The economy, like any organism, can absorb only so many minor injuries before the cumulative impact begins to undermine the economic health of the nation. Builtin stabilizers of unemployment compensation, social security, and the like may pull the economy out of its doldrums, as they have in part during the past year, but like many medicines they may only cure the symptoms of more complex maladies which linger on.
Economists have been busy issuing conflicting diagnoses on the present state of the economy. The optimists point to rising industrial production, to rising profits and building plans, and to the stock market; the pessimists to a continuing hard-core of unemployment. Since both arguments are relevant, perhaps what is required is a trial assessment of some of the larger forces causing the present ferment in the economy.
Probably the most important single trend in the economy since 1948 has been the failure of the manufacturing sector to expand output sufficiently to counterbalance rising worker productivity and maintain full employment. Manufacturing output last August was 35 per cent greater than in 1948, but employment of production workers was six per cent lower. Technological innovation accounts for the difference, and although a comparison with 1929 raises dismal and not altogether irrelevant analogies, it is worth noting that from 1919 to 1929 manufacturing output rose 40 per cent while employment fell two per cent. This disparity between production and employment explains the current persistence of heavy unemployment in steel, autos, and many durable goods industries. Given the modest expectations for steel and auto production next year —even optimists expect no more than 75 per cent and 60 per cent, respectively, of capacity to be utilized—heavy unemployment in these fields will continue, if not grow.