Conversation 005-067

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Hello.

There's a shelter.

Yeah.

Yes, sir.

Well, I'm glad you weren't as depressed as most of the quandary had today.

That's sort of a gloomy session, isn't it?

Oh, it was terribly gloomy and unnecessary.

Connolly, I must say, brings some a beat.

But what the hell is the matter?

I mean, understand, if the prospects are that dire, then maybe we better all turn in our suits and run for the hills.

But I don't know.

you feel that they overstated it a bit?

Well, I think that, in a sense, they're having it both ways.

That is, if the expansion is going to lag, then the inflation problem will be less.

So that you can't say both that it's going to lag and inflation is going to get worse.

Our evidence is that

that if anything has happened to inflation, that problem is in better shape.

But do you look at Archer's figures where he takes, of course, all of the deflator and shows it's actually gone up?

I guess that's the only page I saw.

I suppose that's the other side of it, is it?

Well, I think the inflation problem is a real problem to worry about.

As you know, I've felt that way.

I think the dimensions of it are in terms of what our budget does and what our

what our monetary policy does on the wage front.

I was stimulated by the session to get a little project going.

I'm trying to forecast what the wage and labor cost picture is going to be like in the next year and a half, and I think that can be done within reasonable limits.

What I was going to suggest is that not only get the cost of what they're going to be, but let's see what settlements we're really talking about.

In other words, I think when you get it down to that, then

and you don't just talk in general terms, and then you talk to the energy, all right, now here's what we're talking about, and this is what we're going to do with each one, you know, dissect the problem as you did to an extent.

The other thing is that, what about Arthur's point about the businessman, that he has such basically a lack of confidence, and that's never been the case before, and so forth and so on.

Is that true?

Maybe it is.

I don't know.

Well, the businessmen are very unstable in a sense.

They didn't used to be.

No, they always have been.

Well, my point is that I have always found that businessmen are always that way.

They get into this mood or that mood.

I'm sure their mood is improving, I think.

Do you think it is?

The tone of the business council session of whenever that was, about three weeks or so ago,

was much better than the previous fall.

And I think it reflected the fact that they could see their profits were improving pretty sharply.

They are all kind of, they just have an obsession with this wage business.

Yes.

And I think we need to figure that out.

They tend to blame all their problems on the wage thing.

And lay it out.

I just was, just before I came, I just came down to Bob Haldeman's office.

Before I came, I was looking at a,

a National City Bank letter and sort of a little discussion that they printed up.

And a lot of the discussion is exactly on our line.

And there's one place where a fellow says that those who are criticizing the 1065 are more likely to be wrong than those who advocated it.

And they go through exactly this.

line of reasoning that we've talked about before of the impact of increases in output per man hour on labor costs and the future of that and so on.

So I don't think that we're without people who have that view as far as the...

I can't believe that the whole business community reflects that.

I think that what happens, George, is that

people like Arthur and Paul hear from only those that are bitching.

That's my view.

Well, you always get, I talked this morning by chance with a guy who was head of the armor division of Greyhound, the former armor company.

I didn't even know it was Greyhound.

So after he

I got through what he wanted.

I said, well, how is your business going?

He said, oh, it's great, terrific.

We're having a terrific time.

Of course, a lot of other people apparently are having trouble, but we're doing fine.

You find more and more people who say that so that they see what they're doing and it looks all right, but then they hear all this talk around and it gives them the impression that other people aren't doing so well.

Now, I think the two places where you see a cautious attitude in business are, on the one hand, they're not going in for planned equipment expenditures, as Arthur pointed out, and the other is that they're being very cautious about building inventories.

That's pretty clear.

Right.

But if the sales keep going at the rate they are now, they've just got to start putting in this inventory because they're running out of stuff to sell.

And once they begin to get that feeling, the investment business will come along, too.

And then that, plus consumer sentiment, could add up to a tremendous, tremendous boom.

The inventory picture has just got to change.

No way for it not to come into play.

Yeah, the retail sales thing didn't concern you as much as it seemed.

Paul wrote a rather depressing memorandum on that to me, but

You mean the fact that the May figure, he said it was disappointing?

Well, I think that's probably, it is a little disappointing.

But you don't expect it to go up every month, huh?

Well, it is at an extraordinary level right now.

They keep revising it.

They revised April up by a very substantial amount.

And the most solid information we have on sales is these big independent chains.

Chains, seers and boards and pennies and all those, they're up pretty sharply.

So there's that.

I think on the unemployment, Paul kept referring to unemployment just constantly as the sign the expansion wasn't going right.

That's true.

There are two things, however, that ought to be said about it.

actual unemployment has declined by a very large number.

I don't have it right in mind, but it's like half a million or so in those four months that he was reciting.

It's actually declined a lot.

Now, seasonally adjusted, it has been more or less stable or slightly rising in the unemployment rate.

but the decline is there and these are months when there's a fairly substantial seasonal factor applied and these seasonal factors aren't exactly right.

So at any rate, actual unemployment is declining.

The second thing is that we have had an unusually large buildup in the labor force.

associated with the release of people from the armed forces.

And if we hadn't had that, we'd have an unemployment rate of about 5.5%.

Well, that doesn't make it any better.

We certainly need to get these veterans into jobs and so on.

I agree with that.

But I don't think we should allow the existence of that fact to get us into such a dire frame of mind.

Well,

Okay.

We won't throw in the towel.

Well, I said to them afterwards, I don't like to be a minority of one all the time, but, gee, the costs of going in for a wage and price control system at a time when we are getting out of war and so on.

Well, what Arthur was saying, a new economic policy, my point is I don't think that's a new economic policy.

I've got to be sure that it is.

I think it's an old one.

Mm-hmm.

Isn't it?

Is it new?

It certainly isn't.

Well, that's the point.

Well, we'll have to take a hard look.

Okay.