Recovery in a Deep-Freeze

Like a truck that suddenly hits an icy patch of road, the U.S. economic recovery that had been picking up speed for weeks has begun to skid. The bitter cold and unrelenting snows that have gripped the U.S. east of the Rockies are throwing onto unemployment rolls hundreds of thousands of workers, ranging from coal miners in Appalachia to oystermen who cannot chop through the ice in Chesapeake Bay. Soaring prices for fruit and vegetable crops damaged by the freeze are giving a new push to inflation. Worse, even if the weather should warm up suddenly, which hardly seems likely, many economic effects of the Big Freeze will linger on into the spring and beyond.

The greatest trouble, of course, is the worsening fuel shortage. All over the East, natural gas that had been stored for use in February and March was piped out in January; last week storage levels were one-fifth of those a year ago. Nearly every gas-transmission company has curtailed deliveries to utilities, and utilities in turn have cut off service to factories. Plant closings, often for only a day or two at a time, have idled 400,000 workers by White House estimate, and the blizzardy blast of arctic air at week's end threatened many more layoffs--at least 300,000 in New Jersey alone. General Motors, U.S. Steel and other large companies kept many operations going by switching from natural gas to oil or coal, but all over the Midwest huge quantities of those fuels were immobilized aboard barges stuck in frozen rivers.

In some of the states that are declaring energy emergencies, industries will be allowed to burn fuels that are ordinarily banned because of antipollution laws. In Ohio, where Columbia Gas will start limiting more than 1,300 schools and businesses to just 15% of their normal supplies this week, Governor Rhodes permitted industries to burn smoky high-sulfur coal. Said he: "We can go back to coal and save the schools, save the jobs, save Ohio and save the nation."

The team in Washington swung into action early. Said Presidential Energy Coordinator James Schlesinger: "Someone has observed that energy policy has consisted of prayer for milder weather. This year the prayers were unanswered." The Interstate Commerce Commission directed railroads to give priority to oil tank cars and allowed oil trucks licensed to operate in only one state to cross state lines. The Federal Energy Administration ordered some refineries to cut production of jet fuel so that they can make more heating oil.

The Administration's major effort was to draft a 14-page Emergency Natural Gas Act of 1977. "Its purpose," said President Carter, "is just to ensure that no portion of our country must go without essential services." It would permit Carter to order some interstate pipelines to sell gas to other pipelines that are running low, and allow gas to be piped across state lines at unregulated intrastate prices of $ 1.90 or more per 1,000 cu. ft., rather than the regulated interstate price of $1.44. Gas producers protested that the bill does not go far enough; they contend that only long-term deregulation of gas prices will encourage the industry to drill new wells. Says Texas Gasman Frank Pitts: "We are only spreading out the shortages that exist. We are putting a Band-Aid over a cancer." Perhaps, but the Administration does not want a fight over deregulation to delay passage of the emergency bill, which is expected this week.

Not much can be done to contain inflation resulting from the freeze. In Chicago, pork-loin prices have jumped 300 per lb. because farmers cannot get hogs to market. Florida normally supplies as much as 80% of the nation's fresh produce in the winter, but the freeze has wiped out many crops. In Manhattan, wholesale prices of green beans have more than doubled, to $20 per bu. in one week, and tomato prices jumped more than a third, to $23 per 30-lb. box. Orange juice prices had been depressed by overproduction, but the cold has changed that. The retail price of a 6-oz. can of store-brand frozen orange juice hovered around 210 last month; it could soon hit 310.

Unfortunately, the nation's energy worries will not end with the winter. The same aberrant weather pattern that has frozen the East has deposited scanty snow in California, Colorado, New Mexico and other Western states. Westerners count on melting snow to furnish them with hydroelectric power in the spring and summer. This year they may have to burn scarce fuels instead. Supplies of water for drinking and irrigation may also be scarce. Chemical fertilizer shortages are likely this spring, because natural gas is used to make the stuff. That could hold down national farm output and push feed prices still higher.

Economists differ on the likely total impact of the freeze. Edgar Fiedler of the Conference Board, a nonprofit research group, thinks that the jobless rate might sneak up a few tenths of a percentage point, but adds that industrial layoffs are being partially offset by increased employment in such areas as road clearance and fuel delivery. He also expects virtually no change attributable to the weather in the Consumer Price Index. On the other hand, Michael Evans, president of Chase Econometric Associates, believes that because of the cold, consumer prices will rise at a 5.4% annual rate in the first quarter, rather than the 4.9% he had forecast earlier. Evans also fears that the freeze will weaken the stimulative effect of the $50 tax rebates that Carter proposes because much of the money will be spent to pay higher fuel bills. Says Evans: "It will literally go up in smoke."

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