No Bones Broken

The U.S. economy felt its strike-battered bones and muscles, found only surface bruises. October’s industrial production, which the Federal Reserve Board had estimated would fall 11%, had actually fallen only about 6%. With the strikes over (see NATIONAL AFFAIRS), production already showed signs of turning up, although the U.S. was still so woefully short of steel that it would take the industry six weeks or more to catch up. ”

For lack of steel, Detroit’s automakers were forced to lay off 37,000 more workers this week. But except for strike-born dislocations, the U.S. seemed on the mend from the recession. Employment had picked up so much that U.S. officials removed five areas from their “critical” list of places with high unemployment.

Narrowed Gap. More important, U.S. department-store sales, which had lagged woefully behind 1948, were also on the rise. For the first week in November, although still 2% under 1948 for the U.S. as a whole, they were from 1% to 15% above last year in eleven major U.S. cities.

Cheered by the improvement, Federated Department Stores’ able President Fred Lazarus took a speculative look at the future. For the rest of this year he guessed that unit sales would pick up and match last year’s record high, although dollar volume would dip. Next year looked almost as good. “The next six months,” predicted Lazarus, “will show no further drop in employment or production.” Federated’s Director Paul M. Mazur, a senior partner of Manhattan’s Lehman Bros, investment banking firm, thought that the strikes even held some concealed blessings for business: “They often provide a heaven-sent opportunity to clean up burdensome inventories.”

Fuller Shelves. Many retailers had already cleaned up their inventories too thoroughly. Last week they were busily restocking. After ten months of successive decline, U.S. retail inventories had jumped a tidy $500 million in September. There was still a tremendous amount of pent-up buying power. Disposable income had risen 4.8% in 1949’s first half over the same period last year, to an annual rate of $194.6 billion, and personal savings had almost doubled.

By January, when $2.8 billion of insurance refunds is paid out to veterans, there would be a lot more money around. Pondering this, along with the Federal Government’s whopping deficit and higher industrial costs created by 1949’s pension settlements, Brookings Institution’s President Harold G. Moulton last week warned: “You might as well forget about much cheaper manufacturers’ products.” Although he predicted a drop in business next spring, the U.S. was currently in “a period of creeping inflation.”