If you're totally confused about which way the economy is heading this year, relax: we may be able to get you a job in the federal government.
In the perfect metaphor for Washington's ongoing bewilderment, the Labor Department announced the other morning that business productivity fell at an annual rate of nine-tenths of 1 percent in 1991's first quarter - and then, the same afternoon, confessed that a slight statistical error had been made and that productivity had actually risen at a 1 percent rate in that period.But who's counting? Even the administration's designated optimist, chief economic adviser Michael Boskin, seems uncharacteristically vague about what lies ahead, telling us only that a recovery will begin "in the next two or three or five months." (Stay tuned for statistical revisions.)
Private observers have been equally quick to change their minds. First, a consensus of business economists held that the recession would end this spring. Then came a spate of disappointing reports (factory orders continued to decline, consumer confidence slipped a bit from its postwar euphoria), and a barrage of gloomy analyses appeared, suggesting that things were actually going to be a lot worse for a lot longer than anyone had admitted.
Perhaps. But the suspicion in this corner is that the economy will indeed turn around later this year and that with even minimal common sense and restraint from Washington (admittedly, the maximum we can expect from that quarter), the country will be moving solidly forward again by 1992.
Such a forecast will understandably be met with some skepticism, given the conflicting statistics and rampant confusion in interpreting them, so it seems fair to disclose the reasoning on which it is based.
Let's begin, as the economy must, with money. After a lengthy period in which the Federal Reserve was unduly tight with the nation's cash, it has in recent months raced to the other extreme - greatly accelerating monetary growth and simultaneously using other tools to force down short-term interest rates.
This reverses the situation of last summer, when an already-feeble and cash-starved economy was hit with a threatening Mideast crisis and a dramatic run-up in the price of oil. The price of a barrel of oil today is barely more than half what it was then. The Fed's discount rate, and the banks' prime rate, which it influences, have now seen three straight declines.
All this is helping send a message to the American consumer, who accounts for two-thirds of the economy and who was frightened badly late last year - after spearheading the record peacetime expansion since 1982. Consumer spending is now unmistakably on the rise. Homebuyers are back from coast to coast, encouraged by mortgage rates under 10 percent and by some of the highest readings in years on the National Association of Realtor's affor-dability index. Those tempted to wait have begun to realize that house prices won't be this low for long. Even the long-ailing U.S. auto industry is starting to show flickers of authentic recovery; car executives have boosted assembly schedules by 5 percent in this quarter.
The employment situation is still no reason to throw hats in the air, and it will probably show some further deterioration later this year (it's a notoriously lagging indicator), but it's a long way from the disaster levels reached in other modern recessions. The unexpected one-month fall in unemployment to 6.6 percent, while it involved some obvious aberrations, dramatizes the resilience of which the private jobs market is capable. (The percentage of the nation holding paying jobs remains close to the all-time record set in 1990.)
Meanwhile, the predictors of future growth remain mixed, but generally positive. Corporate executives are notably more cautious than consumers in their spending plans. But the overall index of leading economic indicators has increased for two months running (three straight would be taken as a significant harbinger), and while that funny old stock market has frequently given erroneous signals on the downside, it has never had an advance this substantial that was not followed by a genuine economic recovery.
So, don't play "Happy Days Are Here Again," but it seems a reasonable bet to plan for the year ahead on the assumption that "The Sun Will Come Out Tomorrow."