Fed Finds Slow Pace Of Growth: Floods and Drought Fail to Halt Recovery Economic Activity Still Expanding Slowly. WASHINGTON, Aug. 4 — Neither flood nor rain nor searing drought is choking off the nation's modest economic recovery, even though they have been devastating to the Midwest and the South.</br></br>The 12 Federal Reserve Banks reported today that economic activity in most districts, including the Midwest, continued to expand "slowly to moderately” in June and the first half of July.</br></br>"The effects of flooding were said to be highly concentrated and were not seen to threaten overall economic expansion,” the Federal Reserve said in its latest survey of regional economic conditions, a report known as the beige book.</br></br>The Federal Reserve’s latest appraisal of economic conditions was based on surveys of farmers, bankers and business executives conducted before July 27. The Federal Reserve Banks assess economic conditions and price trends before the Fed’s monetary policy meetings, which are held roughly every six weeks. The next meeting of the Federal Open Market Committee, which decides whether to raise or lower short-term interest rates, is scheduled for Aug. 16 and 17.</br></br>The Federal Reserve’s chairman, Alan Greenspan, has been watching for signs that prices are starting to rise faster as the economy keeps growing, which could lead the Fed id raise rates to check inflation. But the report today found that price pressures were mixed.

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Boca Raton is a town that has everything -- including many an unsavory company.: An Oasis Rich in Shady Operators. at Florida Atlantic University, named for now-defunct penny stock brokerage firm that paid $1.9 million fine to N.A.S.D.</br></br>Former Boca office of F.D. ROBERTS & COMPANY, now-defunct brokerage firm still the target of a Federal fraud investigation that has produced more than 30 guilty pleas.</br></br>home of Joel S. Nadel, under Federal scrutiny for direct-mail "sweepstakes” programs; birthplace of Hughes Capital fraud scheme.</br></br>whose officers belatedly disclosed two prior bankruptcies and three years' worth of insider stock sales.</br></br>Address listed for A.B.E. INDUSTRIAL, under investigation by S.E.C. over an apparently fraudulent mortgage.

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U.S. ADDS PROGRAMS WITH LITTLE REVIEW OF LOCAL BURDENS: IN 1990, 20 NEW MANDATES Despite Bush's Deregulatory Drive, Analysts Report New Expenses for the States U.S. Adds Programs With Little Review of Burden's. Against the background of a stubborn recession and mounting financial distress in the country, the Federal Government continues to create or expand domestic spending programs with little or no review of the financial burdens they will place on state and local governments, public policy analysts say.</br></br>In 1990 alone, the year the recession began, President Bush signed 20 bills into law, ordering programs that the National Conference of State Legislatures says will cost state and local governments billions of extra dollars, primarily for health care, the environment and Social Security payments for public employees.</br></br>Some mandates, like the Americans With Disabilities Act, were enacted without any reliable estimates of the cost to state and local governments. The legislation, which requires businesses and state and local governments to provide the disabled with equal access to services, employment, buildings and transportation systems, is now expected to cost them millions of dollars annually to comply.</br></br>The most expensive regulations for any state involve Medicaid, the Federally subsidized health-care program for low-income people that will cost $38.3 billion for the states to finance this year. The next most expensive mandates involve environmental laws, primarily water purification, which will cost state and local governments $32 billion a year by 1995.</br></br>And three new studies show that despite the publicized efforts of President Ronald Reagan and President Bush to decentralize government, both contributed to a proliferation of regulations that meant enormous costs to states and cities in the 1980’s.

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UNEMPLOYMENT UP TO 9.8% FOR JULY, A POSTWAR RECORD: NEW YORK RATES DECLINE U.S. Level Rises From 9.5% -- Administration Blamed by Democrats and Unions Unemployment Rate for July Rose to a Postwar Record of 9.8%. Tetl Kordus, a. carpenter, listening to an explanation of unemployment benefits at a state employment office in Royal Oak, Mich. He said the last time he was out of work was in 1937, when he was laid off by General Motors.</br></br>WASHINGTON, Aug. 6 — The nation’s rate of unemployment in July rose three-tenths of a percentage point to a postwar record of 9.8 percent of the labor force, the Department of Labor reported today.</br></br>A White House spokesman said the sharp rise last month, coming after the rate had held at 9.5 percent in May and June, did not conflict with the Reagan Administration’s assertions that the recession had reached the bottom.</br></br>But it evoked angry criticism of the Reagan economic program from Democratic Congressmen and from heads of some large labor unions, who accused the President of clinging to policies that I were increasing hardships among | working people.</br></br>360,000 More Unemployed The number of people working held steady at 99,732,000 last month, partly as a result of an increase in the number of service jobs. But 360,000 more people were unemployed than in June because of an increase in the number of people entering the labor force, bringing to

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Battered Dollar's Future: Domestic Politics Assuming Priority Over International Monetary Problems Economic Analysis: Dollar's Future. The statement by Arthur IF. Bums, chairman of the | Federal Reserve Board, that American interest rates have hit their lows and. will be trending upward may have •reassured European central bankers, but it certainly jarred the New York stock market. Not long ago it was conventional for American economic and financial analysts to say</br></br>After the Smithsonian Agreement in Washington of last Dec. 18, realigning exchange rates among the major non-iCommunist countries, the Nixon Administration thought it had considerable breathing space for restimulating the domestic economy — especially by expanding the money supply and pushing down interest rates. But this has proved to be an unduly sanguine assumption.</br></br>Confidence in the dollar was shaken by the failure of the anticipated backflow of funds from Europe to the United States to materialize.</br></br>Then private European bankers and businessmen worked themselves into, a state of jitters over the unwillingness of American officials ' to talk about restoring the convertibility of the dollar.</br></br>Conservative financial Interests-—including not only private businessmen and bankers but quite a few central bankers and finance ministers as well-exacerbated lack of confidence in the dollar by attacking Nixon Administration fiscal and monetary policy as wildly irresponsible.

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Treasury Prices Mixed A Day After Fed Move. Prices of Treasury securities were mixed yesterday, with longer maturities giving up a little of the gains made Tuesday in the wake of the Federal Reserve’s move to increase .short-term interest rates half a percentage point.</br></br>The 30-year bond fell fl/32, to a price of 101°/32, yielding 7.39 percent, up from 7.37 percent on Tuesday, following the market’s biggest rally in two -weeks after the Fed’s fifth interest _ rate rise of the year.</br></br>- with investors’ confidence that the Fed is through for the moment in raising rates to fight inflation or the . fear of it. The three-month bill rates •• dropped 4 basis points, to 4.56 percent, while a six-month rate was down a couple, to 4.91 percent.</br></br>ed, that “we think inflation is going to go to 4.75 percent and eliminate the real rate of interest now set in the Federal funds rate.” He said, “Mr. Greenspan, we think has achieved what he wanted.” With regard to the economy’s rate of growth, Mr. Krai believes that since the economy is coming out of a slow growth period, it can handle a 3.5 percent rate of growth for a little longer, without sparking inflation, than some other analysts think. “1 see the long bond rallying for the rest of the year,” he said.</br></br>According to a number of market analysts, the Fed increase on Tuesday disclosed one new point about the central bank’s policy. There has been a shift in the strategy of the Fed chairman, Alan Greenspan, and the policy-making Federal Open Market Committee away from frequent quarter-point moves to a less frequent half-point moves.

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Reply to Hartke. Senator Hartke's “Point of View” article (Feb. 27) advocating passage of his bill to restrict U.S.-controlled multinational corporations through higher taxes and other measures wrongly assumes that curbing American investment abroad would somehow reduce domestic unemployment.</br></br>In casting the multinationals as villains, the Senator fails to explain how penalizing them would benefit the American worker. Perhaps the reason is he can’t. As The Times reported on Jan. 22, a Harvard Business School research team found that about 600,000 jobs in this country were dependent on the overseas operations of U.S.-based multinationals.</br></br>This study confirmed what many businessmen had known for a long time: foreign direct investment by American companies creates U.S. jobs rather than exporting them.</br></br>As a rule, U.S. companies invest in manufacturing facilities abroad to protect and expand their overseas mar- kets, which would otherwise be lost to foreign competitors. Transportation costs, trade barriers, local government regulations and other factors, compel American companies to establish plants in or near their foreign markets in order to compete.</br></br>There is little to support the charge that these investments are made to escape the U.S. labor market. On the contrary, survey after survey has shown that American companies with extensive overseas operations are increasing their U.S. employment at a faster rate than industry in general.

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100-Billion Budget Deficit Projected by Ford's Aides: $100-Billion Budget Deficit Projected by Ford's Aides Under Pending Plans. WASHINGTON, March 2-)— Ford Administration officials said today that the potential budget deficit for the fiscal year 1976 had reached the SlOO-billion level and was still growing under the tax reduction and spending proposals pending before Congress.</br></br>| President Ford projected a i$51.9-billion deficit in his ! Budget Message two months [ago. In Congressional testimony |last week, Secretary of the [Treasury William E. Simon [raised the Administration's estimate to $80-bi!lion.</br></br>The chairmen of the two Congressional budget committees, Senator Edmund S. Muskie, Democrat of Maine, and Representative Brock Adams, Democrat of Washington, both said they agreed that uncoordinated spending by Congress could raise the budget deficit beyond acceptable levels. Mr. Adams said that ■ But Senator Muskie said it was premature at this stage to predict exactly what tax cut and spending legislation Congress would pass. And Mr. Adams said that his House Budget Committee would issue a report, probably on April 7,</br></br>The Administration's projec tlons are based on an internal document prepared by the Office of Management and Budget, a copy of wTiich was given to The New York Times today. The document lists all legislative proposals, wh'ch were before Congress on March 19, that would reduce the Federal budget deficit and all that would increase the deficit.</br></br>posals have been made since the list was prepared, including a $5-billion public works spending program put forward by the Democratic Speaker cf the House. Carl Albert ot Oklahoma. Because the list describes only legislation that is pending or proposed, it describes what might happen not what will happen. But many of the items on the last are fairly sure to be enacted. For example, Administration sources privately conceded that Congress almost certainly will pass an antirecession tax cut higher than the £16-billion proposed by President Ford.

