Masonry Magazine July 1971 Page. 19
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THE PACE OF THE RECOVERY IS INCREASINGLY DISAPPOINTING to economists in government and industry. As they read the latest statistics, there is simply not enough vigor in the upturn to get unemployment back to levels that are socially and politically acceptable. This is why there is still so much interest in doing more to stimulate business, though the President refuses.
The economic indicators are very much a mixed bag of pluses and minuses. There are some clear-cut strengths to be found:
* Construction continues vigorous especially home-building.
* State-local government spending is on a persistent uptrend.
* Inventory building is beginning to show up, though mildly.
* And retail sales keep making fair gains, except for autos,
On the other hand, there are clear weaknesses, too:
* The consumer has not embarked on any spending spree.
* Auto sales, especially, have lagged officials' expectations,
* The gains in many figures are mainly a result of inflation.
THE FACT THAT THE RECOVERY HASN'T REALLY BROADENED to the business sector is the most disturbing part of the business picture. Businessmen are not sufficiently encouraged to step up their inventory-building intensively. And they are not yet increasing their investment in new plant and equipment. What's more, new orders for durable goods have been flat since last summer.
In over-all terms, the recovery slowed markedly during the second quarter, after the sharp start-of-the-year bounceback in autos. Total output-Gross National Product rose at a $20 billion-a-year clip, down from $302 billion of the first three months. Deflating for price hikes, the rise was less than 3%-not enough to absorb many new workers, so that unemployment seems bound to go higher before it turns lower.
IT WILL TAKE REAL GROWTH OF MORE THAN 5% to make a noticeable dent in unemployment. That's because the labor force is growing at more than a 3%-a-year clip, while productivity (output per manhour) is rising about as fast. This means we can turn out 5% more with the same number of workers. The drop in June's jobless total was a quirk, very likely to be reversed.
The polls indicate that the economic issues could be Nixon's Achilles Heel. Political observers agree that he can't afford high-level unemployment in mid-1972 -just before the election.
WHY HAS THE PRESIDENT BEEN SO RELUCTANT IN ASKING Congress for more stimulation-tax cuts especially? Because his most influential adviser-Director George Shultz of the Office of Management and Budget-believes that the big Budget deficits, plus easy money, are giving the economy all the prod needed. To do more at this time, would only add fuel to the bad inflation.
But Nixon's other advisers have been shifting their thinking for some months now. Chairman Arthur Burns of the Federal Reserve Board has been pressing the President to take more active steps against prices and wages at every opportunity. And the Council of Economic Advisers, authors of the game-plan now being followed, sees a need for further information.
JANUARY 8-12, 1972
MCAA
CONVENTION & SHOW
at the Americana
Bal Harbour, Fla.
YOU STILL CAN'T RULE OUT A WHITE HOUSE CALL for further stimulation and the establishment of, say, a Price-Wage Review Board to brake inflation pressure. A number of officials feel that the President's flat no of late June may not be final. They feel that he can be persuaded to move in the next month or two if the recent unemployment decline is reversed and the economy in general continues on its present unsatisfactory recovery path.
Action to control inflation would permit more leeway to prod the economy with, say, tax cuts. It would also let the "Fed" tighten credit some to slow excessive money supply growth. As of now, the sluggish upturn inhibits tightening somewhat.
THE FEDERAL RESERVE SYSTEM HAS TIGHTENED CREDIT gradually, anyway. It has attempted to nudge short-term interest rates up only slightly higher, to slow excessive growth in the money supply in advance of new stimulation. The "Fed" has not been making an all-out effort to brake the economy as in '69. It is still deeply committed to promoting a return to full employment soon.