Masonry Magazine January 1969 Page.19
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GOVERNMENT CURBS ON THE ECONOMY WILL REMAIN IN FORCE for some time longer, if the current views of Washington economists are any guide. Some officials do believe that we have passed the worst of the inflation. The latest business news generally tends to confirm forecasts of a slowing down. At some agencies, there is even worry about the possibility of a recession.
But the battle against inflation hasn't been won yet. Boom psychology is still strong. From time to time, disturbing signs of renewed vigor keep popping up. They imply it will be a little while yet before a shift to easier money comes.
THERE IS STILL PLENTY OF EVIDENCE TO SHOW THAT A SLOWDOWN has begun. The sharp jump in unemployment in September certainly added to the picture. It seemed to sell many of those who doubted inflation would ever be licked. They now appear at least ready to believe that a cooling can really occur. This should dampen the desire to rush to build plant to beat out cost hikes.
Actually, the September figure exaggerated the true jobless situation. It included a lot of students who hadn't gone back to school at sampling time. But the half-point jump that was reported to 4%-did have a marked impact. It made many realize that a cooling is definitely in progress.
THIS SOFTENING IS INCREASINGLY EVIDENT in key business statistics. The indicators have been displaying an ever more convincing pattern, almost week by week. The jump in unemployment is only the top of the iceberg, many feel. But other signs of significance, other symptoms, can also be cited.
-Industrial production has been moving down steadily since mid-summer. Economists believe that the slide foreshadows still further cutbacks in hiring over the months to come.
-Personal income is now rising at less than half the average rate of the first half. Consumer buying is bound to feel this as joblessness rises and overtime begins to shrink.
-The money supply has actually failed to grow for more than four months. This suggests that investment in inventories and new plants should be curbed for lack of needed credit.
The promise of still further moves toward a settlement in Viet Nam adds to expectations of gains against inflation-and toward the stability that must precede any letting up.
BUT THE ROAD TO STABILITY IS RARELY SMOOTH-and won't be this time. Inflationary psychology has only been dented-not broken once and for all. There are still enough plus-figures cropping up to keep boom thinking alive. Consumer prices and new housing starts have lately shown unexpected gains.
More important the new-orders figures are worrying many economists, in industry as well as government. The numbers spurted in September, by more than twice the August drop.
This may not be a fluke, reflecting a leveling of defense orders, as has happened before. The increases were fairly broadly based, implying there's a lot of oomph still around.
THE PICK-UP IN NEW ORDERS ALSO JIBES with strength previously shown in several surveys of industry's plans to invest in new plant and equipment. Till recently, the experts tended to discount the solid gains being reported by the surveys because they didn't fit the picture of a weakening economy.
Now, economists can't help wondering whether the new-orders figures and the spending surveys aren't the ones reflecting the real trend. Most do not believe that this is actually the case-but they can't yet be as sure as they would like.
THUS, THE SENTIMENT TO EASE RESTRAINT ON THE ECONOMY is still muted in Washington these days. It is by no means the dominant philosophy-yet. As noted, inflation has only been dented. Policy-makers at the White House and the Federal Reserve know boom psychology is only suppressed, not dead. They fear it will flare up again, if the restraints are taken off too soon.
But officials are watching closely to pinpoint the precise moment at which the need for continued restraint gives way to the need to ease up. To miss that particular moment -to keep money tight too long-would invite a serious recession.
THE PRESIDENT DOESN'T WANT TO SEE A RECESSION-not even a mild one. He is said to remember still how the slide of 1960 cost him that election. Some of his advisers-Labor Secretary Shultz, for one want to let up now. So far, the Administration has held the line in collaboration with the Fed. But the White House is bound to be more conscious of the political aspects of a recession and, thus, would want to move sooner than the credit men.
The recent nomination of Arthur Burns to take the helm at the Federal Reserve implies that timely action to ease will be taken. Burns is close to Nixon. And the outgoing Fed Chairman will not press a policy his successor will oppose.
THE FEDERAL RESERVE COULD MAKE A MOVE TO EASE UP before much longer, especially if the next few figures show the new orders spurt being reversed. It will be a very mild step at first one hardly perceptible to the eye. But the shift will mark the (Continued on page 28)
masonry • Nov./Dec., 1969
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