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OCR Page 1 of 50THE 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
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