Business In I960: Tough Prosperity

BUSINESS in 1960

FOR the U.S., 1960 was the most prosperous year in history—if judged by the overall statistics. The year marked the birth of the first half-trillion-dollar economy the world has ever known, saw the nation's gross national product rise from $482 billion to $504 billion. New records were set for total employment, personal income, industrial production and consumer spending. With more money to spend, the consumer kept buying right up until Christmas week, when department-store sales rose 30% over record 1959.

But in the mood of the U.S. at the end of 1960, there was little comfort in all the new records. The nation worried about a host of new economic problems for which there were no quick solutions; at home and abroad, it was buffeted by the winds of profound change. Frederick R. Kappel, president of American Telephone & Telegraph Co., spoke for many U.S. businessmen when he said: "We have more problems than we realized we had." As it entered 1961, the U.S. was caught in a business downturn so mild by past standards that economists vied with each other to give it a new name. But, mild or not, the recession of 1960 drove down some business indices, added to the growing ranks of the unemployed, caused countless householders to put off the purchase of a new home or refrigerator, made gold a surprise issue in a presidential campaign. Said Federal Reserve Board Chairman William McChesney Martin Jr.: "This is the first time in my lifetime that the credit of the U.S. has been questioned. A very serious shadow lies over the American business picture." Economic Hypochondria. In 1960 the U.S. citizen faced the new problems with uncommon concern, gamely tried to grapple with such subjects as the rate of economic growth, interest rates and the balance of payments. Even cartoonists turned their drawing boards into economics classrooms. So widespread was the sense of involvement that Charles H. Schmidt, vice president of the National Bank of Detroit, was led to complain: "We are becoming a nation of economic hypochondriacs." The hypochondria was caused by the fact that too many economists and businessmen misjudged the economy at the beginning of 1960. They predicted such a state of economic euphoria that the aches and pains that appeared were magnified. "The glowing predictions I made a year ago were certainly wide of the mark," said Joseph L. Block, chairman of Inland Steel Co. "If I were a member of a big-league ball team, I would either be benched or sent back to the minors." The glowing predictions—and the dimmer actualities that followed—added up to a lesson. They made the U.S. see clearly that no matter what it had done, it was not enough. Employment stood at 67 mil lion in December, a record for the month, but unemployment rose to 4,250,000, which was 6.3% of the labor force and the highest total for the month since 1940. The housing industry built 1,265,000 new homes, but that was 19% below 1959. Steel had its sixth best year; its 99 million tons were 6% below 1951.

Industrial production averaged 108% (1957 = 100%) but at year's end was down 5% from the first of the year. Corporate profits, originally expected to reach $51 billion, were hit by a profit squeeze that drove them down to an estimated $44 billion, practically destroying the Government's hope of a 1961 budget