STATE OF BUSINESS: The High Plateau

The U.S. is “poised on a high plateau with neither the threat of inflation nor of recession . . . ever very distant.” Thus Arthur F. Burns, chairman of the President’s Council of Economic Advisers, describes the economic state of the nation. In this situation, Burns told the New York State Chamber of Commerce: “We must be alert to changes in economic conditions. The only rigidity that we can afford is the principle that the best way to fight a recession is to prevent it.”

Burns saw no recession in sight, thought that the U.S. is still feeling the thrust of inflation, although with lessening force. Said he: “The widespread tendency toward increasingly liberal credit terms, which existed several months ago, has apparently run its course. Some improvement in the quality of new mortgage loans is now under way. The same is true of the consumer installment loans being made by some important lenders, though by no means all. Although the total expansion of loans by financial institutions has been continuing at a rapid rate, the loan funds are coming from past and current savings, not from newly created money.”

Burns cited other elements of strength: “Although the nation’s business is significantly larger than at the peak of 1953, inventory holdings are smaller. Despite the extensive [housing] boom, vacancies now available fall short of the reserve that people need.”

Last week the most powerful group of money managers in the U.S., the presidents of the 12 Federal Reserve district banks, met in Washington to take a reading on the economy. They also concluded that the push is still upward, and the monetary authorities must go on with their policy of restricting credit.

There is ample evidence of the continuing upsurge. Construction hit an alltime monthly high of $4 billion in September and set a new quarterly record as well. Employment rose to 64,700,000, the highest point ever reached in September, while unemployment dropped to 2,100,000, lowest for any postwar month. Corporation dividends for the year’s first eight months reached a record $5,564,000,000. Even bill collectors shared in the good news. The American Collectors Association said that between June and September “collectibility” rose 12%.

The commodity futures markets, which soared on the news of the President’s heart attack, in expectation of a possible return to Democratic high-price supports, dropped last week in the sharpest break since May 1954. One big reason was an unofficial estimate by the Journal of Commerce that the cotton crop would exceed Government figures; this touched off a reaction which sent cotton plunging $10 a bale for the maximum permissible drop, followed by eggs, corn, soybeans and wheat.

Last week Grover W. Ensley, staff director of the Joint Congressional Committee on the Economic Report, took a look ahead to 1965 and forecast:

¶ Population will increase 25 million, to 190 million people, and each worker will labor 200 hours less each year.

¶ Real income per capita will soar 30%. The average American will have an additional $370 to spend on goods and services.

¶ Total national production will increase to an annual total of $540 billion.