`Steady as she goes' outdoes `full speed' for world's wary helmsmen

BOTH domestic economic news last week and the joint meetings in Washington of the World Bank and the International Monetary Fund highlighted the long transition period the US and world economies are continuing to wend their way through. What we're seeing right now is, of course, a whole lot better than recession or depression, of course. But the conditions have not yet arrived for a resumption of normal growth.

In the United States, leading indicators for August were off 0.2 percentage points. They have now declined in three of the past four months.

Machine tool orders were down substantially, both from the previous month and from one year ago. These orders are small in relation to the whole economy, but they do often point the direction of capital spending.

Sales of new homes fell for the fifth straight month, indicating that even with this year's much lower interest rates, the demand in that area is not going to strengthen immediately.

The US trade deficit shrank in August to $13.3 billion. It had hit a record high in July, and analysts were not in agreement on the significance of the one-month decline.

Finally, last Friday the September unemployment numbers were announced. Unemployment jumped 0.2 percentage points, to an even 7 percent.

Some 38,000 more people have lost their jobs in the manufacturing sector. This decline in manufacturing has been going on for well over a year and indicates the relative loss of competitiveness in that sector to overseas jobs.

Some of that loss is due to the overvalued dollar of recent years. But the dollar has been declining since March 1985, and most strongly since last September.

This continuing loss of jobs to overseas workers is probably the most important economic problem the US faces -- although the budget deficit can't be far behind.

Last week the World Bank-IMF meetings also provided a list of problems. The agreement on the next year's financing of Mexico's debt has to be seen as one problem that is at least partially solved for the time being.

Whether it is really solved, however, depends on how much and how soon the Mexican economy picks up. And other third-world nations have debt problems similar to Mexico's.

One year ago Treasury Secretary James Baker III worked out the famous Plaza agreement with four other nations. This at least helped bring about the orderly decline of the US dollar.

That dollar's fall, however, has not yet helped end the US trade deficit, and Washington has been pressuring its two main industrial competitors, West Germany and Japan, to do more to reflate their own economies.

Despite talks at this year's meetings, there was no sign of agreement on how to manage exchange rates better or get a handle on the trade imbalances around the world.

At the end of the week Emmett Rice, a governor of the Federal Reserve Board, announced his intention to resign at the end of the year. Mr. Rice is regarded as one of the governors still concerned about a rebirth of inflation.

Picking his successor gives President Reagan one more chance to put someone on the board who might be more expansionist, as his other appointments have tended to be.

On the other hand, the rapid expansion of the US money supply this year makes it problematic that the Federal Reserve Board could lean substantially further in the direction of easy money than it already has been doing.

Whether it's politics or economics, one wants to ask at any given period: ``What are the governing elements in this situation?''

On both the domestic and international fronts, the key elements today are the large amount of debt that have been piled up and the excess industrial capacity and abundant raw material supplies that exist throughout the world.

In this situation, no central bank wants to be so niggardly as to cause the next recession. But most of the free world's economic leaders appear to be setting their sights on modest growth targets.

This, they seem to feel, is safer than looking for a head of steam to pull the world economy out of its current transition.