Masonry Magazine August 1966 Page. 35
Washington Wire
(Continued from page 11)
There will be grumbling about high interest rates but, privately, Administration officials concede the need for credit curbs. They want some checks on the price increases that are becoming politically embarrassing to the President. Yet he is not ready to ask for tax increases.
But the Federal Reserve will move slowly in tightening much further. Relatively modest turns of the screw can produce sharp moves in already record-high interest rates. No one really wants this, because there are fears that too tight money can cause a panic or bring a business slowdown. The size of loan need this fall will decide if rates go higher.
THE WAGE-PRICE GUIDEPOSTS WON'T BE
RESURRECTED despite the success of the White House in forcing withdrawal of recent increases in molybdenum. The administration pushed for the roll-back in a gesture to show its concern about the inflation. The guideposts do serve as a mild psychological brake.
There will still be talk about the guideposts. It would be good politics with the elections due. But few in Washington regard them as a major, serious bulwark against inflation.
The guidelines can't work in a business boom:
-The unions won't go along. They showed this in rejecting the first airline agreement. They want their cut of profits. With prices climbing 3.8%, a 3.2% wage hike won't satisfy.
-Industry can't be kept from raising prices as costs go up. Officials cannot watch or roll back thousands of prices.
GET SET FOR SOME MORE BIG STRIKES this fall. Labor experts now feel that the rash of walkouts they were expecting in 1967 may break out earlier. Union leaders who come up for bargaining soon are looking ahead, projecting the gains that others will be getting next year once the expected wage push snow-balls. They want the same gains now... from employers who are not yet prepared to pay this much. And labor is ready to fight hard on down the line.
Also in the back of labor leaders' minds is the fear that a recession may hurt their positions on their next contracts.
PRODUCTIVITY IN MANUFACTURING KEEPS
SURPRISING economists, who have been forecasting slower growth. It has been gaining steadily at the 3.2% rate of recent years, despite shortages of materials and skilled labor and the fact that capacity production has meant use of some higher-cost plants. But the highly efficient new plants coming on stream, plus the fact that high production spreads overhead expenses, has kept unit labor costs fairly stable. As a result, profit margins... in most cases... have held up nicely.
With little more unused capacity to draw on, to increase output further, productivity may soon lag a bit, as costs rise faster than prices. Increases in output per man-hour could fall to a 2.8%-a-year rate. Manpower experts feel that a faster rate may not reappear till a recession comes.
CORPORATE PROFITS ARE LEAPING UP-
WARD, despite widespread forecasts of a slowdown, such as those which put the stock market in the doldrums. Fairly complete reports for the second quarter show gains of 12%-plus, even after reckoning in the poor showing of the steel and auto makers. Those stable labor costs, plus rising sales, are the explanation. It looks now as though 1966 as a whole will show a whopping 10% gain in net over last year.
Next year could be another story. The union drive for big packages will drive up wage costs substantially. But should the business expansion peter out, it would be hard to raise prices accordingly. Margins would be hit very, very hard.
NO LET-UP IN SPENDING FOR NEW PLANT CAPACITY is evident yet, though many business ana-
(Continued on page 40)
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