The United States Recession

After living on the crest of a wave for years, the United States of America is now experiencing a taste of the trough, as the current slump progresses. And when, as has happened, the professional optimism of the administration is sufficiently quelled for them to admit that the slump exists, albeit with voluble protestations concerning its temporary nature, then one can be certain that affairs are serious. This month such ubiquitpus news items as missiles, satelites, and so forth, have been completely displaced in business circles by the current level of business activity, and, even more, by talk of present unemployment. The figure for this latter rose by 1,100,000 in January, and by 700,000 in February, to a record post-war height of 5.2 millions. The actual figures for the total wages and salaries bill for February are not yet available, but the "Economist" of London thinks that when they do become available, they will show a decline of 1.1 billion dollars. The reduction in the amount people have to spend is only just beginning to make itself felt as falling sales, retail sales being down by 3 per cent. In the overseas field the United States is rapidly absorbing dollars from other countries.

So far the situation has been supported by the so-called "automatic checks", of which by far the most important is unemployment compensation, but it is questionable whether they will hold up under the assault of the February and March figures.

Some further indications: according to the Bureau of Labour, the average price of 22 basic commodities fell by nine per cent, in 1957, to a figure 36 per cent, below the level at the height of the Korean War boom. Copper prices are down 20 to 30 per cent., as are those for lead and zinc, in the twelve months ended February. Wool prices are down 17 per cent., and rubber 16 per cent.

With regard to unemployment—the number of areas with "substantial labour surplus" was 19 in February, 1957, 24 in November, 1958, and 45 in February this year.

There have also been cutbacks in factory operations: steel ingot production is at only 70 per cent. capacity; automobile manufacture laid off 90,000 at the beginning of the year.

There is political as well as economic unrest, in the form of rivalry between Democrat and Republican factions with regard to their respective measures for correcting the situation. The Democrat leader, Senator Johnson of Texas, has prepared a carefully worked out campaign, complete with an even more carefully worked out publicity scheme. Vice-president Nixon, and other leading figures of the administration, on the other hand, appear to be terrified that prolonged slump conditions will produce huge, and rather left-wing, Democrat majorities in the coming November Congressional elections, and that the Republican party will then be finished for a generation. With this possibility, the Republicans are exercising every power to stop the, in economic parlance, "business recession". The present measures that the administration seem to have in mind have been described as "massive government intervention". Amongst the most immediately noticeable, from the point of view of the ordinary citizen, is the possibility of a substantial tax cut. So far, Congressional Democrats, with the exception of Senator Douglas of Illinois, the sole economist of the Congress, have been cautious concerning the advisability of such a step.

It has been said that when the United States sneezes, the rest of the world catches pneumonia, and the Sterling Area, because of its general dependence on trade, catches it worst of all. This idea, however, was falsified in the slight 1953/1954 recession, when booming European conditions actually helped the Americans recover. This time, on the other hand, conditions in Europe are very far from booming. Even Western Germany has halved her hitherto phenomenal rate of expansion. So it seems that, if conditions in the United States of America should worsen, the slump will spread to Europe. And inevitably, New Zealand, under present conditions, will follow. . . .

—V.J.T.