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Stimulus to Pay for More Summer Jobs. Citing tlie soaring unemployment rate among New York teenagers and young adults, state and city officials announced on Satur-’ day that money from the federal stimulus program would be used to expand the number of summer jobs.</br></br>Gov. David A. Paterson said $18.5 million would be directed to the city so it can offer 51,000 jobs, an increase of 8,000 from last year.</br></br>"Spring is job-hunting season," said Mayor Michael R.' Bloomberg, who joined Mr. Paterson and other elected officials at a news conference in Midtown Manhattan to provide details of the jobs program. "But as we know, these are not the best of times when it comes to landing work.”</br></br>The program has already received 81,000 applications, said Jeanne B. Mullgrav, commissioner of the Department of Youth and Community Development. Participants earn the minimum wage, $7.25 an hour, any, attend workshops on topics like financial literacy and job preparedness. Employers include city agencies and nonprofit groups as well as private companies, which are eligible to receive tax credits for hiring low-income youth.</br></br>ticular endeavor,” Mr. Paterson said, “is that rather than the normal jobs that young people have working in pools and parks and beaches, we will expand those opportunities to work with community organizations and businesses.”

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Capital Drives Prosper. THE long recession-induced drought in college fund drives is over. Colleges across the country are again in the midst of an ambitious round of campaigns to raise record amounts of money to replace deteriorating plant and to replenish endowments eaten away by inflation.</br></br>Eight colleges have begun drives for more than $200 million each, and 12 more are conducting campaigns for more than $100 million each, according to statistics compiled by the American Association of Fund-Raising Counsel. These goals easily top the record efforts of the 1960’s, when the largest campaigns raised somewhat less than $150 million each.</br></br>Most campaigns under way have been successful, with funds arriving on or ahead of the target date. The most notable exception is Yale University, whose attempts to raise a record $370 million have foundered, forcing it to extend the deadline a year, to December 1978.</br></br>“Giving to colleges and universities seems to have regained the vigorous rate of growth that it enjoyed back in the 1950’s and early 1960’s,” according to the Council for Financial Aid to Education. “The total volume of support jumped nearly 12 percent in fiscal 1975-76, and preliminary data indicate that the increase for fiscal 1976-77 will be at least as great."</br></br>Interviews with educators and professional fund raisers indicate the major reasons for their success are the recovering economy and the rising incomes of alumni and other donors.

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STOCKS UP A BIT IN SLOW TRADING: Strength Follows Report of a Rise in Factory Orders Dow Average Up 2.80 STOCKS UP A BIT IN SLOW TRADING. By GENE SMITH The stock market erased opening losses yesterday and closed moderately higher in continued slow trading, i The Dow Jones industrial average ended the day at 975.93, up 2.80. After opening at 971.10, down 2.03. it managed by noon to post a gain of 0.18. From then on it continued to rise until it hit the day's high at 976.18 and then slipped in the final hour.</br></br>Volume increased to 16.12 million shares from the 13.88 million shares traded on Tuesday, which was the second slowest day of the year. Of 1,-834 issues traded yesterday. 757 advanced, 640 declined and !437 were unchanged. Thirty-three issues posted 1976 highs, and 36 set new lows.</br></br>At least part of the after-: noon's finning action was traced to the Commerce Department’s report that new factory orders rose 1.1 percent in April. The increased volume was attributable in part to sev. eral large block trades.</br></br>Focus on Fundamentals Commenting on yesterday’s trading, William Le Fevre, senior analyst at Granger & Company. said: “The fear of rising interest rates, which has plagued the market for some months, appears to become less a drag on the market as investors now seem to feel that the worst of the interest rise is over. They are concentrating more on the fundamentals—rising earnings and increasing dividends."</br></br>1.1 percent increase in factory orders was “an additional positive factor which helps to alleviate those nagging fears that the economic recovery' is losing some of its vigor." He added that he felt it would take only |a small improvement in inves-jtor confidence to send popular indexes to new high ground. One of the biggest gains of the day was scored by International Business Machines, which rose 3V£ to 25714, after having traded earlier at 2581/,. A total of 71,400 shares changed hands.

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PRICES OF STOCKS TAKE SHARP DROP: Money-Rate. Economic and Political Uncertainties Are Factors in Decline DOW OFF 9.93 TO 902.02 Leading Auto Issues Reflect Market's Gloominess by Falling Substantially Stock Prices, Reflecting Uncertainties, Register a Decline of 9.93 to 902.02 on the Dow-Jones Index Percentage Gains Percentage Drops New 1973 Highs/Lows Odd-Lot Transactions Market Averages. The stock market, which traditionally abhors uncertainty, suffered a substantial decline yesterday in the face of uncertainties on the money-rate, economic and political fronts.</br></br>As a result, the Dow-Jones industrial average, finishing near its low for the day, closed at 902.02 with a loss of 9.93 points. This marked the seventh 0.74 point to 96.24 for its lowest reading since 1970. Higher interest rates mean increased borrowing costs for the money-sensitive utilities.</br></br>Record yields in Treasury hill rates — with 90-day bills hitting 8.75 per cent this week —symbolize the tight monetary stance of the Federal Reserve. The near-term future of bill yields, many observers believe, will depend upon the success or failure of the Fed to curtail</br></br>The economic uncertainly was indicated in the action of leading automotive stocks, which declined despite record^ new-car sales so far this year, arterstunit The forthcoming contract negotiations, a Wall Street analyst said, evidently unsettled the important auto group.</br></br>Ford fell a point to 53, finishing only a fraction above its yearly low—compared with a 1973 peak some 30 points higher. Chrysler slipped % to 25. Both issues are carried on the stock tables as showing a price-earnings ratio of 4.

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The Hole in Hollywood's Pocket: Bidding Wars Over A Handful of Talent The Hole in Hollywood's Pocket: Bidding Wars for Talent. While many American industries are retrenching in the face of a recession, Hollywood is on a spending spree. The studios are paying unprecedented prices for scripts, stars, directors and other talent required to produce feature films.</br></br>The theatrical, video and pay television businesses have exploded abroad, setting off bidding wars among the studios for the handful of talent believed to have the greatest global appeal. Artists involved in action films, which consistently play well worldwide, have seen the most spectacular increases.</br></br>High Industry Benchmarks And rates like the following are beginning to serve as benchmarks for the entire industry:</br></br>Q A mold Schwarzenegger was paid $10 million for starring in “Total Recall” and will earn $12 million from Carolco Pictures for “The Terminator II.” q“The Godfather, Part III,” which stars A1 Pacino, will cost Paramount Pictures at least $55 million.</br></br>OThe screenwriter Shane Black earned less than $750,000 for “Lethal Weapon,” one industry executive said, but he received $1.7 million from Warner Brothers for his latest script, “The Last Boy Scout.” qThe screenwriter Joe Esterhaus received $3 million for a screenplay for Carolco Pictures’ “Basic Instinct,” and Irwin Winkler earned $1 million to produce the film, even though both left the project by mutual agreement shortly after production began.

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Market Place|: Profits from higher-rate loans to low-income home buyers.. FOR a profitable mortgage-lending business, consumers with low incomes and checkered credit records marred by delinquent payments are not the usual prospects. But they are the bread and butter for the United Companies Financial Corporation of Baton Rouge, La., and some other finance companies, which have found that low-income homeowners will mortgage their houses at relatively high interest rates to obtain loans unavailable from other sources.</br></br>While the traditional mortgage-lending business is slumping as interest rates rise and middle-class homeowners have stopped refinancing, some lenders in low-income areas are expanding rapidly. With the help of Wall Street and bond insurance companies, these “B” and "C" loans issued to borrowers with credit blemishes are now routinely packaged into securities that can be sold readily in the financial markets.</br></br>That business of making high-interest-rate loans, selling them as securities and then making more loans has transformed United from a sleepy consumer loan and annuity company into a fastgrowing mortgage company. United first caught the eye of analysts in mid-1993, when it sold its original bundle of mortgage securities. Since then, it has packaged $1.1 billion in mortgages and its stock has more than tripled in value.</br></br>But it still may be a good buy. After starting at less than $10 in mid-1993. United rose in over-the-counter trading to a peak of $48 in March. Affected by the general weakness in mortgage company stocks, however, it has fallen and traded at $33.50, unchanged, on Nasdaq yesterday. That is less than six times next year's expected earnings.</br></br>"This is one cheap growth stock," said Stephen Eisman, an analyst at Oppenheimer & Company. He noted that demand for United's loans was little affected by rising interest rates and said the company could earn $5.75 a share next year, up 26 percent from this year.

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Fed Vote in May Backed Rate Rises. WASHINGTON, July 1 (AP) — Top policy makers at the Federal Reserve voted in mid-May to push interest rates higher as a way of fighting inflationary pressures, according to minutes of the discussions released today.</br></br>The Federal Open Market Committee, which sets monetary policy for the central bank, voted by 9 to 2 at its May 17 meeting to tighten credit conditions slightly in the weeks after the meeting.</br></br>The two dissenters, Lee Hoskins, • president of the Federal Reserve Bank of Cleveland, and Robert Parry, president of the Federal Reserve Bank of San Francisco, contended that a more substantial tightening move was needed to dampen inflationary pressures.</br></br>Fed policy makers met again on Wednesday and Thursday of this week, and many analysts believe the central bank discussed increasing its discount rate, the interest it charges to make loans to banks, which is now 6 percent. Some economists suspect that such a move has become less urgent because of signs that the economy is slowing a bit.</br></br>An increase in the discount rate, which was last raised in September, is the strongest signal the central bank can send of its intention to push interest rates higher.

