Moving up, but slowly

Traditionally, the period of transition from recession to recovery is a time of economic confusion. Last week a large batch of statistics, resembling so many fingers pointing in opposite directions, clearly mirrored that unsettled condition. Generally the figures fit the picture of an economy finally poised to climb out of its deepest slump in almost four decades, but they also point to a relatively slow recovery.

The grimmest news was that the unemployment rate climbed from 8.9% in April to 9.2% in May, yet another new high since 1941. That meant 8.5 million Americans were out of work, a jump of 360,000 from April. Administration officials acknowledge that unemployment could continue to swell in June and July. One reason: millions of students are about to flood the market in search of summer work (see story page 76).

Still, the worst of the wave of layoffs that began in August is probably over. Indeed, the actual number of workers employed in April rose by 320,000 over the month before; but that was not enough to offset the rise in the national unemployment rate, caused by the flow of new job seekers entering the market.

The news was equally glum on business and consumer spending. The Conference Board, a research group, reported that big manufacturers in the first quarter reduced appropriations for capital spending 9.4% below the fourth quarter of 1974, which was down 26% from the previous three months. That marked the steepest six-month slide in 17 years. For all this year, the Commerce Department announced, businessmen expect to spend $114 billion for new plant and equipment, a puny 1.6% more than in 1974. Such spending rose 13% in both 1973 and 1974.

Consumers, too, continued wary. In April they trimmed their installment debt by $100 million, largely by holding off on new auto loans. The April decline, the fifth in the past six months, was much less than a $462 million drop in March, but it contrasted with a $1.5 billion jump in April 1974.

Dwindling Stockpiles. Yet for all the bearish signs, there were clear indications of economic revival. Manufacturers reduced their inventories in April a huge $1.1 billion, the sharpest monthly drop since the bottom of an earlier recession in May 1958. The liquidation foreshadows increased production to replace dwindling stockpiles, and there may not be much longer to wait. New factory orders in April leaped 6.4% over the month before, the biggest jump in 20 years. Among the leaders: heavy electrical equipment used in power generation and transmission, fabricated metals and paper goods.

Inflation also continued to moderate, a development that could prompt more consumer spending. Wholesale prices in May rose .4%--high by historic standards but modest compared with the 1.5% increase in April and a far cry from the rates of last year. In the past three months, wholesale prices have climbed at an annual rate of 5.5%, compared with the peak rate of 35.3% in the three months ended last August. Businessmen's borrowing costs are also coming down. Manhattan's First National City Bank, which usually sets the pace for other major institutions, lowered its prime loan rate a quarter point, to 6 3/4%, v. 12% last July.

Even so, most critics of Administration policy, especially Democrats, want the Government to take a more vigorous approach to recovery, notably a more expansive monetary policy. Last week the Federal Reserve Board revealed that so far this year it has expanded the money supply at an average annual rate of 4.4% This is still well below the 5% to 7.5% rate that Fed Chairman Arthur Burns has set as the target for the twelve months ending next March.

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