A hesitant economy; slow-moving Congress; guilty E. F. Hutton
THE economic consensus remains one of continued growth in the United States economy this year. Last week's statistics do not necessarily contradict that view, but they may blur the expectations of growth.
The leading economic indicators for March were down 0.2 percent, and their upward direction for the previous month was revised down to a positive 0.5 percent. Factory orders for March were off 0.9 percent, the second month of a decline by that amount. The decline in the latter figure may represent some of the sales being lost to overseas companies because of a relatively lower price of imported goods.
And on Friday the April unemployment rate was announced. For the third month in a row, joblessness held steady at 7.3 percent.
A. Gilbert Heebner, executive vice-president and economist with CoreStates Financial Corporation in Philadelphia, writes in his bank's current economic letter: ``The major reason not to forecast a recession in the year or so ahead is the absence of the basic conditions that normally lead to recessions: accelerating inflation and rising interest rates, the adoption of a tight money policy by the Federal Reserve, and then still higher interest rates.
``Instead, in recent months inflation has remained moderate. Interest rates have come down substantially since last summer; after some rise in February and March the decline was resumed. The Federal Reserve eased monetary policy last fall and may now be close to making another easing move.''
Without a period of even higher interest rates and tight money, the economy is not apt to slip into recession. Still, the overvalued dollar and popularity of imports have added a new wrinkle to the analysis of this business cycle.
And that may not be entirely understood. Year-long budget project
Down in Washington, Congress is at work on its apparently year-long project, passing a budget. For those who do not agree with the President on the desirability of major tax reform, the only good thing about the budget standoff is that it probably means there will be no time left for action on tax reform in 1985.
The Senate was busy unraveling the budget compromise between the White House and the Senate leadership. It voted to maintain cost-of-living adjustments in social security payments at their full level and to further reduce the rise in defense spending to only the increase in inflation. Whatever the Senate finally does, it will all get discussed, dissected, and put together once again in the House and then go to a joint conference committee. If the economy continues to look weak, there will be even more reluctance to make major cuts in proposed spending. But this would also leave the budget deficit at unacceptable levels. Hutton's guilty plea
A review of last week would be incomplete, unfortunately, without a mention of E. F. Hutton's guilty plea in the matter of defrauding some of its banks through practices similar to kiting checks. This is one of those occasional sorry episodes that should remind us that most of the regulation thrust upon US business over the past century has been the result of its own misdoings.
Going back to the post-Civil War era, when the great railroad empires were built, or to the creation of the oil and steel trusts later on, one finds the positive motivation of America's business leaders more than once being compromised by less than savory practices.
Today's standards are measurably higher than a century ago. But some of today's corporate takeover tactics, or the megabucks salaries of some high executives, or in this case the loss of trust in a financial business whose byword should be trust -- all such incidents go beyond the harm done in the particular case to give a poorly focused and unfair image of business at large.