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Wary Outlook On Bond Rates. || F recent history is any guide, stock market in-j|j vestors might benefit in the period ahead by EH keeping a watchful eye on the bond market. That is because bonds are keyed to interest rates, and declining rates, with a slight time lag, called the tune to the upturn in stock prices last August. Equally significant is the fact that, starting in the late spring of 1983, rising rates presaged a retreat in equity prices.</br></br>This latest surge in interest rates, catching most forecasters by surprise, sent bond prices down and bond yields up. Its chief cause was the unexpectedly fast pace of the business recovery and a coincident move by the Federal Reserve Board to tighten monetary policy. And, as rates climbed, money was siphoned from stocks into higher-yielding fixed-income securities.</br></br>While the immediate outlook for rates remains in doubt, there is little evidence of any rush to buy bonds. "Since we think that Interest rates have yet to see their peak, we continue to recommend that new bond money be left on the sidelines,” said Ronald A. Glantz, chief Investment officer of Paine Webber Mitchell Hutchins Inc.</br></br>"Both the stock market and the bond market would benefit from signs of slowing economic growth and an easing in the Fed’s credit policy later this year," said Donald E. Maude, the chief financial economist at Merrill Lynch. “Meanwhile, I expect the bond market to remain shaky over the next month or so — a pattern likely to be "We’re getting close to the peak In rates,” said Robert Slnche, chief economist at Bear, Steams & Company. “But even if we’re going through a peak period, there still exists some risk in the equity market.”</br></br>In Baltimore, George J. Collins, director of the fixed-income division at T. Rowe Price Associates, remains wary on the rate outlook. Indicative of his caution is a 47 percent cash position in the T. Rowe Price New Income Fund, which has $650 million in assets. The portfolio’s approximately $300 million in cash, incidentally, is invested mainly in commercial paper and certificates of deposit.

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Fed Is Narrowing Target For Its Operating Policy: Will Concentrate on Reserves Available to Support Private Nonbank Deposits and Seek Growth of 6 to 10% RESERVE REFINES TARGET OF POLICY. Will Concentrate on Reserves Available to Support Private Non bank Deposits and Seek Growth of 6 to 10%</br></br>WASHINGTON, May 15 — The Federal Reserve’s Open Market Committee refined further its operating "target” for monetary policy—a target centering on the reserves of the nation’s banks—in its meeting of Feb. 15 this year, it was dislosed today.</br></br>The disclosure came in a summary of the February meeting. Taken together with the January meeting, the February decisions indicated an important evolution of Federal Reserve operating policy, though not necessarily a permanent new course.</br></br>In February, the Open Market Committee settled on a newly refined target for daily operations in the money markets. This, according to the summary, was "total member bank reserves less those required to support Government and interbank deposits." At the January meeting, the committee had decided on a broader target: member bank reserves as a whole.</br></br>nical. But they go to the root of the real problem of whether the central bank should aim chiefly at controlling the total growth of money in the econ. omy rather than interest rates — and if so, by what operating method.

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More Women Work at Traditional Male Jobs: Women Making Inroads on Traditional Jobs of Men. An increasing number of women in the United States are working at what used to be men’s jobs. Despite the unemployment rate, the number of women working in the United States has risen 21 million, or 95 percent, over the last two decades, according to a new study by the United States Department of Labor, and many of the jobs they have taken are in categories once largely the province of men.</br></br>In fact, the Labor Department says, there are six major job categories in which women have become the majority in the last decade. Those categories are insurance adjusters, examiners and investigators; bill collectors; real estate agents and brokers; photographic process workers; checkers, examiners and inspectors, and production-line assemblers.</br></br>In several of these areas the changes have been major. In 1961, for example, only 9 percent of the nation’s insurance adjusters were women. By 1972, their number had risen to 26 percent and, last year, women accounted for 58 percent of all the people in that job category. Female bill collectors increased from 22 percent in 1961 to 37 percent in 1971 to 63 percent last year.</br></br>According to the Labor Department figures, even in job categories where women are still a small minority, the percentage increases have been dramatic. Where only 4 percent of the nation’s lawyers and judges were women in 1971, a decade later they acounted for 14 percent, an increase of 250 percent in</br></br>Continued From Page 1 10 years. In 1971, women made up 9 percent of the country’s physicians. In 1981 they accounted for 22 percent, or more than one doctor in five.

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PRICES RETREAT FOR TAX-EXEMPTS: Yields on Corporate Issues Register a Decline Prices Retreat for Tax-Exempt Bonds. Interest rates on corporate and tax-exempt bonds moved in sharply opposite directions yesterday while other rates remained steady on light activity.</br></br>Tax-exempts continued a skid that began last Wednesday when a $ 145-million offering by Pennsylvania failed to spark investor enthusiasm and a</br></br>The group will seek bids on part of the $114-million that remains while dividing other bonds among the account.</br></br>The bank would not be specific, but other sources said that bonds due in 1984-99 would be split up and that the long discount bonds would bid off. Early maturities might be tossed into the open market, they said.</br></br>UTILITIES Oris. Asked Price Quote Chns. Nev Power 7%s02 100.293 101% +% NowEns Tel 7%s07 99.68 100% +% Pug Sound 7%s02 100.25 100% 4% Col Gas 7*/as97 99.441 101 +% Consumrs Pr 7Vjs02 100.569 101% +% Pot Elec Pr 7%s07 100.25 1 02% +% OTHER BONDS Hershey 7’/4s97 100 102% +%

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CULTURAL STUDIES: Hey, Small Spender. THE rich are always with us. But sometimes they keep a lower profile than others. In an era of global economic recession — an unshaven whisker’s edge from Depression — as the unemployment rate in the United States shuffles around 10 percent, as former fat cats like the faux-financier Bernard L. Madorf languish behind bars and as second homes and pleasure boats clot the "For Sale” columns of want ads, conspicuous consumption is out. Pitchfork populism is in. The hour of bling has blung. And yet.. Botte-ga Veneta dares to sell tie-dyed T-shirts for S330 each, while Apple has sold three million iPads in 80 days (at $499; minimum) to somebody. Who has the money? Nobody's telling.</br></br>Frelte sheets, Kelly bags and corporate accounts were staples, not perks, of the unexamined luxurious lifestyle. But lately, ns we read in the July Issue of Details magazine, high fliers have moved their revels underground. Jeff Gordinier writes: “The notion that people have crawled into a bunker stocked with canned beans is a bit of a myth. Pleasure-seeking has stubbornly continued.1' An owner of a high-end personal-concierge company told Mr. Gor-dinicr, “Unless you unfortunately lost your job, nobody stopped," adding,</br></br>Still, some former big spenders seem to genuinely regret their past excesses and are rushing to eat crow, putting their ortolan-munching days behind them. A recent example is LuAnn de Lesseps, the former Wilhelmina model and countess who appears on the Bravo reality show “The Real Wives of New York City.” Ms. Do Lesseps's calchphrase on the program is, “I nev- • er feel guilty about being privileged."</br></br>But the new austerity seems to have pricked her conscience. This spring she released a rock video in which she struts past four boy-toys, picks their pockets, throws their cash to the floor and rasps to a techno beat, “Money can’t buy you class, elegance is learned ” A fistful of money-wise new books attest to a growing vogue for thrift.</br></br>SPENT: MEMOIRS OF A SHOPPING addict (Little, Brown), by Avis Car-della, is a contrite account of her 30 years as a shopaholic. Ms. Cardella, a magazine writer (and a former hairdresser, model and flight attendant) grew up in Fort Greene, Brooklyn, in the 70s, long before it was gentrified.

