 1941 was over 13 percent-approximately double the unemployment rate in other large cities. By November 1942-although the unemployment rate in New York City had been reduced to 5%1⁄2 percentunemployment was a sufficiently serious problem to cause Governor Dewey to appoint the Hanes Committee to study its solution. The New York Times, in an editorial commenting on the need for the appointment of this committee, stated: "In the face of a national manpower crisis and a national need for full production, New York City, the greatest industrial city in the Nation, has large unemployment and idle factories and idle machines, while many of its smaller businesses face the threat of extinction." " As late as the first quarter of 1943, unemployment was regarded as a grave problem by Governor Dewey and Mayor LaGuardia. 12 In quantitative terms, the number of persons unemployed at the beginning of 1943 constituted somewhat less than 5 percent of the total civilian labor force.

10 Unemployment rates from unpublished data of Bureau of the Census, Monthly Report on the Labor Force.

11 New York Times, November 12, 1942 (p. 24).

12 Idem, February 20, 1943 (p. 1), January 6, 1943 (p. 29).

The turning point in the unemployment situation occurred around April 1943, largely as the cumulative result of the induction of many men into the armed services, the migration of New Yorkers to war production centers, and the increased placement of war contracts in the metropolitan area. Col. Robert P. Johnson, Chairman of the Smaller War Plants Corporation, noted that the reduction in the number of distressed plants had brought this troublesome problem to a manageable point.13 In addition, the Hanes Committee noted "a marked improvement in the unemployment trend." 14

By the middle of the year, Anna Rosenberg, Regional Director, War Manpower Commission, reported the beginning of shortages in many skills and specialized occupations. 15 As 1943 drew to its close, New York City's officials had oriented their manpower planning toward dealing with the developing labor shortages. In November, Stephan S. Sheridan, Acting WMC Director, pointed out that the unemployed were no longer numerous enough to meet quotas for essential manpower. Manpower requirements, he stated, are going to be met through the recruitment of new women workers and by the transfer of men from nonessential to essential industries. 16 At the close of 1943 the unemployment rate had dropped to 21⁄2 percenthalf the rate at the beginning of the year. By January 1944 a survey conducted by the New York Times in the metropolitan area indicated an immediate need for both skilled and unskilled workers in war plants.17

Over the year, New York City had progressed from a situation in which unemployment was regarded as a serious public problem to one in which signs of a tight labor market were evident. Thus, sometime in 1943, probably in the second quarter, this area passed through a phase in which unemployment ceased to be an important problem and no serious labor shortages had developed; at that time about 3.3 percent of the labor force was looking for work.

The Period of the Twenties

The years of lowest unemployment during the 1920's are generally accepted as typical of conditions affording satisfactory employment opportunity. At the same time, however, the Nation did not suffer from a general labor shortage; some concern existed over the frictional unemployment created by technological advances. According to

New York Times, April 23, 1943 (p. 27).

"Idem, April 12, 1943 (p. 16).

"Idem, June 4, 1943 (p. 12).

14 Idem, November 19, 1943 (p. 16).

17 Idem, January 9, 1944 (p. 7).

Isador Lubin's study of the absorption of the unemployed during the twenties, "dispossessed workers did not easily find new employment." 18 The lowest rates of unemployment during the decade were in 1920, 1923, 1926, and 1929. The year 1920, however, may be too closely allied to the abnormal wartime period to be considered representative. And 1929 an unstable year ending in financial crisis-may also be a poor year to choose as a guide. The remaining years, 1923 and 1926, are recognized as representative of conditions of high prosperity. Estimated unemployment averaged 3.9 percent of the labor force in 1923 and 3.7 percent in 1926.

Thus, experience during past periods characterized by ample employment opportunity and the absence of serious labor shortages indicates that necessary frictional unemployment should not exceed 3 to 4 percent of the civilian labor force. For a civilian labor force of approximately 60 million-the current total-this rate would mean a range of roughly 2 to 21⁄2 million unemployed. To the extent that past levels contained a "reserve" of unemployed, and to the extent that frictions in the labor market can be reduced through such measures as effective vocational guidance and employment service, the volume of frictional unemployment may be brought below the levels indicated by past experience. There is little reason to believe, however, that it need exceed such levels.

18 Isador Lubin, The Absorption of the Unemployed by American Industry, The Brookings Institution, Washington, 1929 (p. 15).

Trends in Housing During the War and

Postwar Periods 1

The War Years

LACK of adequate residential construction for more than a decade lies at the root of current housing shortages. During wartime, housing needs became critical in many parts of the country as millions of workers migrated to areas where war industries were expanding. In addition, residential building was retarded by the diversion of construction materials to meet the needs of total war. It seems appropriate, therefore, to review the wartime pattern in new dwellings started in nonfarm areas throughout the United States during World War II, and to indicate the trend in housing for succeeding months of the postwar period.2

The rise in housing construction (table 1) which followed the depression years in the 1930's continued after the outbreak of war in Europe, as a result of the increased demand for emergency housing in defense areas and easier financing through the Federal Housing Administration, together with generally improved economic conditions. The peak of wartime building was reached in 1941, when more than 700,000 new units were started.3 In September 1941, builders of moderate-priced dwellings in critical areas were assisted in obtaining materials in short supply by the issuance of preference ratings under regulations set up by the Office of Production Management, later the War Production Board.*

A reversal in trend was evident, however, during the last half of the year 1941, as the number of new dwelling units declined from a - high point of 223,000 for the second quarter.

A further decline in residential building occurred during the two succeeding years, partly as a result of the restrictive legislation enacted in the spring of 1942, and partly because of the scarcity of

Prepared in the Bureau's Division of Construction and Public Employment by Mary Frost Jessup. This article, covering the period from 1944 through the first 6 months of 1946, is part of a forthcoming bulletin on the construction industry. For current data and developments on housing, see p. 118 this issue of the Monthly Labor Review.

'This report is based on estimates of the number of new residential units started, their valuations, and source of funds, in nonfarm areas throughout the United States. The tabulations show these data by population groups and by geographic regions. The number of new dwellings in urban and rural nonfarm areas, which are financed by private funds and by public funds, and 1-family, 2-family, and multifamily structures are also shown.

Current estimates of residential construction are derived from building-permit reports made to the Bureau of Labor Statistics and from field investigation into the start and completion rate of building in a sample of both permit- and nonpermit-issuing places. The Bureau began the regular collection of buildingpermit reports from officials in 196 large cities in 1920. By 1944 collection had been expanded to include more than 2,700 cities and 1,400 nonurban incorporated places. During the last 2 years, the coverage has been greatly extended to include between 4,000 and 5,000 places.

'Applications from private builders were approved only if the sales price was $6,000 or less and the monthly rental $50 or less.



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