STATE OF BUSINESS: The Morning After

(See Cover)

The ides of March came and went last week, and brought with it the most widespread depression talk in a decade. The sound and fury were touched off by publication of the unemployment totals for February, showing 5,173,000, or 6.7% of the labor force,* out of work, considerably more than in the 1953-54 downturn, but about the same as in the 1948-49 recession.

To add to the gloom, the latest production estimates from the Federal Reserve showed a three-point drop to 130 on the index in February, a total six-point decline since the first of the year. All told, industrial production was down 17 points from the 1956 peak, a slightly bigger drop than during the 1953-54 recession.

To top off the bad news, the Commerce Department announced that personal income had edged down (though still above that of a year ago), and the Securities and Exchange Commission revised its estimates of capital expenditures for new plant and equipment. Last December SEC estimated that plant expansion, roaring along at a rate of $37.5 billion in 1957's final quarter, would taper off to $35.5 billion in first-quarter 1958 as many industries approached their expansion goals. Now it forecast a first-quarter rate down to $34 billion. Second-quarter estimate: down another $1.5 billion to $32.5 billion, with some pessimists even predicting a further drop to $30 billion during the rest of 1958.

The Calm View. For all these woeful tidings, U.S. businessmen worried less than the politicians about the recession (see NATIONAL AFFAIRS). Businessmen did not brush the facts under the rug, but their anxieties were generally more for "the other guy" than for their own business. They saw no long slide but talked of the decline as the "saucer recession"—a curving dip to a level bottom and a climb on the other side. They viewed the now-dwindling inventory surpluses as a natural result of years of postwar expansion to keep pace with ever-growing markets—and considered this situation as a normal hangover caused by an inflationary binge.

Said Board Chairman Paul L. Davies of San Francisco's $300 million-a-year Food Machinery & Chemical Corp., who expects a rise in volume but a dip in profits in 1958: "My feeling is that recession within bounds is healthy. We have been in a boom economy since 1946. The pause will make us more efficient and competitive after setting new records for capital expansion. We need a breather for the economy to catch up with us. It will be healthy if it runs a year."

If business was not alarmed, neither was the U.S. public, though never had a stumbling economy been so widely discussed or so vigilantly watched. While the recessions of 1949 and 1954 went largely unnoticed, this time it was Topic A from club car to subway strap. It spawned some wry gags, such as the Recession Cocktail

(Business on the Rocks) and new definitions, e.g., the difference between recession and depression ("A recession is when you lose your job, a depression when I lose mine"). Yet, like businessmen, the average consumer seemed more worried about his neighbor than himself.