Passive Restraint

Before an audience at the National Press Club. Federal Reserve Chairman William McChesney Martin Jr. made an unusual admission for an expert economist--or indeed any kind of expert. Since the first of the year, said Chairman Martin, the FRB's governors "really haven't known which way the business currents are running." And until they do know, the Federal Reserve will follow a policy of "passive" credit restraint, neither tightening nor loosening the nation's money supply. "We are simply trying to let the forces of supply and demand operate in the money market."

The forces of supply and demand were operating all over. Some industries, such as agriculture-equipment and auto-parts manufacturers, were stepping up production. The steel industry was down to 92.7% of capacity as shipments exceeded new orders, and customers continued to live off inventories. Automakers were still increasing production. Led by Ford and Chrysler, production last week rose to 141,324 cars --10,117 units higher than the same week in 1956.

The Labor Department reported that employment in February rose by 612,000 workers to a new monthly record of 63.1 million, largely wiping out the extra-heavy January decline. Unemployment also took a better turn, dropped by 123,000 to a total of 3,121,000 jobless. U.S. factory hands earned an average $82.41 a week, a new record for the month. And with hourly earnings of $2.05, the workingman had the highest wage level of all time.

Despite some doubts over the immediate outlook, businessmen were making only slight changes in expansion plans. After first predicting an 8% increase in new plant and equipment spending in 1957, the Securities and Exchange Commission and the Commerce Department took another reading and revised the figures. The amended totals would probably hit $37.5 billion, an increase of 64% instead of 8%. Even so, it would still be the greatest outpouring of expansion money in history.

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