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Stocks Rally As Data Hints At Slower Pace: STOCKS & BONDS; Stocks Rally as June Jobs Data Hints at a Slower Pace Hot & Cold The Favorites. Both stocks and bonds rallied yesterday after the June employment report brought investors news of slower growth and the hope that the Federal Reserve might now refrain from another increase in interest rates next month The Nasdaq composite index jumped over the 4,000 mark for the first time since April, and cut its loss for the year to a little more than 1 percent The Standard & Poor’s 500-stock index popped back into the plus column for the year, while the Dow Jones industrial average narrowed its decline In the bond market, interest rates slipped</br></br>But both stocks and bonds are still locked m their recent trading ranges, and are likely to remain there until it is clear that the Federal Reserve has finished raising its short-term interest rate target to slow the blistering pace of economic growth and dampen inflationary pressures While private-sector jobs continued to increase, the June data showed that the pace of growth was slowing At the same time, income growth — as measured by average hourly earnings — remained moderate And the increase in aggregate hours worked slowed some, signaling that worker productivity is still strong Investors seemed to conclude that the pace of growth might be decelerating enough to keep Fed policy makers from raising interest rates when they meet again on Aug 22 Inflationary pressures, as measured by wages and productivity, are also not too threatening At the same time, economic growth is still robust enough to keep the corpo-iate earnings outlook positive. The reporting season for second-quarter earnings gets into full swing next week and forecasters are still expecting a robust quarter, with growth of about 19 percent over the second quarter of 1999 “People have become less certain that the Fed will tighten at the August meeting, while that was the forecast after the June meeting,” said Joseph Liro, chief economist at Stone & McCarthy Research Associates in Princeton, N J That sentiment was reflected in the slight decline yesterday in the yield on federal funds futures for August, to 6 53 percent from 6 545 percent The federal funds rate, which is the interest charged on overnight loans between banks, is the Federal Reserve’s target for shortterm interest rates It is now at 6 5 percent after an increase of half of a percentage point in May Policy makers left the rate unchanged in June but warned that it might be raised again if the economy did not slow more And, Mr Liro added, investors can be “confident that there will be enough aggregate demand out there to keep the economy growing ”</br></br>into a nice positive The Nasdaq rose 1 4 percent for the week and the technology-heavy index is now down just 11 percent for the year But it is still 20 3 percent below its high for the year, set in March The S&P was up 1 7 percent for the week and is now up 0 7 percent for the year But it is still 3 2 percent below its high set in March The Dow finished the week 1 8 percent higher It is still the worst performer of the three indexes, down 7 5 percent for the year and is 9 3 percent from its record high in January Mr Liro noted that while investors seemed to worry about the impact of the monthly jobs data on the stock market, the data has usually been a help to the stock market on the day it is released He said that on 15 of the 18 Fridays on which the employment report has been issued since January 1999, the S & P index has rallied And in 12 of those rallies, the S & P has risen 1 percent or more</br></br>There are several reasons for this sunny response, he said One is that investors who are worried about the Fed’s raising interest rates are calmed by signs that the economy is slowing a bit The underlying growth, meanwhile, is a natural balm to the market And often, just getting the news out of the way, even if it is negative, is a relief to many investors In the bond market, prices were higher as yields, which move in the opposite direction, fell The yield on the Treasury’s 10-year note fell to GOO percent from 6 04 percent on Thursday, while the price rose %2, to 103% The yield on the 10-year note has been fighting to get back below 6 percent for the last four weeks The yield on the 30-year bond fell to 5 87 percent from 5 90 percent Thursday</br></br>After one day of trading a cent below $30 a barrel, the price of crude oil rose yesterday Oil for August delivery on the New York Mercantile Exchange was up 29 cents, or 1 percent. to $30 28 It is still unclear how much the Organization of Petroleum Exporting Countries will actually increase its crude oil production Saudi Arabia said Monday that it would raise its production by 500,000 barrels a day — less than 2 percent of OPEC production — if the price did not decline soon But other OPEC members are still discussmg how much of an increase they will accept

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Lacking the Plaudits of 2006, the Fed Chief Takes the Oath Quietly This Time. WASHINGTON - Ben S. Ber-nanke stepped into the imposing two-story marble atrium at the Federal Reserve's headquarters and took the oath of office from his deputy. The president lauded Mr. Bernanke as "an economist’s economist” who had "earned the respect of the global financial community.” A cabinet secretary, members of Congress and two former Fed chairmen looked on.</br></br>This is now. Mr. Bernanke was sworn in Wednesday to a second four-year term as chairman of the central bank in a quiet ceremony that had none of the pomp and praise of four years ago.</br></br>mark interest rate to 4.5 percent as it tried to slow the economy and prevent inflation. The Senate had confirmed Mr. Bernanke by acclaim. The Fed’s institutional prestige was so high that George</br></br>Today, the unemployment rate is 10 percent, and the Fed has kept the federal funds rate, its main policy lever, near zero for more than a year as Mr. Ber-nanke and the bank have been criticized for contributing to the housing bubble and the financial collapse.</br></br>The Senate reconfirmed Mr. Bernanke Jan. 28 by the narrowest margin in the Fed’s 96-year history, and only after lobbying by the White House.

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BIG BOARD PAUSES TO CONSOLIDATE: Moves in Popular Indicators Are Small Dow Is Down 0.68 to End at 759.79 GLAMOUR STOCKS MIXED 653 Issues Rise While 625 Fall Turnover Slips to 12.44 Million Shares Big Board Pauses for Consolidation. The stock market moved yesterday through its third straight session of “catch your breath” on the heels of a dynamic advance that got under way last week.</br></br>Once again, changes in the popular indicators were small as many Wall Street analysts held to the view that the market was consolidating its recent gains in commendable fashion.</br></br>The Dow-Jones industrial average, down as much as 3 points at 10:30 A.M., displayed small changes, both up and down, after the opening hour and finished at 759.79 with a token loss of 0.68 points.</br></br>Thus, turnover continued above last year’s estimated break-even point of 12 million shares, the amount needed by Big Board member firms _to cover expenses on their security commission business. Over the four previous sessions, volume had averaged more than 16.4 million shares daily, much to the delight of financially troubled brokerage houses.</br></br>“The market looks a little tired here,” commented a Wall Street broker shortly before noon, when the popular averages were hovering on an even keel. “That fast runup we saw —up 50 Dow points in five trading days—pretty well discounts any good news we’ll see for a while.” “I expect the market to pull back a bit around here,” the broker added. “But the basic strength is fantastic.”

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Reserve Chief Optimistic on the Economy -- Calls Inflation Curb 'Vital': Burns Optimistic on Economic Outlook. WASHINGTON, July 26 — The Federal Reserve Board "is in a favorable position to continue pursuing a path of moderate monetary growth." its chairman, Arthur F. Burns, told Congress today.</br></br>Mr. Burns added, in testimony before the Joint Economic Committee, “And if, as seems likely, private credit demands advance at a temperate pace, interest rates near current levels could continue to prevail in the months immedi-j ately ahead."</br></br>Although he warned about the "ominous" condition of the Federal budget, Mr. Burns painted. a generally optimistic picture of the economic outlook, stretching into 1973.</br></br>On inflation. Mr. Bums cited "progress" up to now but said even further moderation of the rate of price increase was “vital,” Warning about the major collective bargaining settlements due for next year, he said: "If costs are to be stabilized, the wage guidelines — which now permit increases in wage rates well above long-term productivity gains —will need to be lowered. But any such wage development will necessitate measures to assure workers that their real earnings will not be</br></br><!He is in “close agreement" with George P. Shultz, the new Secretary of the Treasury, on international monetary policy. <JThe new Reserve policy of intervening occasionally in the foreign-exchange market “has nothing to do” with convertibility of the dollar into reserve assets such as gold, and “is not to be regarded as having any implications for what will be decided later on convertibility.” <5He regards as “very promising” the results to date of the Reserve’s new domestic monetary policy operating technique, which seeks to control bank reserves available to support private, nonbank deposits. Its aim, he said, was to prevent, the growth of money and bank credit from deviating from the Reserve’s intentions, as he con-, ceded had happened in the pastJ •JHe suggested several techniques by which Congress could gain better control over its own spending actions, including the possibility of a single appropriations bill. He warned that a rising deficit in the current fiscal year, when the “economy is

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Fighter for 'Economic Justice': A Fighter for 'Economic Justice'. FOR more than a year. Auxiliary Bishop Peter A. Ro-sazza of the Roman Catholic Archdiocese of Hartford has been traveling around the nation listening to stories of economic hardship — hunger, homelessness and unemployment. Earlier this month, events struck closer to home when the General Products Division of Century Brass Products Inc. closed its brass production plant in Water-bury, laying off at least 600 people.</br></br>On the local level. Bishop Ro-sazza, who lives in the rectory of St. Margaret’s Roman Catholic Church on Willow Street in Water-bury, has been a leader of the Naugatuck Valley Project, which has been fighting to save factories in Connecticut’s “Brass Valley.” On a national level, the Bishop was one of the five Catholic prelates who drafted the pastoral letter on the United States economy. The letter calls for “a new commitment to economic justice" through efforts to reduce poverty and unemployment. Since its release by the National Conference of Catholic Bishops last November, the first draft of the letter has been the subject of much heated debate at hearings around the nation.</br></br>-Later this week. Bishop Ro-sazza will travel to Chicago for a session with other committee members to discuss the reaction to the letter and to lay the groundwork for a second draft. After further hearings, a final version will be voted on by the nation’s 280 Roman Catholic bishops.</br></br>Bishop Rosazza expressed great disappointment at the closing of the Waterbury plant, the largest brass producer in Connecticut, which came three days after union workers refused management’s request for $4.8 million in concessions.</br></br>“I felt very sad for the workers and sad that there wasn’t any kind of meaningful dialogue that could precede the closing,” he said. “The workers were given an ultimatum.”

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The $1,000 Tower -- and the Hungry. Though Ronald Reagan came to office preaching slogans about big, bad deficits, what he’s preaching now is responsible fiscal policy. Forget the deficit, he says, until Government can steer the economy out of recession.</br></br>Yet when it comes to social policy, the President suddenly remembers the deficit. It’s the poor he seems willing to forget, even though they are the recession’s primary victims.</br></br>When even President Reagan can say what he did at his news conference Wednesday, we’re all Keynesians: “It’s a common rule and an accepted fact that increasing taxes is not the way out of a recession... What we must do is get the economy restored on a long-term, permanent basis. And everything we do must be directed toward that. ”</br></br>Everything we do. That’s not only right; it’s brave. Consider how dramatically Mr. Reagan inveighed against the deficit two years ago. The national debt, he said, was approaching $1 trillion. “If you had a stack of thousand-dollar bills in your hand only 4 inches high, you’d be a millionaire. A trillion dollars would be a stack of thousand-dollar bills 67 miles high.”</br></br>The President knows that in two years the stack has risen to 80 miles. With a $200 billion deficit now likely, it could climb another 13 miles this year alone. He also knows how eagerly his critics, left and far right, will jump on the seeming contradiction in his views. In truth, there is no contradiction, only a question of time perspective.

