Prospect: Growth

Like sleet out of a grey winter sky, gloomy economic reports pelted out of Washington. The December industrial-production index drooped 7% below the level of December 1956. Personal income fell off in the steepest monthly drop since the alltime peak of last August. Year-end unemployment edged up 200,000 to 3.4 million to make it 5.2% of the labor force, the highest December rate since the recession year of 1949.

Against the wintry backdrop of statistics, President Eisenhower sent to Congress this week a calm reminder of the U.S. economy's strength and a firm prediction of its renewed growth. The President's yearly Economic Report, drafted with the help of his Council of Economic Advisers, reiterated that 1957 was a year of record-setting prosperity. Total industrial output equaled the 1956 record. Gross national product ($434 billion) and total personal income '($343 billion) surpassed 1956 levels by 5%. At midyear the employment total stood at a new record high of 67.2 million, and the last quarter's "moderate" decline still left employment at 64.4 million, a higher mark than the U.S. reached in any year prior to 1956.

What of this year? Without pinning himself to exact numerical predictions, the President declared that "economic growth can be resumed without extended interruption," and he added a promise: "The policies of Government will be directed toward helping to assure this result." Easier credit would spur both homebuilding and federal-state outlays for schools, roads, etc. Increased federal spending for defense would add further economic pep.

In a free economy, said the report, "growth will inevitably proceed at a somewhat uneven pace." The "unfavorable feature" in the economy of 1957 was not the dip but the fact that, even with industrial capacity outpacing demand, the consumer price index kept creeping upward.

Viewing this kind of against-the-tide price inflation (TIME, Jan. 6) as a serious danger sign, the President pledged the Administration to promote price stability. But he also called upon business and labor to show restraint in using their power to force up prices and wages. Price boosts unjustified by cost increases can curb demand. Wage boosts unjustified by productivity increases can push prices upward, slow down economic recovery.

The main economic task confronting the U.S., as the President's Economic Report saw it, is not merely to get the indexes of output and employment moving upward again, but to assure that the coming upturn brings "increases in real output accompanied by stable prices."

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