Wait and See

The auto industry, hailed in 1960 as one of the chief props of a sagging economy, last week showed signs of sagging itself. Faced with slipping sales in December and a backlog of about 1,000,000 new cars, a record for this time of year, the industry began to trim production to fit in more closely with sales. The cutbacks meant that production in the next few months will look poor when compared with 1960, when the industry produced heavily in the first quarter to replenish stocks depleted by the steel strike.

Auto output last week dropped about 18% from the week before, and several automakers closed down plants. For January the industry now expects to produce about 465,000 cars, 10% fewer than December and 32% below last January. That would mean the lowest January production since 1954. First-quarter production as a whole will probably be one of the lowest in years. General Motors, which accounted for 69.9% of last week's output, has already cut its January production schedules about 7%.

Layoffs. The cutbacks are bad news for auto workers. About 25,000 have been laid off since the model year began, and the total is expected to climb to 31,000 in January, more than 6% of the industry's working force.

With auto cutbacks, steel's operating rate eased to a 20-year low. Steel executives and union representatives, who rarely meet except at the bargaining table, got together in Washington at the urging of United Steelworkers President David McDonald to discuss ways "to get idle steelmaking facilities and idle steelworkers back to work." The two sides came to no agreement. Railroad freight carloadings, continuing to feel the pinch in steel, were down 13.2% in the last reported week, and shippers predicted that they will fall 5.1% in the first quarter below the year-ago level.

Tax Cut? Only bright spot was the stock market. At midweek it staged a spirited rally that produced the best daily gain in three years, hiking the Dow-Jones industrial average 11.24. Then the market eased a bit, ending at 621.54 for a week's gain of 5.75. The market, like many businessmen, was waiting to see what the new Administration will do to spur business. A Kennedy-sponsored economic task force headed by M.I.T.'s Professor Paul Samuelson last week gave some hints. In a lengthy report (see NATIONAL AFFAIRS), it said that a temporary tax cut of 3 or 4 percentage points in individual tax rates might be necessary to combat the recession if it does not end by spring, plumped for more federal spending but came out against a massive program of public works. Those were clues; the business community waited to see whether they would become policy.

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