Action & Reaction

The stock market, which has been viewing the world through dark glasses, last week finally reacted with spirit to the favorable news in the U.S. economy. It not only bounded ahead for three days in a row, but made its sharpest one-day advance in eleven weeks. What was equally cheering to investors was the fact that volume increased as the market rose. Trading of 3,752,980 shares in one day was the biggest since March 4. The Dow-Jones industrial average closed the week at 616.03, up 8.41 points for the week and well above the recent lows.

The market got a healthy boost from President Eisenhower's press-conference "good news" about the U.S. economy. Ike made one announcement that everyone had long expected: final figures for the gross national product during the first quarter were above earlier estimates. The value of goods and services produced in the U.S. had nudged over the magic half-trillion-dollar mark, was running at the rate of $502 billion a year.

Biggest Increase. Ike also announced that in the month ending in mid-April, employment rose substantially more than usual for "the biggest April increase by far in the postwar period." The 1,900,000 who found jobs boosted total employment to 66.2 million, and unemployment was down 546,000 to 3,660,000. The big improvement reflected a recovery from the bad weather of March, but unemployment figures remain a real worry to the

Government. They still represent 5% of the working force, are actually higher than the figures for the same period last year (see chart).

There was some hope that unemployment might decline as the economy expands, but Administration economists fear that the percentage of unemployed will remain about the same for some months. The Commerce Department reported that housing starts, which have been dragging, rose in April slightly more than seasonally to reach an annual rate of 1,135,000, though they are still 18% below 1959 so far this year. The Government hopes that an easing in mortgage money will bring a further pickup. Auto production last week was scheduled to reach 150,338 units, the highest since February; sales were still booming along, led by the compact cars. Next month Ford will make the eighth boost in production of its compact Falcon, stepping it up 10%. That will bring the Falcon to an annual rate of nearly 600,000 cars--just about double the company's early estimates of what it would sell.

Sales of compacts are moving up so well that makers are preparing to broaden their compact lines. At least two more compact convertibles, joining Studebaker's Lark convertible, will appear in the 1961 compact lines. American Motors will bring out a 100-in. Rambler convertible with a factory list price of $2,000 and a body redesigned to give a sporty appearance.

Chevrolet is planning a two-door Corvair convertible built largely on the same body shell as the present Corvair. Factory suggested list price: $2,100.

No Slowdown. Looking at these signs of strength, top industry and Government economists attending the semiannual meeting of the Commerce Department's Business Advisory Council forecast that strong consumer demand will carry the U.S. economy through 1960 and the first months of 1961 without any slowdown.

But the economists do not expect any great upsurge. They believe that the gross national product will average out at about $507 billion for the year (less than the $510 billion forecast by the Government).

They expect little advance in industrial production, think that both prices and company profits will stay just about where they are.

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