Wnter's Chill

The U.S. economy, entering the last month of a disappointing year, last week was chilled by more unpleasant news. Unemployment in November seemed headed for a new postwar high for the month. With increases among the jobless in 48 out of 50 states, November unemployment was up more than 300,000 over October to an estimated 4,200,000, according to preliminary figures based on the number of workers drawing unemployment compensation.

After a two-month rise that temporarily heartened businessmen, manufacturers' orders turned about and dropped 4% in October, sending the backlog of unfilled orders to the lowest point in two years. Manufacturers' sales fell 1% in October for their sixth monthly decline in a row. What was even more disturbing to economists--and the chief cause of the orders slump--was that businessmen are still living off their inventories instead of reordering. In October, business inventories fell $400 million from September for their fourth straight decline.

The Christmas Test. One big test for the economy is whether retail stores will be able to top--or at least match--last year's record Christmas sales. Merchants are confident that an extra selling day and the consumer's yuletide spirit, helped by record personal income, will do the trick. So far, the signs are mixed. Department-store sales have been edging up for several weeks, reached a new high last week for the year. But for four straight weeks they have been running slightly below 1959 levels. Merchants blame part of the lag on unseasonably warm weather, hope the coming of colder weather will stir the consumers to buy.

Adding to the consumer's buying power, pay boosts averaging 9.4-c- per hour last week went to 450,000 steelworkers under the 30-month contract that ended last year's steel strike. The big question whether the settlement would bring an inflationary price rise at last seemed to be answered: with steel operating at 49% of capacity, the major steel producers were in no position to raise prices.

Wait & See. The next warming bit of news amid the chill was a rise in construction contracts awarded in October (see below). They topped the year before by 6%, the third monthly rise in a row, and set a new record for that month. Housing starts in October rose from September to 109,900, although they continued to trail last year. Said George Cline Smith, vice president and chief economist of F. W. Dodge Corp.: "This activity will help to ensure that the current business dip will be quite mild and of short duration, since construction is the nation's largest fabricating industry."

General Electric Chairman Ralph Cordiner demonstrated his confidence in the future by announcing that G.E. plans to "continue and in some areas to increase'' its capital spending in 1961 despite an expected cut in sales and earnings in 1960's last quarter and 1961's first quarter. While G.E.'s earnings have been pinched by price-cutting caused by heavy foreign and U.S. competition, Cordiner believes that price cuts "have about run their course," and that the electrical equipment industry is due for a "leveling off, or gradually higher prices."

Viewing the week's preponderantly bearish news, the stock market adopted the wait-and-see attitude of most businessmen. After a post-election surge, it dropped off slowly during the week, rallied at week's end to 596 on the Dow-Jones industrial average, down 10.47 points for the week. The big question now is whether the market will stage the traditional year-end rally that it has missed only twice in the last decade.

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