From Cheers to Jolts

"Secretary of Commerce Sinclair Weeks will not call a press conference until he can get off an optimistic statement," wrote Hearst's jocose Columnist George Dixon last week. "This has led the press to refer to his seminars as 'cheery outlooks.' " When newsmen gathered in Weeks's office later that morning, Weeks was still chuckling over Dixon's dig. As usual, the Secretary was also brimming with optimism. Said he: "I think the outlook is still cheery."

To justify his cheer, Weeks read off a bundle of statistics fresh from the Gov ernment's tabulating machines. April employment rose to a new record for the month of 64 million, and the rolls of the unemployed were cut 300,000 to 2,500,000. *Personal income for March climbed to a record annual rate of $315 billion, a gain of $19 billion over last year. Weeks conceded that the economy is showing soft spots in autos and residential construction, but thought there was nothing to worry about. But Weeks--along with Treasury Secretary George Humphrey, Presidential Economic Adviser Arthur Burns and others high in the Administration--was worried about the Federal Reserve Board's boost in the discount rate (TIME, April 23). Said Weeks: "The tight money situation might prove to be a handicap in business expansion and sales."

Full Safe. There was no doubt that the money pinch was real. Chicago's big commercial banks were slow to take on new borrowers, were only lending to prime risks. At a Pennsylvania Bankers Association meeting, FRB Chairman William McChesney Martin Jr. felt called upon to defend his policy. FRB, said Martin, has "always met business's seasonal needs and will keep on doing so." And needs were being met: even at high interest rates, commercial bank loans in Manhattan alone rose $122 million for the week, nearly five times the increase for the comparable period of last year.

In the disagreement over policy within the Administration, President Eisenhower gave FRB and Martin his tacit support. Said Ike: "If it [the Federal Reserve] believes that money is getting too tight because of this, they will take measures to meet it."

Customers Wanted. Not all U.S. businessmen were as cheerful as Sunny Sinny Weeks. March figures on manufacturers' sales and inventories turned up a disturbing trend: inventories went up $500 million over February to $47.4 billion, $4.1 billion over March of last year. Sales of all manufactured goods slipped $100 million below February, and new orders dropped $700 million. However, both sales and new orders for March were still running ahead of March 1955. though the ratio of inventories to sales has been creeping up since last fall.

The biggest trouble spot was in the auto industry. United Auto Workers President Walter Reuther flatly said there was "no hope" for a sales pickup, asked auto and farm-equipment makers to meet with labor to map plans to help the industries' unemployed; he put the auto figure at 142,000, out of a total work force of 900,000. Detroit was worried, and rightly so. There was also a bright side to the picture. Used cars were moving well, and some late models were in such short supply that prices were better than last year.

Though first quarter production was down 18% from the comparable period last year,.the automakers' work force was cut less, about 15%. For 1956's first quarter, sales totaled 1,570,900, only 11% below lastyear's record-breaking first quarter. April sales were also good (about 550,000 cars, second only to April 1955), but not good enough to whittle down the huge backlog of new models gathering dust on dealers' lots. Despite big sales promotions and repeated cutbacks in production, inventories edged well past the 900,000 mark to an alltime high (see chart).

For months, the automakers have been using the weather--a bad winter and a late spring--as an alibi for lagging sales. With decent weather, predicted one auto-man, sales will pick up speed, and dealers will soon drive a big hole in the winter's huge production backlog. But now, over most of the U.S., warm weather has finally arrived. If auto sales fail to climb with the temperatures, both the automakers and the auto workers are in for a rough ride.

*Manufacturing accounts for 40% of the unemployed, reported the U.S. Labor Department last week. Of the balance, one of four came from the seasonal construction industry, and one in ten was a white-collar worker. Average jobless period: 7.4 weeks.

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