THE 1957 RECESSION: Facts & Figures for the Debate

THE 1957 RECESSION. Facts & Figures for the Debate

WHERE does the U.S. economy stand? Statistics last week were as varied as economists’ ideas about what constitutes a recession, each open to endless debate. Some figures that showed a continuing rise were clouded by deprecatory “buts.” Others indicating a downturn were brightened by curiously cheery notes.

For 1957’s third quarter, the gross national product increased to an annual rate of $439 billion, $5 billion more than the second quarter. But economists charge all the gain off to price rises; the real value of goods and services produced showed no increase. In October industrial production was down 2 points to 142 on the Federal Reserve Board’s index, compared to the boom peak of 147. Though overall employment in October increased slightly to a monthly record of 66 million—and unemployment decreased to 2,500,000—the bulk of the gain was in farm workers; nonfarm workers increased by only 12,000 v. a 317,000 gain in October 1956. –

Personal income (on a seasonally adjusted basis) edged down $1 billion to an annual rate of $345.6 billion in October. The total was still $11.5 billion better than October 1956. Yet it meant that workers’ take-home pay slipped to $74.78 a week v. $75.63 last month. One effect was that October retail sales of $16.5 billion were the lowest since April, though considerably better than 1956.

Many economists see a major trouble spot in the steel industry, which started out 1957 at nearly 100% of rated capacity to make up for the 1956 steel strike. It is now down to 81% of capacity. The steel industry considers recession a dirty word, says flatly that it is undergoing a “mild cyclical adjustment” which is now stabilizing. Production may go down some more, but steelmen expect consumption to remain at current levels as businessmen live off inventories. The oil industry is also cutting back to pare its ultralarge, 283 million-bbl. inventory of oil stocks.

Another worry is Detroit’s auto industry. Detroit still expects to sell 6,200,000 cars this year and about the same number next year. This week it is scheduling the highest production since December 1956. Sales for the first ten days of November were 10% better than last year, but the industry will not know how the 1958 models are going over for another two or three weeks. Ford’s new Edsel is a disappointment so far. But Ford’s other cars are doing well, and General Motors’ President Harlow Curtice says that “the initial response to the 1958 line is the best we’ve ever experienced.”

A third worry is freight carloadings. Last week they were down again, 15.3% below the same week in 1956, for the sharpest drop of the year and the greatest fall since August 1954. Much of the drop was caused by the winter stop in Great Lakes ore shipments ten days earlier than forecast. The key “miscellaneous” category, which includes all manufactured goods and is generally considered a good barometer, slipped only 12.4% below last year, and only 2.8% below the week before, considerably less, say railroaders, than the normal seasonal decline. Total for the year will probably wind up about 5½% less than last year. In the 1953-54 recession the drop was 11.6%, in the 1949 slump 15.9%. Moreover, truck lines, which carry 17% of all freight, are doing better than last year.

Home construction, which has been down all year, increased from a rate of 990,000 new homes annually to 1,000,000 annually last month. Builders expect easier credit to push the industry higher next year. Though plant expansion may drop as much as 7% in 1958, the new homes, coupled with big programs for new schools, highways, dams and bridges, are expected by F. W. Dodge Corp., the building industry’s top experts, to nudge overall construction beyond $48 billion to another record next year. As for retail sales, store owners, who expected record Thanksgiving and Christmas business, have shaved their estimates. Sales last month dropped 2%, and though the year-long totals are still a little ahead of 1956, many retailers say frankly that the recession talk is keeping customers away.

Despite the recent drops, the U.S. economy still has a long way to go before it approaches the slump of 1953-54—which economists now refer to as the “goldplated” recession. Steel must drop another 21% of rated capacity, retail sales 10%, carloadings another 6%, industrial production another 12 points, and unemployment would have to double to 5,000,000 (most economists foresee 4,000,000 by spring). The only part of the U.S. economy that has dropped far enough to be in a serious recession is the stock market. It plummeted 19% to a low of 419.79 on the Dow-Jones industrial average before bouncing back a bit. By odd contrast, Wall Street ignored the 1953-54 slump, and prices on the stock market held steady.