Hardening the Soft Spots

One by one, the last remaining soft spots in the U.S. economy are firming. After months in the horse latitudes, retail and auto sales are scudding along at a brisk pace. Last week came two new harbingers of boom: a sharp drop in unemployment and a pickup in the long-sluggish construction market.

With dispiriting consistency, unemployment has been averaging just under 7% ever since last January. But in November the number of unemployed abruptly dropped to 6.1% of the work force. Unseasonably warm weather had reduced the usual winter layoffs in outdoor jobs. And the general economic upswing was creating more jobs for auto workers, office help, sales clerks. More important, some of the hard-core unemployment at last began to give way. Of the 3,990,000 Americans still looking for jobs, the number who had been out of work for 15 weeks or more declined last month to 1,137,000--about half the recession's April peak.

Through the Roof. By early 1962, Labor Department experts predict, the unemployment rate may well slide below 5%. A major factor in creating more jobs should be the new vigor displayed by the construction business, which now accounts for one-ninth of the gross national product. Spending on new construction of all kinds has risen more than 40% from the recession's depths last February, is expected to hit $57 billion this year and $60 billion next year.

Most notable surge is in homebuilding. New private housing starts in the U.S., which in recent weeks have peaked at an estimated annual rate of about 1,400,000, are expected to total about 1,300,000 for 1961 as a whole. In 1962, with buyers encouraged by more jobs, higher personal income, loose mortgage money and an easing of military call-up fears, the Administration forecasts that new housing starts will run between 1,400,000 to 1,500,000--not far off the 1959 record of 1,517,000. Slightly less bullishly, the National Association of Home Builders predicts 1,375,000 starts.

Bargain Basement. Home buyers can expect a better break next year. The builders intend to trim home prices from this year's median of $15,100, to $14,950 in 1962. Behind the decision to cut prices are several factors: stiff competition, fears that the higher-priced market is saturated, and expectations that new FHA rules permitting smaller down payments will attract more lower-income families. More efficient building methods and increasing reliance on prebuilt parts will help bring prices down.

There have also been price cuts in building materials recently, ranging all the way from floor tiles to roofing insulation. All these are signs of an encouraging new U.S. pattern: a rising level of economic activity without the usual rise in costs and prices.

This file is automatically generated by a robot program, so reader's discretion is required.