Higher prices, fewer jobs likely in U.S.

Press, Volume CXIV, Issue 33450, 4 February 1974, Page 20

Higher prices, fewer jobs likely in U.S.

WASHINGTON. President Nixon has given a warning to Americans that they face higher prices and more unemployment in the next few months.

He acknowledged that the tight against domestic inflation had not made the progress he had hoped for, and his economic advisers predicted another leap in the cost of living this year. Prices are expected to rise' 7 per cent, over-all in 1974—, even faster in the first few months—virtually wiping out] any real economic growth,] according to the President’s! annual economic report to] Congress. There could be an actual] decline in the gross national, oroduct early in the year—meaning price rises will outstrip production increases— Mr Nixon’s economic advisers said in their section of the report. But for the year as a whole real output is expected to go up about 1 per cent. Mr Nixon said the Budget of $U5304.400,000,000 he will send to Congress on Monday swill be one of moderate economic restraint. But he added that he would be prepared to take additional budgetary measures if necessary—meaning : if there appeared to be a risk of an economic recession. “NO RECESSION” The President’s declaration on Wednesday that there would be no recession was echoed today by the chairman of his Council of Economic Advisers (Dr Herbert Stein). Dr Stein said he disagreed

‘With one definition of a recession — two successive i quarterly falls in real output. He said that he did not ] expect real output to fall for itWo consecutive three'monthly periods. Mr Nixon’s economic report contained the first details of his Budget, including, irecord defence spending of! !SUSB7,7OOm. This is about] |$US7OOOm higher than in the] I present financial year. The President is expected jto emphasise, in his Budget : message next Monday, that !most if not all the increase iin defence spending will be I swallowed up by inflation and ] higher pay for the armed forces. YEAR OF PROBLEMS Mr Nixon acknowledged that 1973 was a year of problems as well as progress in the American economy. “In some respects the problems were greater than we expected and the progress was less than we had hoped,” he said in his economic report. Production and employment had risen rapidly and there had been a dramatic improvement in the United States balance of trade, but control of inflation had been I the great difficulty. I “We cannot accept continuation of the inflation rate of 1973, and still less can we accept its acceleration,” he said. The rate of inflation last year was 9 per cent, Mr Nixon said the energyshortage aggravated the inflation problem. “We will try to manage the

energy shortage in such a way as to keep the loss of jobs and production to a minimum, although some loss is inevitable in the short run,” he said. MORE UNEMPLOYMENT The unemployment rate now is just under 5 per cent. Mr Nixon’s economic advisers predicted it would average slightly above 5| per cent during 1974. The economic advisers said prices would rise rapidly in the early part of this year, mainly because of increases in the costs of fuel and food. But they would then subside to a level significantly below the 9 per cent annual rate in 1973. Mr Nixon, who earlier this week described recent world oil price increases as arbitrary and exploitative, refrained from any criticism of,Arab oil producers in his economic report. But his Council of Economic Advisers, in their section of the report, said controls on Arab oil exports threatened the economic prospects of all industrialised countries. They also gave a warning of the risks of competition among oil consuming countries for Arab oil, saying that it would be likely to cause even more serious economic damage to all. The report reaffirmed United States determination to negotiate a reduction of trade barriers and called on Congress to grant President Nixon power to conduct such negotiations. The report said: “Countries have benefited greatly from the rapid expansion of trade in the last quarter century, and should this trend cease [Or be reversed because of a failure of international cooperation, the economic welfare of all countries, including the United States, would be likely to suffer.”