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Data Give Big Lift To Bonds: Weakness Is Seen In Report on G.N.P.; Inflation Index Low CREDIT MARKETS Bond Prices Surge on New Data. Treasury bond prices exploded and . long-term interest rates fell well below 8 percent yesterday after the Government reported that a critical inflation measure * posted a big de-. cline in the third quarter. In addition,; a respected survey showed that consumer confidence fell to recessionary, levels in October. \</br></br>The day’s events only heightened speculation that the Federal Reserve Board would move soon to lower short-term interest rates to provide additional relief to what appears to be: a faltering recovery.</br></br>A cut in rates by the Fed would almost certainly prompt commercial banks to lower their prime lending rates, now at 8 percent First Fidelity Move Indeed, one institution, the First Fidelity Bancorporation in Newark, said yesterday that it had cut its prime rate to 7.75 percent. The rate is used as a benchmark for other consumer borrowing rates.</br></br>No other leading banks followed suit, and analysts said most were likely to wait until they could lower their prime rate by a half a percentage point.</br></br>That probably would not occur until after the Fed pushes down the overnight rate on bank loans in the Federal funds market, or the discount rate, or both, the analysts said.

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MARKET REGISTERS BEST RISE SINCE '39: Report on President's Plans, Copper Price Rise More Than Offset Gas Bill Veto GAINS PUT AT $4 BILLION Index Jumps 6.13 to 319.01 as du Pont Soars 8 -- Volume Is 2,840,000 Copper Price Rise Cited Opening Quiet, Mixed STOCKS REGISTER $4 BILLION GAINS. Several factors—some tech* nical, some' not— thrust tha stock market yesterday into tha best one-day gain, as measured by The . New. York Times Index, since September, 1939. The valua of stocks listed on the New York Stock Exchange showed a net gain of $4,000,000,000.</br></br>Trad>”'y expanded to 2,840,000 share:*, *'om 1,750,000 on Thurs-day, owing to a surge of buying drive in the final thirty minutes, in which turnover Went to 750,- 000 shares. In the last twelve minutes, under pressure of higher quotations, the ticker was three minutes late in reporting what was happening on the floor.</br></br>Market analysts volunteered two technical reasons for the market’s strength yesterday. First, they said, the market for some weeks had been shaking itself down into an exceedingly strong technical position, ready to shoot upward on good news. Second, it proved its resistance to bad news by the manner in which it reacted to the President's veto of the natural gas bill.</br></br>Among the nontechnical factors was a radio report early yesterday that Edgar Eisenhower had predicted that his brother would run for a second term. Added to this was the report of January housing starts, supplemented by private reports on brokerage house wires that the first half of February also had shown a gain. This seemed to indicate that the January upturn had been something more than an accidental bulge.</br></br>Some traders also interpreted the 3-cent-a-pound increase in the price of copper by the Anaconda Company as an indication that inflation was continuing in everything save the price of farm products—the decline of which has kept the over-all price average on a fairly even course.

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Rates Ease in Weak Demand: Uncertainty On Housing. Interest rates fell slightly yesterday, though securities dealers said investor demand remains weak, particularly in the long-term bond market.</br></br>Prices of Treasury issues, which normally set the tone for the corporate and tax-exempt markets as well, opened slightly higher in response to a larger-than-expected decline in housing starts last month. The March housing data were of interest to bond traders because forecasts of lower interest rates this quarter are based largely on a slowdown in economic growth.</br></br>Combined with the 2.2 percent decline in retail sales during March and a smaller expected increase in nonfarm employment for the month, economists agree that housing data indicate a slowing economy.</br></br>But there is uncertainty about whether the weaker March data will continue through the current quarter or if they reflect unusually bad weather over much of the country last month.</br></br>Analysts at Evans Economics said in commentary published yesterday that the drop in housing permits, which are not affected by bad weather and give a clearer picture of future housing activity, fell to 1.946.000 units in February. The economics advisory firm estimated that housing starts would rebound in April to a 1.8 million rate.

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IRREGULAR MARKET PERSISTS IN STOCKS: Price Average Ends Day With Gain of 0.41 After Early Rises Are Reduced TRADING PACE IS STEADY But Interest Shrinks to 1,059 Issues--Steels Favored First, Then the Oils Economic Factors Overlooked Fedders-Quigan Active. The stock market was highly Irregular again yesterday, indicative of the caution induced by the international situation. Early gains were shaded in the afternoon to leave the list irregularly higher on the day and the composite rate rose 0.41 point. Advances were most frequent in the steels in the morning,. while emphasis shifted to the oils and chemicals in the'Efternoon.</br></br>Volume was fairly constant throughout the session, transfers cn the Stock Exchange rising slightly to 1,360,000 shares from 1,260,000 on Tuesday. Interest continued to narrow in terms of issues traded, however, and took in only 1,059 stocks. At the close 477 were higher and 296 lower.</br></br>Continuing to overhang the market was the talk of a cease-fire in Korea. The comeback in prices on the Big Board since the sharp recession of Monday, laid to the armistice bid of the Soviet Government, has so far been quite faint. The rails have been most seriously affected, and especially the Western carriers, which have been the main avenue for siphoning materials to the fighting front.</br></br>There are, however, many domestic economic factors affecting the share list. Some have been lost sight of owing to the Korean situation. In the case of the rails, th* cost of living index will now assure a wage increase for almost 1,250 -000 railway employes whose pay scale is linked to an escalator clause. Many industrial corporations, which have been geared for armament production, find Government orders scarce or not forthcoming. The motors are a good case in point. The tax and controls program remains in a state of f ix and not conducive to stock market action in the opinion of Wall Street observers.</br></br>1,000 shares off % point, and New York Central was lifted % point on an initial sale of 2,500 shares. The list then drifted narrowly for an hour, but firmed near midday, with the steels rising and Brooklyn Union Gas responding to the increased dividend. Sales in the morning were 510,000 shares. After continuing firmer in the lunch period, quotations sagged below the forenoon peaks as the afternoon progressed. Fcdders-Quigan was hit sharply by an avalanche of selling orders and sank to a new low for the year. Crosscurrents prevailed in the final hour although the list generally remained on the better side.

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Consumers Rush to Buy Peak-Rate Certificates: Peak-Rate Certificates Sell Fast Aims of Measures. There was something of a flurry yesterday in money-market certificates as customers rushed to savings institutions to buy the last ones permitted under old rules, allowing higher interest rates.</br></br>With introduction of new rules due today. Citibank jumped in with an advertisement that starting today its rate was as good as any saving bank’s. It also said it would give gifts, such as coffee makers and electric drills, to certificate purchasers.</br></br>Starting today, savings banks and savings and loan associations offering six-month certificates may not pay one-quarter of n percentage point more than commercial banks whenever rates are 9 percent or higher. And no one may compound interest on the certificates. (The interest rate on these certificates is set weekly at the average discount rate in the sale of six-month T reasury bills.)</br></br>The National Savings and Loan League tried to get banking regulators lo delay putting the new regulations into effect until March 31, but a spokesman for the Federal Home Loan Bank Board yesterday said the changes would be made as planned. The savings and loan trade group complained that the banks faced problems in notifying depositors of the changed rules.</br></br>credit unions could put off the new regulations until March 30 because of the need to give depositors 10 days' notice. Credit unions as of January had only $600 million of money-market certificates outstanding of the $105 billion that had been sold. Savings and loan associations accounted for $55 billion; mutual savings banks, $17.5 billion, and commercial banks, $31.9 billion.

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Phone Company WillSeek $350-Million Rise inState: 11-Month Wait Noted Phone Company Plans to Sek $350-Million Increase in State. The New YorlPy'S^oIe^VJIlQftbry process is not Company, citing inflation,' ar only lengthy, but also backs nounced ; plans, yesterday. Unto the future. As a result, in seek an annual rate increase o times of inflation, the new rates $350-million to $400-million sfcre often inadequate the mo-it could, get 15 per cent to 2&nent they go into effect.” per cent more revenue next EUinghaus cited higher year. • - . costs for wages, taxes, capital,</br></br>The coirtpany’s president, Wi! Equipment and energy, liam M. EUinghaus, said details ge nolt say how the com- \yould affect the monthly bill o proposed ra'te increase among the utility s six million, yarjoug services,</br></br>15.4 per cent; was granted lasFnts-Italso has sought to put November, raising the.monthl/ charge on single-message bill of the utility's average CUfumt. calls, which now cost one tomer to $19 before taxes. ™essa8a unit no matter how toria noted that it took 11 months to win approval of the last rate rise,, He maintained that the . utility was "not free to mark up our prices to offset surging costs.”</br></br>The average monthly tele-poted was “equivalent really phone bill of New York City jt0 a rate case." residents has gone up from! “But we also.have negotiated P.S.C. that it was not receiving a fair return 'of 8.51 per cent on its intrastate investment, as permitted by the state. The actual return has been only around 6 per cent, the company says.</br></br>Such a return is not pleasing to the parent corporation, the American Telephone and Telegraph Company. Both need to show a good rate of return on their capital investment, the utility points out, to attract private capital for construction projects., t •

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INDUSTRIAL LOANS DROP $250,000,000: New York City Accounted for $197,000,000 of Decline, Reserve Board Reports. WASHINGTON, July 16— The Federal Reserve Board reported' todky the condition statement of weekly reporting member banks in ninety-four lead-1 ing. cities showed that in the: week ended Wednesday, July 9, there were: ^Decreases of $572,000,OOOin loans adjusted, $238,000,000 in) holdings of United States Government securities, $196,000,000 in reserves with Federal Reserve banks, $240,000,000 in balances With domestic banks, and $1,736,000 in United States Government deposits.</br></br>Commercial and industrial loans decreased a total of $250,-00OS000 at all reporting member] banks; the principal changes were decreases of $197,000,000 in New York City, $47,000,000 in Chicago, and $22,000,000 in the San Francisco district, and increases of $13,000,000 each in the Boston and Kansas City district.</br></br>a. year earlier. ' ... ; -So; far this year, commercial and industrial loans ‘ have decreased by $2,242,000,000, compared to an increase of $907,-; 000,000 in the' corresponding portion-of last year.</br></br>- Loans to brokers, and dealers for purchasing or Carrying Government and other securities decreased $183,000,000 in New York City and a total of; $309,r 000,000 at all reporting member banks.. ‘Other” loans fell by $23,000,000. i Holdings of Treasury bills decreased $201,000,000, of which1 $182,000,000 was in New York</br></br>City. . 'Holdings1 of Treasury notes'increased $28,000,000, and holdings of Government. bonds fellv $48,000,000; ! Holdings of "other” securities rose $70;000,-000.

