Masonry Magazine March 1975 Page. 23
theWASHINGTONvire...
THE U.S. ECONOMY MAY ENJOY A BRISK RECOVERY, beginning around the middle of the year. That's not the prevailing view among the country's business analysts; most still look for a slow upturn. But a growing number of forecasters see several forces already in operation that should get activity moving faster again at a satisfactory rate before many more months.
The optimists aren't saying that the economy's troubles are over. There's still three or four months of bad news ahead. Production will be trimmed further before the turn. And the unemployment rate will continue to move measurably higher.
But the optimists deserve a full hearing on their records. They were among the first to warn about the likelihood of a severe recession, at a time when it was expected to be mild.
CERTAIN SELF-CORRECTING FORCES ARE ALREADY AT WORK to lift economic activity. Virtually all analysts agree on this. These are the factors that customarily bring the shift from the recession stage of any business cycle. (In effect, every business downturn carries the seeds of its own reversal.)
* Consumers are paying off debt, getting into shape to buy. They're also generating replacement needs for things such as autos, clothing, appliances and other big-ticket items.
* An upturn in home-building is in the making though only a slow one. Savings are flowing into thrift institutions at a very rapid clip again. In time, the improved financial conditions should make them more willing mortgage lenders.
* And inventory liquidation is under way, as industry tries to get stocks back into line with sales by cutting output.
BUT SOME CYCLICAL CORRECTIONS ARE MOVING FASTER than most analysts had been expecting. The optimists see evidence that industry is working off its inventory at a really aggressive pace now, though the latest official statistics don't fully reflect this yet. And the historical record suggests that the faster the rundown, the sooner and brisker the rebound in output.
The inventory liquidation is helping to curb inflation. And that will assist recovery by abetting consumer confidence...and by stretching the purchasing power of consumers' dollars.
masonry • March, 1975
STIMULATIVE GOVERNMENT POLICIES WILL REINFORCE the normal business cycle forces. The optimistic analysts consider this the critical element in catalyzing a more rapid recovery. They feel that the full implications of the developing fiscal-policy impact are not yet generally appreciated.
Congress is now in the process of beefing up the President's tax package. His call for a hold-down in spending is being ignored. And much of the economic drag inherent in the Ford energy program will be cut out by the Democratic majority.
Disposable income will get a major lift from the tax rebate of $8 billion plus the permanent cuts in withholding taxes that both the House and Senate are also likely to vote. The income impact this summer could be nothing short of enormous.
TOTAL OUTPUT COULD BE RISING SOLIDLY by year-end. The optimists can see real Gross National Product, washing out prices increases, climbing at an annual rate of 4% even 5%. That wouldn't be explosive growth, by any means. But it would not be halting, either. It would be very close to the rate that analysts consider sustainable and noninflationary over the long-run.
Unfortunately, a brisk upturn won't cut unemployment sharply. More people will be reaching working age and will be looking for jobs. Meanwhile, any extra production can probably be handled with few extra workers, as productivity rises, as it generally does in the early stages of a business recovery.
Even the optimists see unemployment still topping 8% by the end of the year. It may not get below 8% until 1976 or 1977.
SIGNIFICANT PROGRESS AGAINST INFLATION NOW SEEMS CERTAIN during 1975. As noted, the price indexes are acting better than many economists thought. Continued improvement appears likely as the recession carries through June. Prices have been falling all along the production chain for some months now. Industrial raw materials prices began the decline, falling 25% since April. Finished goods prices are now benefitting from the lower materials prices.
What is more, as many companies try to work off excessive stocks, price concessions are being offered on a wide range of goods and services. The farm price rise is slowing, too, after the sharp advances of 1974.
(Continued on next page)
23