Upturn with Problems

"Improvement has come somewhat sooner and more vigorously than many observers had perhaps anticipated." So reported the monthly review of the Federal Reserve Bank of New York last week. The 1958 recession, said the review, probably reached its low point in April, and it was the shortest and the most severe of the postwar recessions. Though it warned that a mild setback might follow the initial upturn, as in 1949 and 1954, the bank saw hopeful signs in the fact that the recovery so far has been broader than in either of the previous postwar recessions.

Housing starts increased in June for the fourth consecutive month, steel production has declined only seasonally (while new orders held up), petroleum output increased and is scheduled to gain further in August, and demand for natural and synthetic textiles has firmed. Last week the Federal Reserve Board reported that department store sales for the previous week were running 3% above the 1957 level. Adding to recent gains in manufacturing employment and hours, the Big Three automakers announced plans to recall 182,000 workers to work on the 1959 models. And though the rate of inventory cutback continued in June at a much slower rate, the nation's retailers actually increased their inventories--the first increase by any sector of business in 1958.

Taking up the threat of oncoming inflation, the Federal Reserve review speculated that further price rises might be held down by the large inventories still on hand. Recent price rises in steel and other raw materials, said the report, were encouraged by the Mideast crisis, and might prove to be transitory. In one case they had already proved so; custom smelters of copper, who fortnight ago raised their prices 1/2-c- to 27-c- a lb., last week cut their prices back to 26 1/2-c-. But steel showed no sign of retreat, as steel price hikes spread to 65% of the industry's output. Though Tennessee's Senator Estes Kefauver started a probe of the increases, the Federal Trade Commission said that it had found no illegal price fixing in the steel industry, planned no action.

Despite the business improvement, unemployment was still high. The Government last week reported that, while employment rose to 65,179,000 in July, the drop in unemployment was smaller than usual. Because large numbers of new workers are entering the working force (55,000 in July alone) and heavy rains curtailed farm and construction activities in many parts of the country, the jobless total of 5,294,000 was up from June to 7.3% of the working force, v. 7.5% in the April recession peak. Most economists fear that the total will remain high for months. Just as production drops off faster than employment when a recession begins, so employment recovers more slowly as a recession peters out, largely because of recession-time economies and technological advances that lessen the demand for workers.

This file is automatically generated by a robot program, so reader's discretion is required.