STATE OF BUSINESS: Static '60

• Share

The stock market last week was buffeted by the heaviest losses in weeks. In one day the Dow-Jones industrial average plummeted 15.42 points, biggest break since President Eisenhower's heart attack in 1955. The slide was accelerated by the fact that when the average eased through the previous 1960 low of 599.10, which had withstood two previous onslaughts, a storm of selling was touched off. At week's end the average was down to 585.20, lowest level in 19 months.

While some traders worried about what was going on at the United Nations, biggest reason for the drop was worry about what is going on in U.S. business. The course of the economy has been so puzzling this year—and so many have already guessed wrong on where the economy is going—that investors and businessmen alike have become uncertain. Few are at all sure about what is ahead. Inland Steel Chairman Joseph Block spoke for many businessmen when he said: "I've never seen a year when our forecasts and actual production were so out of line."

Blue Sky Estimates. The forecasts were out of line chiefly because some sales estimates were more blue sky than blue chip. The original overoptimism is long gone, replaced by a sober realization that the U.S. economy, while operating at close to a peak level, is not moving forward in line with expectations.

Adding up the signs, some economists conclude that the U.S. is on the brink of a recession. Others, like the Wall Street Journal's columnist George Shea, hold that the nation has for some months actually been in a recession. Says James A. Byrd, economic adviser for Houston's National Bank of Commerce: "I believe we are probably about halfway through a rolling readjustment.* The recession of 1961 that everyone is talking about is already half over. It will bottom out early in 1961, and by the middle of 1961 we should have a boom. The worst lies between now and spring." To support this position, Byrd and others cite certain key areas of the economy:

STEEL PRODUCTION has been slipping since January's near capacity, last week was scheduled at 53.9%. The big post-Labor Day upturn predicted by many steelmen has failed to materialize, and most have given up predicting when it will come.

HOUSING has been running below 1959 every month so far this year, in August was 12% below the same month last year.

RETAIL SALES, up 6% in the first eight months of 1960 over last year, have been slipping. Department-store sales across the U.S. declined 5% from last year in the latest week.

FREIGHT CARLOADINGS, after a rise early in the year, fell off steadily until July, when comparisons with last year's strike period began to make them look better. Miscellaneous loadings, generally more representative of general business, began to fall below 1959 in August and have been falling farther each week since then.

Industrial production, overall employment and the gross national product, all of which behaved well for the first six months, have suffered setbacks. Gross national product is not expected to show any increase in the third quarter. Unemployment has not dropped, nor total employment risen in line with seasonal expectations. The Federal Reserve Board's Index of Industrial Production has reversed its upward direction, was down one point in August.