Masonry Magazine April 1970 Page. 22
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THE BUSINESS READJUSTMENT MAY NOW BE BOTTOMING OUT. There is still some bad news some weak statistics-to come. But an increasing number of economists see pluses developing to offset the softening. The results could be an essentially sidewise trend during the current quarter, to be followed by a second-half upturn. If this appraisal proves wrong, then the chances are that the country will see at least a mild recession before 1970 is over.
This is an unusually difficult time to chart the near-term future. The economy is delicately balanced on a knife-edge. No one can yet say for sure that tight money and the tight Federal Budget did not do more damage than has surfaced so far. The coming seven or eight weeks could tell the story.
THE STATISTICS SHOWED A CLEAR, UNIFORM SLOWING in the first quarter. A long list of major indicators revealed declines. Where there were pluses, they were primarily a result of price increases, rather than physical gains. In other words, the predicted cooling in the economy has definitely appeared.
-Unemployment has beca rising moderately, month after month.
-Industrial output has fallen 3% over the last eight months.
-Personal income is rising sluggishly. Buying power is down.
-Retail Sales have been flat in dollars, off in unit volume.
-Gross National Product-total output of goods and services was down 1%-plus in the first quarter, net of price hikes.
BUT THERE HAVE BEEN POSITIVE DEVELOPMENTS of some significance, too. These have not gotten much attention, but they could play an important role. The drop in inventories during January, and the only modest February rise, suggest that the bogged-down consumer-durables sector is now well on its way through the wringer. Prompt cuts have brought output into line with sales. Many analysts feel this development will be growing in importance over time.
Auto sales show signs of firming as the spring gets rolling. Business spending for new plant-a dynamic force-will stay high, even though it may fall a bit shy of industry's plans. These trends can be at least partial offsets to a recession.
OFFICIALS ARE WATCHING THE CONSUMER VERY CLOSELY for critical signs as to which way the economy will turn. His is the one major area of doubt. Federal spending is flat, with Defense outlays down and other programs up. State and local expenditures will rise only slowly. Housing is depressed. Outlays for plant expansion will remain high, though perhaps not as high as surveys hint. But now the consumer is getting bigger Social Security checks. And he will also have more spending money after the surtax ends on June 30.
-If he spends it freely, then the economy will get its pickup.
-If he saves his extra income at first, then a recession seems more likely. Though families do spend more in response to increases in income, the important question is: How quickly? A delayed response would give the downward forces at work in the economy time to cumulate. to gather momentum and change a mild readjustment into a more serious recession with high unemployment. A quick reaction would check such cumulation.
WE ARE NOT IN A RECESSION NOW, economists say... not quite. There is a popular fallacy that six months of decline in real output (net of price changes) means a recession. But the experts would have to see more easing in more ways. More signs will appear. But not enough have shown up yet.
THE GOVERNMENT IS NOW TAKING IMPORTANT STEPS to avoid a recession. President Nixon has reversed Federal policy: Curbing inflation is no longer the chief objective, though it continues to be a subsidiary consideration. Currently, the Administration is mobilizing all of its substantial resources to see that today's business slowdown doesn't pick up unstoppable momentum. This is an election year, and the President is simply not prepared to permit rising unemployment to hurt his party's chances of making gains in Congress.
This explains his decision to unfreeze grants to the states and cities for building roads, hospitals, etc. Not much money is involved this year. But there is more to come and to show where White House policy is heading. Psychologically, it is the kind of thing that can encourage people to spend freely.
MONEY IS BEING EASED . MODERATELY, BUT UNMISTAKABLY to aid Nixon in the struggle to avoid a recession. Federal Reserve Board Chairman Burns shares the President's concern. He does not think a slide is a certainty. But he thinks one is a real possibility. though he won't say so publicly. He doesn't want to be blamed for causing a slump his first year in office. Besides, (Continued on page 29)
masonry
• April, 1970