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Decline Continues In Business Loans: Business Loans and Interest Rates Decline Again. The main banking trends or the new year remained intact this week, the Federal Reserve Bank of New York showed yesterday in its weekly statistics. Business loans declined, interest rates dropped, money-supply growth remained stalled and banks were less cramped for reserves.</br></br>Wednesday, commercial and industrial loans decreased $93-million. It was their fifth drop in a row for a cumulative decline of S2-billion since Jan. 1.</br></br>Nationally, bank loans to business fell $930-millicn in the week ended Jan. 29 to SI 2(5.9-billion. National loan figures lag a week behind regional jdata. Credit market analysts ume of C.D.’s outstanding in aii lane Banks-R 128.595 12a.n the Jan. 29 week fell 5221-mil- Ncw York Banks r r 3-477</br></br>For January the money supply averaged $231.5-biU:on, down from $2S3.5-bi!licn in December. Money has exnanded at an annual rate of only 4 nor cent, the Federal Reserve disclosed yesterday.</br></br>ing week, down from 6.78 per nected to announce a reduct'on Market Committee deckled. In cent a week earlier and some in its prime rate this morning the latest month, M-2 increased six percentage points below the to 9 per cent from 9*4 tier cent, at an annual rate'of 7 per cent, high of 12.66 per cent in mid- Fourteen of the nation’s 20 the Federal Reserve Bank of July last year. largest banks were charging a New York reported yesterday. Most other short-term inter-: 914 per cent prime rate yester- Bank borrowing from the Fed est rates also continued to: day, and five banks (all in k'-ew fell to the lowest level since move downward this week. But j York City) were charging 9 per June, 1972. In the week ended the average rate for 90-day|-'ent on cc-cmte loans. The Wednesdav, such borrowings dealer-placed commercial paperi Morgan Guaranty Trust Com- averaged SR6-mM!inn. Last '-.urn-edged up 5 basis points to 6.60 j nanv on Wednesday lowered its mer they ran as high as $2.P-per cent from 6.55 per cent af- prime rate to 8% percent. bi!l!on, including perhaps S1.6-

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How Not to Handle Prosperity. Get this thing over with, this worst ever of mayoral campaigns. Nothing about it is appealing, least of all the candidates. There is no fun, no excitement, no charm, no charisma and nothing in the way of new ideas. If this were a prizefight the referee jvould stop it amid a cascade of boos. There should be a way to spare the voters this exercise in sustained dreariness.</br></br>The outcome has never been in doubt. A Democratic candidate who has trouble putting away A1 Sharpton is not likely to engineer the ouster of a crime-busting incumbent with a job approval rating of 66 percent. To get a sense of how badly things are going for Ruth Messinger, consider that polls show her getting far fewer white votes than David Dinkins did in each of his two runs for mayor. The smart money has her losing her own borough of Manhattan.</br></br>The most recent poll by the Marist Institute for Public Opinion showed Ms. Messinger trailing Rudolph Giuliani among all voters by 18 percentage points. And even those who support Ms. Messinger do so with less conviction than those who support the Mayor, said Lee Miringoff, director of the institute.</br></br>You might think that Mr. Giuliani would heed the lessons of Politics 101 and try to maximize his considerable advantage by taking the high road. He has nothing to lose and much to gain by acting like a gentleman. But that is not his nature. Ruthlessness is Mr. Giuliani’s dominant characteristic. Winning big is not enough for him; he likes to stomp his opponents. And even when it is in his best interests, he is incapable of keeping his snarling, nasty persona under control for very long.</br></br>That was in response to the Mayor's cheap and wildly inappropriate Columbus Day attack on Ms. Messinger. Apparently unable to prevent himself from playing the worst kind of ethnic politics, Mr. Giuliani assailed Ms. Messinger, who is Jewish, for not attending a Columbus Day Mass at St. Patrick’s Cathedral, and for not marching every step of the Columbus Day parade.

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Those Strange Market Turns: Arbitraging Play Is Cited Those Strange Stock Market Price Fluctuations. This chart shows the difference between the value of the S SP 500 futures contract and the corresponding value of the S.& P. 500 index itself The futures contract price derives from the S.& P 500 index plus a premium. That premium mainly reflects the fact that the future is bought on a small down payment and does not tie up the buyer's capital. This concept of the premium is called the "fair value'' portion of the futures contract. In practice, however, the premium continually fluctuates, and when the actual value exceeds or falls below the "fair value.'' there are arbitrage trading opportunities. Several times during this month, abnormally wide differences between the actual and the "fair value” premium prompted arbitragers to buy or sell stocks and stock index futures. This can cause abrupt price fluctuations in the equity markets, especially on days when stock trading is slow.</br></br>One day early this month in the midst of an otherwise lazy summer afternoon the stock market was grabbed by an undertow that pulled the Dow Jones industrial average down 21.73 points. And last week, stocks bounded up 11 points one day and down 11 on another for no apparent reason.</br></br>The mysterious force behind the moves, it turned out, was a relatively new phenomenon on Wall Street called program trading. The term refers to programs of orders from institutional investors and other professional traders to buy or sell shares in 100 or more large companies that are a surrogate for the broader Standard & Poor’s index of 500 stocks.</br></br>Such programs are often initiated by arbitrage opportunities when the current value of stocks reflected by the S.&P. 500 and the price of a stock index future on that index are out of line. An index future is a contract between two parties that allows an investor to bet on the general direction of the market over a short period of time.</br></br>The abrupt moves set off by the arbitrage play, market professionals say, stem from events unrelated to the prospects for the individual stocks that comprise the Dow industrial average and the S.&P. 500. And they emphasize that the action does not represent an overall shift of investor sentiment since the market straightens itself out when prices become either too bearish or too bullish.

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UNDERWRITERS FORM SINGLE GROUP TO BID ON STATE BOND ISSUE: Investment Bankers Undecided on Possible Impact of Lawsuit and $1 Billion Budget Deficit UNDERWRITERS FORM GROUP ON STATE BOND. Investment bankers, pondering Governor Carey’s disclosure of a $1 billion budget deficit and informed of a lawsuit against the state by Leon E. Wein, a Brooklyn law professor, have combined to form one bidding group to seek the $91.9 million of New York State bonds 1 that are scheduled for sale today.</br></br>The men who will bid for the bonds were divided in their opinions about what the impact of these two developments would be on the state's bond sale, the third public offering of its bonds this year.</br></br>According to some underwriters analyzing the prospective sale early yesterday, the state’s deficit and the new lawsuit would increase the interest rate for the state by an estimated 20/100ths of a percentage point, or $2.5 million over the period of time that the bonds will be outstanding.</br></br>Other leading underwriters, after meeting yesterday afternoon, asserted that the sale would not be hurt by the Wein suit or by Mr. Carey’s budget announcement.</br></br>New York State on July 21 sold $45 million of bonds at an interest cost of 7.53 percent, and since then, the tax-exempt bond market has made a pronounced move toward lower interest rates, reducing rates generally by three-quarters of 1 percentage point.

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Sidelights: A Mild Word of Caution. With the. stock market vigor-, oug and Ute economists generally 'optimistic, an occasional voice of. pessimism or caution can barely be ..heard.</br></br>Yesterday, Lionel D. Kdie & Co„ investment counselors'and economic consultants, had a few reservations about the upturn. Based on a private survey, it lias concluded .that the decline in capital expenditures by corporations is Indeed over, But it is not so hopeful about a speedy upturn in this activity.</br></br>The Edle group estimates that "for all practical purposes" capital expenditures will be about the same in 1959 as in 1958, or at a rate of $30,100,-000,000 a year. It also expects the preliminary Government figure of capital expenditures in the fourth quarter at the rate of 31 billion a year,"is likely" to be revised downward, In 1957 the rate was $36,900,000,000.</br></br>Next Monday will be observed as a holiday in lieu of Columbus Day by banks, That means no quotations on foreign exchange or on., Government bonds will be available, However, the nation's major stock trading centers will remain open, including The New York Stock Exchange, The American Stock Exchange and The Midwest Stock Exchange. So will the Chicago Board of Trade.</br></br>Many of the commodity exchanges will be closed, including the New York Qotton Exchange and its Wool 'Associates, the Commodity Exchange (rubber,' hide, copper, lead, tin, zinc and burlap) the New York Cocoa Exchange and the New York Coffee and Sugar Exchange. The New York Mercantile Exchange (potato'futures) and the New York Produce Exchange (cotton and soybean oils) will remain open, In Canada, stock and commodity exchanges will be closed in honor of Canada's Thanksgiving Day, Markets in Europe will operate as usual,

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Exit Strategies: The Rich Are Different. They Know When to Leave. Workers invest alongside bosses. The risks they face aren't equal. The Rich Know When to Leave. BUSINESS booms are famous for hiding underlying problems in an economy. It takes a recession to make them obvious. Now, like melting snow, this recession Is uncovering a glaring inequality in the system the United States has gradually adopted over the lost 20 years to prepare its workers for retirement.</br></br>The Enron Corporation is the showcase. Its top executives are walking away with money In their pockets for their own retirement, while their employees have watched their pension savings disappear because Enron's stock price plunged.</br></br>But Enron is not the only place where inequality exists. With much less ranfare — and in the absence of corporate misbehavior — top executives at other big companies have been similarly insulated from the losses that recession and reversal are imposing on their workers.</br></br>In the 1980's and 90's, millions of workers were persuaded that when they invested in stock plans for their retirement, they were gaining access to the same rising market that has traditionally benefited the wealthy. It seemed a way to make access to retirement security more equitable. But when prices fell, lower-income people began suffering in ways that higher-income people have not, because top executives have better information, more diversified ways to save and, above all, company-funded pension plans that are less and less available to ordinary workers.</br></br>In other words, workers gained an ability to profit from a stock market boom alongside the wealthy, but not an equivalent ability to withstand a downturn. “What we are seeing is a retirement safety net for top executives, whereas ordinary workers, in the name of freedom to manage their own investments, are left without a safety net,” said Michael Sandel, a Harvard political scientist. “Worse than paradoxical, is there not something unfair in such a system?”

