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Snapping out of its September lethargy, the U.S. economy once again spurted ahead. From the Federal Reserve came the cheering news that the industrial production index had risen by more than one point in October, to 113.1% of the 1957 average, and record auto sales of 21,800 cars a day for the first ten days of November suggested that the rise would continue. Stock prices on the Dow-Jones industrial index reached new peaks on three successive days last week, hit an alltime high of 734.34 before simmering down to 729.53 at week's end. But while...
...milling around indecisively, U.S. investors last week went on a buying spree that sent the stock market charging up. On one day alone, a record 1,360 issues were traded on the New York Stock Exchange, well over 6,000,000 shares changed hands, and the Dow-Jones industrials index climbed 9.14 points to 723.74-just a shade below its alltime peak of 726.53 in early September. At week's end, still on the rise, the market...
...little-discussed reason for the spate of improved corporate earnings is that production costs in the U.S. are trending downward. Though some businessmen still find themselves in a wage-price squeeze, the Commerce Department's new index of wage and salary costs per unit of manufacturing production has been moving down since the economy started climbing back last March (see chart). Labor costs usually fall during the early stages of a recovery because production then increases more rapidly than hiring does, but this year's drop has been abnormally large...
Reinforcing this trend is the decreasing importance of escalator clauses, which provide for automatic wage increases as the cost-of-living index rises. General Electric, Westinghouse and the railroads have completely eliminated escalator clauses from their labor contracts and the steel companies have cut back sharply on escalator benefits. Simultaneously, the engine that drives the escalators has slowed down: since January, the cost-of-living index has advanced only nine-tenths of a point. One sign of the times: the auto industry's escalator program will probably increase the average pay of U.A.W. members this year by only...
...important new indicators make their debut in the Commerce Department booklet. One is the "Index of Wage and Salary Cost per Unit of Output"-which is the ratio of total U.S. manufacturing wage payments to U.S. industrial production. (This index is a lagger, which tends to fall during the early stages of a business expansion, because productivity then increases faster than wages do.) The other key indicator, which tends to lead the economic curve, is the ratio of wholesale prices that manufacturers receive for their goods to the price that they pay for labor. (It tends to lead the economy...