Share this story
Close X
Switch to Desktop Site

Talk of a depression called 'far-fetched'

There's been much talk lately about the prospect of a depression in the United States, with unemployment perhaps rising to 20 percent. But one of the world's top experts on the business cycle, Dr. Geoffrey Moore, says: ''I don't really see that. If that were the case, we would have already seen the economy in worse shape than we have seen to date.''

New York's Citibank agrees. States the bank in its Economic Week letter: ''. . . the notion of an imminent depression is far-fetched.''

About these ads

In fact, Dr. Moore expects a recovery in the US economy by summer. And he finds modest upturns already under way in Japan, France, and the United Kingdom.

Again, Citibank basically agrees in regard to the US: ''We remain persuaded that the current recession will end in the spring or early summer.'' A new survey of more than 40 business economists by Blue Chip Economic Indicators (Sedona, Ariz.) found that most predict an upturn in the March-June period (9 in March, 7 in April, 10 in May, and 8 in June).

In Paris, Mrs. Sylvia Ostry, chief economist for the Organization for Economic Cooperation and Development, also anticipates ''a modest upturn'' on average for the economies of the industrial countries that are members of this international organization.

Further, she sees the decline in world oil prices as ''bullish'' for growth in oil-consuming countries and an aid in trimming inflation.

Dr. Moore now heads the Center for International Business Cycle Research at Rutgers University. For decades he studied the business cycle at the National Bureau of Economic Research, taking out a few years in the 1960s to be director of the Bureau of Labor Statistics in Washington.

As part of his research at Rutgers, Dr. Moore keeps close track of the economies of the major industrial nations. He finds ''neither a black nor white economic situation'' in these countries. ''That is not an unimportant message,'' he says. ''If all the economies were going down together, it would be a very much more serious situation for the United States. That, happily, isn't the case. It reduces the odds of a depression.''

Another point made by Dr. Moore in a telephone interview: The rate of inflation in the United States is declining faster than usual during a recession. Using a ''smoothed'' six-month average as a measure, he notes the consumer price index was rising at a 7.6 percent annual rate in January, compared with more than 15 percent in early 1980. ''We have cut the peak rate in half,'' he notes.

About these ads

The producer price index shows even more progress, according to Dr. Moore's measure - which is designed to remove statistical aberrations. It has dropped from about 15 percent in early 1980 to 5 percent in January of this year.

In some 23 industrial countries abroad, inflation has leveled out at around a 10 percent average annual rate. ''We (the US) have done a little better on inflation,'' says Dr. Moore.

To examine the economic prospects for each country, Dr. Moore looks at their so-called ''leading indexes.'' (He helped devise the widely followed ''leading indicator index'' in the US.) These indexes are designed to anticipate changes in national output or employment by several months. The indexes, a composite of various statistical series, usually include such figures as new orders, construction contracts, corporate profits, stock prices, and changes in consumer debt. Here's the picture he finds by examining the latest figures (noted below) and earlier statistics:

United States: Down 10 percent in January; a contraction under way.

Canada: 0 in December; weakness continuing.

Japan: Plus 7 percent in December; recovery continuing.

United Kingdom: Plus 4 in December; recovery hesitating.

West Germany: 0 in December; stagnation prevails.

France: Plus 4 in December; expansion continuing.

Italy: Plus 2 in October; expansion interrupted.

Average of 6 countries, excluding US: plus 3 percent in December; modest recovery under way.

Average of 7 countries: minus 3 percent in December: US weakness prevails.

Nowhere in these countries is the recession so bad as in the United States, Dr. Moore notes. So far, the current US recession is as deep as the average of the the four sharpest recessions in the postwar years - those in 1948-49, 1953- 54, 1957-58 and 1973-75.

These recessions have ended after about a year (though unemployment usually rises for several months afterward). ''So the idea of a summer upturn would be a reasonable conclusion,'' says Dr. Moore.

As evidence of its similar conclusion, Citibank points to several signs that the recession is bottoming out. February industrial production, it says, will be up modestly from the January level, interrupting a six-month string of declines. Retail sales will probably increase. Auto sales rose from a 5.7-million-unit annual pace in January to hit a 6.3-million rate in February. (Statistics out of Detroit usually compare the current period with a similar period a year ago - a comparison that does not always indicate the immediate trend.)

Citibank also expects housing sales to run up in February. It concludes: ''. . . the combination of moderate money growth and low inflation should halt the recession and buttress the subsequent recovery.''