The economy at election time: upbeat views

What shape will the United States economy be in by November 1984, when President Reagan may well be seeking reelection? President Carter's 1980 reelection bid was badly weakened by an economy that was still in the dumps. But economists are becoming more and more upbeat for next year, and perhaps especially Frank A. Morris, president of the Federal Reserve Bank of Boston, and Nicholas S. Perna, manager of economic analysis at the General Electric Company.

Both see a major improvement in productivity next year. Mr. Perna puts a number on his forecast - a 3.5 percent increase in output per man-hour for nonfinancial corporations. That compares with a standard forecast of about 1.7 percent.

Such a jump in productivity would mean ''surprisingly low'' inflation, Mr. Morris says. Perna, the GE ''numbers cruncher,'' reckons about 5 percent in 1984 , up from around 3 percent this year.

One problem is that high productivity gains mean corporations are producing more goods and services without the same need for extra hiring. ''The unemployment rate will come down slowly,'' Mr. Morris warned in an interview.

But both men also figure corporate profits could do exceptionally well. ''Double-digit increases,'' Perna predicts.

High Reagan administration officials are also feeling cheery about the election-time economy. ''We will be in a good economic expansion, with unemployment significantly below where it is now, with inflation numbers probably a little bit higher than now,'' says Beryl Sprinkel, undersecretary for monetary affairs at the Treasury.

He figures the consumer price index this year has been somewhat understating the basic level of inflation. That will end. Moreover, he adds, the Federal Reserve System pumped ''a lot of money'' into the economy in the nine, 10 months or so prior to July.

Mr. Sprinkel is an economist of the ''monetarist'' school, believing that a rush of money into the economy produces more inflation after a lag of a year or so. ''The important thing is that we not continue at a 12-13 percent rate of expansion [in the money supply],'' he said in an interview. If the Fed does, he warns, ''we would start accelerating into a sharp, inflationary burst.''

Before joining the administration, Mr. Sprinkel was a bank economist and a member of a group of monetarist economists known as the Shadow Open Market Committee, which meets twice a year to look at Fed policy. When that group got together last month, his friends looked at the rapid-money-growth numbers and forecast 6 or 7 percent inflation next year, or worse if the Fed shows no restraint.

Mr. Sprinkel maintains: ''President Reagan came down here to avoid this go-stop pattern of economic policies and economic performance, and the chances are very good that we're going to avoid it.''

He criticized the Fed's ''erratic nature'' in supplying money to the economy, ''which created some problems.'' But, he noted, the Fed is within all its target ranges for money growth right now - ''the first time in over three years.'' (That would not be true, however, if the Fed had not used new higher bases for its targets this past summmer. Under the old bases, money growth would have exceeded its targets.)

Sprinkel said some of the various measures of money ''have always been within their targets, but it was usually on the way down or the way up. . . . We're hopeful that they're neither on their way down nor on their way up now. From the beginning we wanted stable, moderate growth, and we have yet to disagree with the targets chosen.''

Mr. Morris of the Boston Fed figures that high productivity growth and continued wage restraint will prevent inflation from bursting forth next year, despite high money-growth numbers. In fact, he argues, ''We can handle a larger growth rate [for money] with less inflationary potential than would be otherwise the case.''

The nation, he says, has in the last three years seen the greatest shakedown in its industrial structure since the 1930s. Corporations have thinned out their white-collar staffs. Labor unions have agreed to many cost-saving concessions in work rules. Employees have had ''a change of attitude'' - they more often identify the survival of their companies with their own good fortune.

GE's Mr. Perna noted that the baby-boom generation, which started work in the 1970s and slowed productivity growth, is more experienced now and working more efficiently.

Further, industry is starting from a lower level of capacity utilization than in most postwar recessions, and thus productivity gains should extend through this year and next as capacity is better used.

Perna figures average compensation will increase only about 6 percent next year. That means, with 3.5 percent productivity gains, that unit wage costs (the additional wage cost per unit of production) will rise only 2.5 percent. So wages will not put much pressure on prices.

''We are actually seeing wage cuts,'' noted Mr. Morris. ''There was no such phenomenon three or four years ago.'' He says the willingness of employees in hard-pressed companies to accept lower wages is caused by the duration and severity of the recession. ''Most people haven't ever experienced a recession that lasted more than nine months.''

The unemployed, those hit by pay cuts, may be critical of Reaganomics. But the majority of voters are working and probably enjoying a modest improvement in their standard of living. Overall, the economy could well be a political plus for the President.