Business: Seeking Muscle for a Flabby Recovery

MUSCLE Builder Charles Atlas might describe the present U.S. business recovery as a 97-lb. weakling —too puny to rout the bullyboy of unemployment. Members of TIME'S Board of Economists use more scholarly analogies, but they make the same point. At a recent all-day meeting, they offered this analysis of the nation's economy:

> The recovery from last year's recession is the slowest and lowest of any since World War II.

>Unemployment, which rose last month to 6.2% of the labor force, matching December's nine-year high, will still hover around 6% by year's end if nothing is done to put more muscle into the recovery.

> Inflation is slowly subsiding, at least in terms of consumer prices, and a large growth in worker productivity will help to check it further this year.

> The fast rise in productivity will also hold down new hiring.

> Given these factors, the U.S. sorely needs a combination of tax cuts and accelerated Government spending to speed the recovery. Otherwise, this year's gross national product is likely to be about $1,050 billion, far off the Administration's forecast of $1,065 billion.

This analysis differs sharply from the reading of Administration economists and the monetarist school led by Milton Friedman, who see a vigorous expansion developing. Friedman recently went so far as to say that the problem is "to keep the economy from going too fast" and setting off another inflationary spiral. Yet most economists and businessmen tend to agree with TIME'S board.

Martin Gainsbrugh, chief economist of the Conference Board, a nonprofit business research organization, has compiled figures to prove that so far the current upturn has been notably weak. Gainsbrugh calculates that the 1970 "recession"—which was officially given that name by the National Bureau of Economic Research two weeks ago—hit bottom in November. Thus, by the end of April, the present recovery was five months old. At that stage in the four previous postwar recoveries, industrial production showed increases ranging from 6.4% to 10.2% above recession lows, while real gross national product went up anywhere from 2.1% to 5%, and manufacturing employment rose 1.2% to 3.8%. In the current recovery, by contrast, industrial production has struggled up only 2.8% from its low point, real G.N.P. only 1.7%, and manufacturing employment a mere .6%.

Sleeping Giant. Assuming no change in Washington policy, members of the Board of Economists see small reason to expect a speedup soon. Despite much talk of expansionary federal budget policy, they find that Government tax and spending programs are not very stimulating. Arthur Okun pointed out that the major force in the recovery so far has been a jump in home building from an annual rate of 1.1 million starts in January 1970 to 1.9 million recently.

The housing upturn, however, may be leveling off. Construction is getting close to the annual rate of 2,000,000 starts that some housing experts believe to be the probable average for the 1970s. Besides, mortgage interest rates have begun to rise again, and are likely to go still higher because other interest rates are climbing.