Points in the Second Half

In an outpouring of prognostication, economists across the U.S. last week were in remarkable agreement about where the U.S. economy is going in 1961. Their consensus: The recession will last into the first half of 1961 but will get no worse, will give way to an upturn in 1961's second half, which should make 1961 a better year than 1960. None felt that the gross national product will drop more than 1% or 2% before the upturn.

More Phrases. Testifying before the Joint Economic Committee of Congress, Government and private economists agreed that the recession (the Government economists preferred to call it a downturn) is the mildest since World War II, has been going on for six months, and stems in large part from the economy's failure to emerge strongly enough from the 1957-58 recession. "In no case," said Geoffrey Moore of the National Bureau of Economic Research, "is the contraction as widespread as it eventually became in 1948-49, 1953-54, or 1957-58."

A new entry in the economic phrasemaking derby came from Charles L. Schultze of Indiana University, who described current conditions as "high-level creeping stagnation." The major reason for the economy's failure to rise strongly from the 1958 recession, said Schultze, was too much tightening of credit by the Federal Reserve Board, and the Government's attempt to "budget for an overly large surplus." "If these restraints were relaxed," added Joseph Pechman of the Brookings Institution, "I would have little doubt that the economy would grow faster and that this growth would be interrupted less frequently by periodic recession." Both Schultze and Pechman recommended more Government spending or ;a tax reduction--or both--as anti-recessionary measures.

None of the economists could spot any signs of an immediate upturn. Louis Paradiso, chief statistician for the Department of Commerce saw "easing-off indicators dominating the economic scene."

The Next Upswing. Outside the hearing room, the testimony was echoed by other economists. The U.S. Chamber of Commerce predicted a "mild" business slump for the first half of 1961 of "only 1% or 2%" in the gross national product. For the long run, the chamber was optimistic. In the face of the slide; said Emerson P. Schmidt, the chamber's chief economist, "the strength and level of the economy are surprising." He believes that the gross national product may climb as high as $520 billion in 1961 (at present: $500 billion) if the slump ends by midyear. Says Schmidt: "There are at present no grounds for sustained pessimism."

In a survey by Dun & Bradstreet, top economists for U.S. corporations agreed that a further decline in overall business can be expected during the early months of 1961, with a recovery in the year's second half. About one-third thought the economy would get its main stimulus from Government spending. V. Stevens Hastings, Chase Manhattan Bank economist, looked ahead and liked what he saw: "The fact that the 1958 to mid-1960 upswing was less than normal does not affect the outlook for the '60s. The next upswing is just as likely to be greater than normal."

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