Extracted text

OCR Page 1 of 50
THE PRESIDENT HAS SEEN THE CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISERS WASHINGTON April 11, 1974 MEMORANDUM FOR THE PRESIDENT Subject: The State of the Economy Our current view is that output, employment and unemployment in the remainder of this year will follow pretty closely the path predicted in January. First quarter output was apparently below our expectations, essentially because automobile output was below expectations. However, employment was no lower, and unemployment no higher, than forecast. Output will probably rise slowly in the second quarter and more rapidly in the third and fourth quarters. This pattern of output would be consistent with unemployment rising further in the second quarter, as the labor force and productivity rise, and then levelling out in the third and fourth quarters. The unemployment rate would not exceed 6 percent in any quarter. This pattern of forecast is now a common one. Moreover, there is little disagreement about the magnitude involved. For example, of six up-to-date, highly developed forecasts, two forecast 5. 9 percent unemploy- ment in the third quarter, three forecast 6. 0 percent and one forecast 6. 1 percent. Despite the general agreement among forecasters there are, of course, a number of uncertainties. 1. The forecast counts on a moderate rise in housing starts -- from an annual rate of 1, 600, 000 in the first quarter to an annual rate of 1,875,000 in the fourth quarter. Recent increases of interest rates have raised the question whether this rise will actually be achieved. 2. The forecast counts on a considerable rise of automobile production from an annual rate of 6.5 million units in the first quarter to an annual rate of 8. 8 million units in the fourth. While there is evidence REVOLUTION INSURANCE 1776-1976