The Economy: A Guide to the Slump

ECONOMIC news out of Washington took an encouraging twist last week as the Government reported upticks in three key indicators. From February to March, housing starts rose 6%, personal income climbed, and industrial production increased (by 0.2%) for the first time in eight months. On the other hand, the annual rate of price increases in the year's first quarter speeded up to 5%, slightly more than in the previous quarter, meaning that inflation was as bad as ever. At the same time, a preliminary estimate showed that the first quarter's real gross national product, after discounting price increases, slid by 1 1/2% to an annual rate of $727 billion. Since that was the second straight quarter of decline, economic purists could declare that the U.S. is--or was--officially suffering from recession. Yet the dropoffs have been so small, compared with the severe slumps of the 1950s, that most economists refuse to classify the current period as more than a mini-recession.

Besides, the declines are spotty. Today's economy is a mosaic of sharply clashing regional patterns. Some areas of the U.S. are enjoying an all-out boom; others are in an alarming slump.

The whole nation shares certain economic headaches. Despite last month's rise, housing construction almost everywhere in the U.S. is still down substantially from a year ago. Jobs are difficult to locate even in areas where unemployment rates are below the national average of 4.4%. Students in particular will have to fight one another for summer work. In prosperous as well as troubled areas, corporate profits are taking a beating. This reduces the tax take of state and local governments, which are also hurt by hold-downs in federal aid and the extreme difficulty of selling their bonds in a depressed financial market.

The regional pattern, ranging from the worst hurt to the least affected:

The Pacific Northwest: For gloom, this region is in a class by itself. March unemployment in the Seattle area jumped to 7.4%, up more than two points in a month and well over double the 3.2% rate of a year earlier. Reason: severe layoffs by Boeing (TIME, March 9). The electric utility Seattle City Light reports that its annual rate of cancellations and shutoffs has been double the usual 5%, indicating that many people are fleeing the area to scout for work elsewhere. For the jobless who remain, the Washington state legislature has voted to raise unemployment compensation from a maximum of $40 a week to $70.

Oregon's economy, heavily dependent on lumber, has been shaken to the roots by the fall in home building. Unemployment has scaled an eight-year high of 5.3%. Department-store sales are off 9% from last year, and a significant decline in tax collections has forced the state government to freeze all construction projects.

A species of economic black humor has developed. Bankers who invite businessmen to lunch tell them that the free meal is all the help that their bank can give in 1970. One banker cheerily explains the meaning of the recent prime-rate cut: the money that business once could not borrow at 8 1/2 is now unavailable at 8%. Portland brokers have started a betting pool on which firm will go bankrupt first--and when.

California: The most populous state is, as usual, a world of its own--or rather two worlds. In Southern California, aerospace cutbacks have been slashing payrolls for more than two years. The situation is better in the state's central and northern areas, which are less dependent than Southern California upon the whims of the Pentagon and NASA. In the San Francisco area, where the unemployment rate exactly matches the national average, few people are losing jobs, but even fewer are finding new ones. One employment agency is vainly trying to place 32 computer programmers who probably could have written their own ticket a short time ago.

New England: Since last June, says University of Connecticut Labor Economist David Pinsky, the six New England states have lost 53,000 factory jobs. They stand to lose another 150,000 in the next twelve months--50,000 in Connecticut alone. The jobless rate in that state, a leading producer of military supplies since the Civil War, has already risen to 4.5%. In Massachusetts, partly because of lower profits and smaller tax payments by some companies, Boston is running out of the cash necessary to finish three almost-completed projects--the Government Center and two public housing complexes--and four half-done projects.

The Midwest: The slump in auto sales (see following story) has pushed Michigan's unemployment rate to 6.3%. Layoffs outside the auto industry are also starting to hurt. Three TV-set makers--RCA, Zenith and Motorola--recently idled 15,000 workers in Illinois and Indiana. Overall employment is still going up in the Midwest, but not nearly fast enough to match the increase in the number of people--largely women and returning servicemen--searching for employment. Factory overtime, part-time work and moonlighting jobs are fast disappearing.

The Southeast: Auto and defense-plant layoffs are swelling the Southeast's unemployment, though it is still below the national average; the jobless rate in Georgia, for example, rose to 3.8% in February, up from 2.5% a year earlier. Home building in some parts of Kentucky has stopped entirely; in March, the city of Louisville (pop. 392,000) issued a grand total of one building permit. Company personnel men notice less job-switching, indicating that employees feel that this is not the time to take chances by moving to new positions. For this summer, employers in Nashville expect to offer only about 1,000 jobs to 10,000 student applicants.

The Middle Atlantic: The armies of office and service workers are in no danger of idleness, but manufacturing payrolls are starting to shrink. A general nervousness is in the air. In Delaware, a prosperous white-collar state, a decline in Du Pont profits that began last year is expected to force reductions in state spending--most likely for educational television and enforcement of antidiscrimination laws. The Pennsylvania government had to extend an extra $15 million in aid to Philadelphia to avert a shutdown of the city's schools at the end of May.

The Southwest and Rocky Mountains: Many parts of these Western regions are still growing strongly, because fresh money continues to pour into their relatively new industries. Unemployment in Houston is a modest 2% of the labor force; the few employees let go by the Manned Spacecraft Center have been quickly hired by other industries. Though sections of the Rocky Mountain region face unemployment problems, a surge of commercial construction is remaking Denver's skyline and creating new jobs. Projects abuilding range from a $5.2 million United Air Lines reservations system center to a $300 million commercial, industrial and residential complex called Front-Range Denver.

Alaska: The North Slope oil strike has produced the sort of rip-roaring boom that is just a memory in most of the "South 48" states. While unemployment still runs high among the Eskimos and the Aleuts, the oil workers' only problem is getting time off. North Slope truck drivers earn $76 a day, Monday through Friday, and $100 a day on Saturday and Sunday--but they work six weeks straight before knocking off two weeks to rest.

These extreme variations in regional business point up a major problem for Washington's economic planners. Even if they properly gauge the nation's overall economic needs--a rather gigantic if--the U.S. is so diverse that their policies are bound to have an unequal impact across the country. That underscores the urgency of averting a real recession. Nationally, the suffering caused by a sharp recession would be bad enough; in the hardest-hit regions, it would be intolerable.

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