A Tough Task for the Victor

The final batch of business statistics issued before the presidential election gave a clear signal: now that the campaign's last heady hurrah has faded, the victor faces a tough task in getting the laggard economy back on schedule. With few exceptions, the indicators point to continuing sluggishness in the business growth needed to create jobs, sales and profits. The most disappointing disclosure: the Government's composite index of leading indicators, which had risen for 17 consecutive months as the economy climbed out of its worst recession in decades, fell .7% in September--the second monthly drop in a row.

Government statisticians were quick to note that despite the lull, the economy is still expanding, if slowly. They note that the index was undoubtedly distorted by the four-week strike against Ford Motor Co., and also that its record as a measure of future business trends is uneven. Three times since 1948 the index fell for two months in a row but no economic downturn followed. On six other occasions, however, two or more consecutive months of decline in the index did signal an overall drop in economic activity.

Of the eleven indicators available for the September index, the most disquieting was the layoff rate. Layoffs in the nation's factories increased from 1.3 for each 100 workers in August to 1.5 in September. The new figures tend to confute those (mainly Republican) economists who have argued up to now that the nation's high 7.8% jobless rate was almost exclusively a result of growth in the number of people looking for employment, rather than a consequence of employed workers losing their jobs. Among other leading indicators, new orders dipped and manufacturers cut the average work week to 39.6 hours, from 39.9 in August. The strongest element in the index was a jump in home building permits.

The dawdling economy is troubling bankers, who have been forced to cut their prime lending rate to corporations twice in little more than a month--from 7% to 6 3/4% and most recently to 6 1/2%. One reason for the drop is a slightly easier credit stand by the Federal Reserve Board. Another cause of slumping rates, bankers assert, is slack loan demand from worried businessmen. Bankers argue that lowered rates will not boost borrowing, but will cut into bank profit margins.

The new figures stirred some bipartisan worry among members of TIME'S Board of Economists. Republican Murray Weidenbaum of Washington University now believes economic expansion in the final three months of the year will be relatively slow, though he expects a strong pickup next year. Democrat Otto Eckstein of Harvard foresees a fourth-quarter growth rate no higher than 3.7%, and possibly as low as 2%, v. the third quarter's already disappointing 4%. As a result, Eckstein believes that the economy will need the stimulus of a new tax cut early in 1977.

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