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RATES INDECISIVE IN CREDIT MARKETS: But Slight Rise in Demaned Is Noted for Some Issues. . Interest rates moved indecisively yesterday as the credit markets remained in their basically trendless pattern of recent weeks. Nothing in the news or technical situation was “I think you’ll see only more jockeying around between now and the time Nixon gets back from Russia,” one analyst 'declared, adding that a climb in rates over the balance of the year seemed likely.</br></br>•A number of financings went through various underwriting processes yesterday'"and a .. major new offering was an* nounced by . the Caterpillar Tractor Company.</br></br>The Gulf Power' Company auctioned $22-miilion of double-A bonds to an Equitable Securities, Morton team that put a return of 7.50 on the securities and reported them 85-95 per cent placed by the end of the day.</br></br>The successful bid was 99.-416 for a 7J/2 per cent coupon rate; competition was keen, with four other bidders reported within $2 per bond of the winners.</br></br>It appeared that Wall Street ' became convinced that institutional investors, laden with funds to invest, could not be lured below the 7(4 per Cent level for double-A paper.

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Treasury Prices Take Fall; Trading Is Reported Quiet. I Treasury prices ended sharply lower in quiet trading yesterday, dragged down by a growing view] that the Federal Reserve will not cut j short-term interest rates again this' summer. j</br></br>The market has been re-evaluating the prospects for a rate cut since! a report on Friday showed surprising strength in retail sales for June. A separate report that day showed a gain in industrial production in June for the first time this year. Treasuryl prices fell on Friday. And a report yesterday on business inventories suggested that businesses might be preparing to step up production.</br></br>The decline yesterday was "a continuation of Friday’s downward imove,” said Michael McGlone, a bond futures trader at Aubrey G.</br></br>‘Estimated dally average, source Telerate "Municipal Bond Index, The Bond Buyer Salomon Brothers and Telerale lor Treasury's bellwether bonds, notes and bills iLanston & Company in New York. l”The numbers on Friday basically knocked the whole idea of economic weakness and further Fed easings out.”</br></br>A sharp rise in commodity prices, reviving fears of inflation picking up, also weighed on bonds yesterday. Inflation erodes the value of fixed-income investments like bonds. Yesterday, the Commodity Research Bureau's index of 21 commodities jumped 2.5 points, to 233.98, led by sharp gains in grain prices.

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Market Place: Selling Waves: What They Do. WHEN the stock market moves downward, the influence of moderate, but sustained, selling on a particular stock can be extraordinary.</br></br>For example, Howard Johnson, the restaurant chain, tumbled 30 per cent — from 51% to 36—on trading of only</br></br>Capital Gains Research Bureau, Inc., of Larchmont, N. Y., picked the example while noting 163 other companies in which mutual funds were major holders. The bureau finds that 11 funds owned 836,520 Howard Johnson shares as of latest reports, that some had substantial profits in the stock and that the funds “stopped buying” the stock a long time ago.</br></br>Capital Gains suggests that when mutual funds are substantial owners of a stock, the shares may be especially vulnerable if the "big fellows" decide to “lighten up."</br></br>Here is a list of stocks in which funds hold more than 20 per cent of the shares outstanding, gleaned from Capital Gains' 164 stocks in which mutual-fund interest was 10 per cent or more: •The list excludes mutual-fund holdings of airlines stocks—they are extensive— because thosa holdings ware detailed hert recently.

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Washington: The Art of Balancing the Boom.. WASHINGTON, June 3—The day after William McChesney Martin, Chairman of the Federal Reserve Board, said in New York this week that he saw a series of “disquieting similarities between our present prosperity and the fabulous twenties," he had lunch with Secretary of the Treasury Fowler and Secretary of Commerce Connor at the Treasury Department.</br></br>“It was a most agreeable lunch," Mr. Fowler said today. “Connor and I approved of what Martin said in New York and there is absolutely no quarrel between the Treasury and the 'Fed’ on the need to keep Martin’s words of caution before the country.”</br></br>Secretary Fowler’s view is that the sudden break in the stock market after Martin’s speech to the Alumni Federation of Columbia University was apparently based on the false assumption that interest rates were about to be raised.</br></br>Secretary Fowler’s concern is that the expansion of the nation's economy should remain balanced; that it should, as he expressed it, “neither run out of gas nor run out of control.” essential, in the Secretary of the Treasury’s view. .First that Gardner Ackley, Chairman of the Council of Economic Advisers, and others continue stressing the need for policies that will keep the economy expanding, and second, that Martin-and others keep warning against the dangers of inflation and other excesses that would lead to recession.</br></br>1. Those who see some improvement in some sectors of the balance of payments picture, and who .therefore would like to abandon-ithe measures taken in the past to strengthen the nation’s balance of payments account. 2. Those who think that all we have to do to solve the balance of payments problem is to raise interest rates.

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Economic Slowdown Catches Up With Nascar. umpiy seats were common last month at the Brickyard '100 in Indianapolis, where attendance was about half that of 2007.</br></br>After years of jam-packed races, sky-high television ratings and record merchandise sales, Nascar has seen attendance at nearly every track slip this year as recession-weary fans continue to cut costs.</br></br>The Behler family could see that firsthand while sitting atop their old school bus in the infield at Pocono Raceway for last week’s race in Long Pond, Pa. From that perch, they saw empty patches of grass with untrampled dandelions that in years past were covered by other spectators' cars, campers and trailers.</br></br>“Everybody’s still coming, but no one’s spending," said Susan Behler, who arrived last Sunday, race day, instead of Friday night to save money. “Three years ago, 1 used to spend $200 or $300 every time I came here. Now, It's a question: do I need it?”</br></br>Other sports leagues have been hurt the past two years. But Nascar — with its heavier reliance on working-class fans, low fuel prices and the beleaguered auto industry — has suffered disproportionately, racing industry executives say. Ratings on television, sales of licensed goods and sponsorships, the lifeblood of the sport, are also suffering, Several racing teams have merged in the last three years.

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CHANGES NARROW IN STOCK TRADING: Impact of East Coast Dock Strike and New Smoking Report Are Factors VOLUME IS 5.44 MILLION Key Averages Reflect the Mixed Market Tone -- R.C.A. Most Active CHANGES NARROW IN STOCK TRADING. The stock market marked time again yesterday as traders pondered the impact of an East Coast dock strike and a new report on health and smoking.</br></br>Volume was heavy at 5.44 [million shares, as an unusally I large number of block trades crossed the tape. Friday’s volume was 5.34 million shares.</br></br>The list was thoroughly mixed, with 109 more gains than losses. Meanwhile, leading averages differed on the result.</br></br>The Dow-Jones industrials, up 0.62, at 883.22, reflected a general market of narrow changes las only two Dow-Jones issues showed moves of a point or 'more—one up, one down. Ironically, American Tobacco was the Dow-Jones stock to advance, up 1%, to 34. Du Pont was off 2%, at 215, on profit taking.</br></br>Tobaccos dipped in early trading after a new report on smoking suggested that last year’s surgeon general’s report linking cigarettes and cancer had cut cigarette sales. However, brokers noted that the surgeon I general in issuing the new report had acknowledged that his j I figures did not jibe with trends indicated by tobacco warehouse : shipments and tax returns.

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Incomes Rise 0.4%, but Spending Is Weak. WASHINGTON, Sept. 27 (AP) — Incomes grew four-iemhs of 1 percent in August, but consumers increased their spending by only one-lemh of 1 percent, the Government said today in a report showing that consumers are not providing their usual lift to the economic recovery.</br></br>During past downturns, consumers used their economic muscle to bring the economy out of recession. Their spending represents two-thirds of the nation's economic activity.</br></br>"Obviously, consumers are not leading the way out of the recession,” said Lawrence A. Hunter, an economist at the United States Chamber of Commerce.</br></br>Sung Won Sohn, an economist with the Norwest Corporation of Minneapolis, said: "It’s going to be a while before we see consumer spending perk up. The fundamentals are not there: jobs, income growth and rising confidence." ported that incomes totaled $4.82 trillion at a seasonally adjusted annual rate in August, up from $4.80 trillion a month earlier. It was the sixth straight advance; an initial decline of one-tenth of 1 percent reported for July was revised in today's report to a gain of two-tenths.</br></br>Disposable income — income after taxes — rose five-tenths of 1 percent in July, after remaining unchanged a month earlier.

