Still in Bed

Into President Truman's offices one day last week went his three-man Council of Economic Advisers, to give him their report on the U.S. economy. Tall, gaunt old Chairman Edwin G. Nourse adjusted his pince-nez, cleared his throat, and informed the President that the U.S. was still in "a healthy state of disinflation." It had not "fallen out of bed."

Was Chairman Nourse dozing a bit himself? Most Government economists and almost all businessmen had been banking on a strong spring upturn to check the recession. So far, no sizable upturn had come. Instead, production in April (as measured by the Federal Reserve index based on the 1935-39 average) had tumbled another 5 points to 179. The index stood a full 16 points below last November's postwar peak of 195. This was the sharpest five-month drop since the 1945 reconversion shakeout after V-J day.

Two-Way Squeeze. Industrial employment was also still falling. The U.S. Census Bureau reported that non-farm employment dropped 225,000 in April, though farm jobs rose by 427,000. But even that was less (by about 275,000) than had been expected. Overall U.S. employment of 57,819,000 was under last year's 58,333,000 at this time.

Federal economists estimated that between now and July, another 2,000,000 persons will find seasonal jobs, most of them on farms. Even if that happened, payrolls would still be 1,800,000 under last summer's. After seven years in which an expanding economy had added 7,500,000 jobs, absorbed the yearly increase in the labor force and cut unemployment to an irreducible minimum, the job climate had changed. With 600,000 ex-G.I.s and other new recruits added to the labor force since last year, the number looking for jobs was increasing considerably faster than the number of new jobs. Thus, even if employment picked up as much as expected, the number of jobless would rise almost as fast.

Exit Sluggards. Not all of this shake-out in employment was caused by a cut in production; nor was it necessarily damaging to the economy. The years of manpower shortages had brought into the labor force inefficient marginal workers (older people, housewives, etc.) who would not normally have been there. They were being weeded out along with the sluggards. Costly overtime and extra shifts were being abolished.

In many companies employers could lay the basis for lower prices by demanding and getting a higher standard of workmanship all around. Last week, a survey of 1,000 manufacturers by Mill & Factory magazine showed that 55% reported productivity on the upgrade.

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