Full text of Basic Business News : June 3, 1958 to June 9, 1958

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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
-.;;;,-~o~---------- June 3, 1958
to
June 9, 1958
- - - - - - - ; ...o

o.

National unemployment declined in May by more than is
usual for the month, the Departments of Labor and Commerce reported. It was the first more-than-usual decline since the recession began. The drop amounted to 216,000, bringing the new total of unemployed to 4,904,000. This was 7.';!fo of the
civilian labor force, after the total was adjusted for normal seasonal
conditions. The report also showed a greater-than-usual increase in
employment--up 1,154,000 from April, to 64,061,000. The improvement
was attributed to normal gains in farming and service jobs, and to
better gains in construction work. (Mooney. N.Y. ~imes, 6/7 p.l)
UNEMPLOYMENT
LOWER IN MAY

MAY AUTO OUTPUT
AT 10-YEAR LOW

U.S. auto production in May was 349,474, a rise of
10.4% from April, but still at the lowest level for
the month since 1948. And in this first week of
June, there are indications of the further cutbacks that may occur as
attempts are made to accelerate the work-off of dealers' inventories,
now estimated at about 750,000 cars. So far this year, auto output
in the United States totals 1,900,000, down 33.8%, from the 2,870,000
of the like period last year. (Wall St. J., 6/3 p.2)

Almost a half million production workers obeyed the instructions o~ United Auto Workers president, Walter P.
Reuther, and worked without contracts and without serious incident in plants throughout the country. The first regular
working day under the unprecedented industry-wide no-contract situation produced only one abnormal occurrence which the company and the
union both belittled as unimportant. Mr. Reuther has barred strike
action now on the ground that to strike would be futile because of
slack sales and an inventory of unsold cars currently estimated at
750,000. (Bedolis. N.Y. Herald Trib., 6/3 p.13)

BUILD AUTOS
WITHOUT PACT

Selection of these iterns does not imply this bank's guaranty of their accuracy,


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nor agreement with the views expressed.

STEEL SCRAP
PRICES RISE

Steel scrap prices rose sharply as the nation's steel
production continued to climb. Quotations for the
steel-making material moved up as much as $3 a ton in
Pittsburgh and $5 in Chicago. These gains followed a further spurt
in mill operations last week to 58.1% of capacity--11 points above the
year's low in late April. The output of the week ended May 30 amounted to 1,567,000 tons. This was 44,ooo tons over the preceding week
and topped the previous 1958 high in mid-January. The American Iron
and Steel Institute predicted a further increase to 1,641,000 tons,
which would be the largest since the week started last December 16.
(Wall St. J., 6/3 p.1)
CONSTRUCTION
OUTLAYS UP

The Department of Commerce estimated that construction
outlays last month rose seasonally to $4.1 billion,
up $400 million from the April total. Expenditures for
the first five months amounted to $17.7 billion--slightly above the
$17.6 billion in the like 1957 period. The five-month gain was credited to a 4% rise in public construction, reflecting increased spending for highways and public housing. Private construction work was
slightly below a year ago. (Wall St. J., 6/6 p.1)
Cutbacks in manufacturing and trade inventories continued in April at the same seasonally adjusted pace as in
March, the Department of Commerce reported. But the
Agency also said total business sales turned up, on an adjusted basis,
for the first time since last summer. The total book value of manufacturing and trade inventories at the end of April, seasonally adjusted, stood at $87.7 billion. This was down by $800 million from
the adjusted total of $88.5 billion at the end of March. While manufacturing and trade sales went up to an adjusted total of $52 billion
in April from $51.3 billion the month before, the increase was all in
the retail and wholesale trades. (Wall St. J., 6/5 p.6)
INVENTORIES
DECLINE

The nation's money supply, the sum of deposits and currency outside banks, is expanding at a more rapid pace
under the influence of increased Treasury deficit financing and rising savings. Total money supply on April 30, according
to latest Reserve Board figures, set an all-time high of $228.4 billion, an increase of $3.9 billion from March 26,and a total $8.8 billion higher than in April 1957. (J. of Comm., 6/4 p.5)

MONEY -SUPPLY
AT NEW PEAK

The stock market bloomed last week with the advent of
June. It wasn't a "burst" by any means, but stocks
generally held steady to higher, and The New York
Times combined average of fifty stocks touched a new 1958 high at
289.14 on Friday, the best level since October 15, 1957. It wasn't

STOCK MARKET
HITS '58 HIGH


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just the weather, of course, that buoyed Wall Street. The state of
the economy seemed to be improving and there were hard statistics that
said so. Even the international situation, so grave recently, seemed
to be easing. (Forrest. N.Y. Times, 6/8 III p.1)
The Treasury Department said its offering of $1 billion
in long-term bonds was oversubscribed by a margin of about 2-1/2 to 1. It said report·s from the Federal Reserve banks indicate that subscriptions totaled about $2.57 billion.
In announcing allotments for the issue, the Treasury said savingstype investors, such as mutual savings banks and pension funds, will
get 601/o of the amount for which they subscribed. A 4afo allotment was
fixed for commercial banks buying the bonds for their own accounts,
and a 25% allotment for all other subscribers. (N.Y. Herald Trib.,
6/6 III p. 7)

U.S. BONDS
OVERSOLD

TREASURY OFFERING

The Government market took in stride the week's
huge Treasury financing operations. Initially,
some uncertainty was reflected in softer prices for long bonds as investors and dealers found it difficult to make an educated guess as
to the percentage allotment on subscriptions to the $1 billion cash
offering of 3-l/4s of 1985. The decision to price the new bond at
100-1/2 marked the first time since the mid-1930s that the Treasury
had deviated from a par offering in fitting a bond into the existing
market pattern. Also, the 201/o cash deposit required to accompany subscriptions from all investors, including banks, was in contrast to

lower cash outlays specified in most recent Treasury operations.
(Stone. Amer. Bkr., 6/6 p.2)
The Government deficit--without any tax cut--might
go as high as $12.5 billion' in the coming fiscal
year, if new estimates of plummeting tax receipts
prove correct. The forecast comes from the Congressional Joint Committee on Internal Revenue Taxation--which in the past has predicted
Government revenues rather accurately. In the fiscal year 1959, receipts are expected to plunge to $66.9 billion as a result of a continued slight decline in personal incomes and a further drop in corporate profits. Revenues of $66.9 billion, coupled with spending of
$79.5 billion--the latest estimate from the Bureau of the Budget-would produce a deficit of $12.6 billion. (J. of Comm., 6/4 p.1)
BIG U.S. BUDGET
DEFICIT SIGHTED

The House of Representatives approved a oneyear extension of present corporate and excise
tax rates that otherwise would drop at the end
of this month. The measure now goes to the Senate where a drive is
slated to reduce some excise levies, notably those on auto sales and

EXCISE AND CORPORATE
TAX RATES EXTENDED


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rail transportation. The outcome in the Senate is still not clear,
though the tide seems to have been running against the excise cut proposals in the past several days. Republican Congressional leaders,
after their weekly conference at the White House, said President
Eisenhower was standing fast against all tax rate reductions. (Wall
St. J., 6 /6 p .1)
PRESIDENT SIGNS
FHA MORI'GAGE BILL

President Eisenhower signed into law a $4 billion
increase in the Federal Housing Administration's
authority to insure mortgages, and the Agency
moved immediately to revive the nearly stalled program. FHA Commissioner Norman Mason followed up the President's action by wiring all
the Agency's 75 field offices, telling them they could resume making
commitments for mortgage insurance. He recently stopped the processing of applications for the insurance because the former $25.8 billion
authorization was almost exhausted. In April, the FHA received applications for insurance on about 79,500 units, more than double the
amount in April 1957. (Wall St. J., 6/5 p.10)

The House of Representatives has approved a bill
to give an average la{o pay increase to more than
1 million Government employes. The increases
would be retroactive to January, and would cost about $542 million a
year. This action followed approval of similar salary increases for
Post Office Department workers. These amounted to $265 million annually, also retroactive to January. In addition, approval has been
given to sharp increases in military pay to hold those with high
skills in the service. The cost of this is estimated at about
$668 million a year. So the Government payroll in the civilian and
military departments promises to rise by abo~t $1.5 billion. The
combined civilian and military payrolls now run roughly to $19 billion. (Trussell. N.Y. Times, 6/3 p.1)
PAY INCREASE varED
FOR U.S. EMPLOYES

The nation's leading steamship lines are launching the
biggest search for ship financing in their history.
Some plan to issue bonds publicly to attract new investors, a departure from the traditional practice of borrowing mainly
from the Government, and more recently from banks and insurance companies. Shipping executives report they'll need over $1 billion--possibly much more--to help finance the construction of more than 300 new
vessels over the next 10 to 12 years. The wide need for ship financing stems from the Department of Commerce's dry cargo ship replacement
program. The 14 steamship lines that operate under Federal subsidy
are required by law to replace a ship after 20 years, or face the loss✓
of subsidy on its operation. (Wall St. J., 6/5 p.24)
SHIP LINES
HUNT CAPITAL


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