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Do New York City Employees Merit More?: Background They Are Overpaid They Are Losing Ground Outlook. Are i^'ew York City’s employees overpaid, or are they already behind other workers and losing ground to inflation every day?</br></br>The labor unions, naturally, take the latter view as the bus and subway workers did Thursday when they warned the Transit Authority that they want 15 percent-plus in pay raises in their new contract. Critics of the city— here, in Albany, in Washington and around the country—hold the opposing belief.</br></br>In most labor negotiations, the ques tion of whether workers are overpaid or underpaid is a propaganda device that has little real effect at the bargaining table. Workers generally win wage and benefit gains because they have the economic or political muscle to get them.</br></br>But in the transit negotiations and in the coming talks with the city unions the issue becomes important precisely because New York must go to those critics in Albany, Washington and around the nation to ask for money.</br></br>The same day the transit talks began, the Senate Banking Committee, headed by Senator William Proxmire, a critic of the city’s pay and benefit levels, rejected the idea of more loans to New

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Factory Orders Down 2.3%: Sales of Homes Also Declined In April Factory Orders Decline. 2.3 percent in April from March, the Government reported today, in what private and Government analysts saw as a clear reflection of the continuing recession.</br></br>The Commerce Department, which announced the figures, also reported that the sales rate for new singlefamily houses dropped 15.3 percent in April, to the lowest level in the 19 years that the Government has been keeping such figures. [Page D15.] “The manufacturing sector of the economy remained in recession during April,” said Commerce Secretary Malcolm Baldrige.</br></br>The problem, as it has been for months, was the stifling effect of high interest rates on economic activity, economists agreed.</br></br>The Commerce Secretary said that the figures on new orders “reflect the ongoing pressure of high interest rates and stress the importance of Congressional action on the budget.” But, he added, “The dramatic drop in inflation has laid the groundwork for a solid business recovery if interest rates come down. ”</br></br>David Ernst, vice president of Evans Economics in Washington, said, “We don’t think we’re in this recession for good.” But he said that he saw little encouragement for substantially better times soon. “Our outlook is for ‘recovery’ — in quotes — to begin in the fourth quarter of this year, but not to be a real booming recovery,” he added.

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BIG BOARD KEEPS ITS LOSING WAYS: After Mustering a Small Rally, the Market Closes With a Modest Decline DOW AVERAGE OFF 1.42 Large Blocks Are Dumped -- T.W.A. Is Down 4 and Heads Active List BIG BOARD KEEPS ITS LOSING WAYS. The stock market mustered a small rally in early trading yesterday, then slipped back into its losing ways and closed with a modest decline.</br></br>The Dow-Jones industrial average held to a thin one-point rise in the first two hours of the session. It moved into the minus column during the noon hour and finished the day at a new 1969 low of 826.53, off 1.42 points.</br></br>9.75 million shares from 11.68 million shares on Wednesday as the successful return of the ■Apollo 11 moon crew attracted the attention of investors.</br></br>Thursday/ July 24; 1969 N.Y. Times Railroads ....119,14 + 0.47 N.Y. Times Industrials ..835.30 — 0.68 N.Y. Times Combined ..477.22 — 0.10 ket, some big traders dumped a series of large blocks. The biggest of the Tot was a 339,700-share block of Trans World Airlines that crossed the tape at 21 for a thumping 5-point loss from Wednesday’s close.</br></br>After the close on Wednesday, T.W.A. reported a 55 per cent drop in net income in the June quarter, and failed to declare its usual quarterly dividend of 25 cents a share.

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PRICES OF STOCKS LOSE SOME GROUND: Day's Changes Largely Minor as Selling Continues, Index Dipping 0.12 Point NEWS DEVELOPMENTS FEW But Dividend Announcements, Failure of Lewis to Clear Up Coal Picture Are Felt. A middle-of-the-road'course was pursued yesterday by the stock market in trading- on the New r>rk Stock Exchange, although the selling continued heavy and on j balance the list lost ground. Crosscurrents ruled through the afternoon after a shaky morning with the composite rate reduced 0 12 point on the day. There were few price changes in excess of a point.</br></br>The news of interest to the market was generally supplied by corporate developments, primarily dividend news, and the only concern felt about the labor situation was linked to John L. Lewis who again failed to show up for a meeting with the United Mine Workers’ policy committee, thus further clouding the possibility of an ex- res! of Pin S the market drifted th« rest of the morning. Sales to midday were 500,000 shares. Mixed changes occurred in the early afternoon, when some of the rails and</br></br>ChpltCtedJiSl °f industrials firmed. Chesapeake & Ohio weakened when the directors announced a deferment of dividend action and in ex-planation of a new policy said that the dividends already paid this year were more than, the road would earn in 1949. Chrysler a£d American Telephone stiffened in the final hour but cross-currents were dominant.</br></br>f c?Tle.r’ with a rise a point to 61, featured the automotive section, while General Motors fell % point to 65%. Narrow price move-£e.n‘s Prevailed in the steels where Bethlehem made a slight advance and United States Steel, Republic and Youngstown showed minor losses.</br></br>Allied Chemical & Dye fell 4 200 after the announce-™,t ,of.an increased special year-end dividend. Reports of a possible split m this stock were cur-r^nt m financial circles. Eastman advanced about a point and du Pont recovered a fractional loss ead unchanged. Magnavox, I recently under pressure, rallied a J.oint *o 9 /8. U. S. Gypsum, ex-

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Allies on Bush: How Will He Deal With the Deficit and Gorbachev?. LONDON, Nov. 14 — President-elect Bush will find his West European allies uncertain about two things when he begins meeting with them in Washington this week: how he intends to reduce the American budget deficit, and how the alliance should respond to rapid change in the Soviet Union and Eastern Europe.</br></br>Of the two issues, the second poses by far the more difficult challenge, in the view of diplomats and Government officials here and in Washington.</br></br>On the need to reduce the $150 billion budget deficit, Chancellor Helmut Kohl of West Germany, who will see Mr. Bush on Tuesday, and Prime Minister Margaret Thatcher of Britain, who follows on Thursday, both agree — though neither is likely to presume to offer Mr. Bush a prescription for doing it.</br></br>Their advisers and diplomats say they will try to persuade him that the European Community’s moves to eliminate internal trade and tariff barriers by the end of 1992 do not constitute a threat to the United States. Both will encourage him to fight protectionist pressures from Congress to reduce the trade deficit by raising American tariffs on imported goods.</br></br>This much the allies are agreed on. Where they do not agree is on questions like these: Is the threat from the Soviet Union so much reduced that NATO can forgo modernizing some weapons sys- terns, or relax its curbs against exporting Western technology to Moscow? Do Mr. Gorbachev’s policies mean greater stability in Eastern Europe, or greater instability, and how should NATO prepare in either case? And how can Europe count on the United States for its defense if Washington lowers the budget deficit — and military spending ■ at the same time?

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Economist Sights End of Decline In Bond Yields Before Labor Day: UPTURN SIGHTED FOR BOND YIELDS. SEATTLE, May 9—A former Federal Reserve Bank economist predicted here today that the present declining trend in bond yields would end before Labor Day. Dr. John</br></br>K. Langum, who addressed' the annual conference of the National Association of Mutual Savings Banks, added that he would not be surprised to see an increase in the prime rate come “sometime after Labor Day.” The prime rate is the basic interest rate that big banks charge big corporate borrowers.</br></br>He said that these two developments would be in line with a general pattern of rising interest rates, which he expected would develop before the end of 1962.</br></br>He said that a further rise in I business activity later this year would put upward pressure on present interest rate levels.</br></br>Dr. Langum is president of Business Economics, Inc., of Chicago. Formerly he was an economist with the Federal Reserve Bank of Chicago.

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New Weakness Seen In New Jersey Jobs: NEW JERSEY Jobless Rate Still Exceeds U.S. Average. New Jersey lost a significant number of jobs last month as the state’s unemployment rate remained above the national average/ suggesting continued sluggishness in the economy, according to new data.</br></br>Using a new method to estimate unemployment, New Jersey’s joblessness rate was 6.5 percent in January. Officials revised the December rate downward, easing concern that a spike in unemployment had signaled a sudden downturn.</br></br>TRENTON, Feb. 23 — New Jersey lost thousands of jobs last month as the state’s unemployment rate remained' above the national average, suggesting continued sluggishness in the local economy, according to data released by state and Federal officials today.</br></br>Using a new method to estimate unemployment figures, officials calculated New Jersey’s jobless rate at 6.5 percent in January. They revised the December rate to 6.6 percent, from 7.3 percent, easing concern among some economists that an apparent spike in December unemployment figures had signaled the beginning of a sudden downturn in the state economy.</br></br>Economists and analysts said that the latest employment data showed that New Jersey could expect slower job growth this year as corporate layoffs continue. For example, the impact of the decision by AT&T, the state’s largest employer, to eliminate 7,000 jobs this year has yet to ripple through the state’s economy.

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Senate Banking Group Bids Fed Ease Monetary Conditions Slightly. WASHINGTON, Dec. 23—The Senate Banking Committee, in a cautiously worded report, urged today that the Federal Reserve Board make a slight shift toward easing monetary conditions and also raise slightly its targets for growth of the monev suddIv in the vear ahead.</br></br>The report said that such a shift would not be inflationary in the current condition of the economy and might help spur the pace of expansion of the economy.</br></br>“There is no question," the report said, “that a too rapid rate of growth in the monetary aggregates would assuredly regenerate inflation in the not-so-distant future. However, the committee is not convinced that the board cannot pursue a slightly more accommodative policy in the next 12 months.”</br></br>The chairman of the committee. Senator William Proxmire, Democrat of Wisconsin, said in a separate statement: “I am hopeful the Federal Reserve Board will heed our advice. We need more vigorous monetary policy to help turn the economy around and put unemployed people back to work. If we don’t succeed in stimulating the economy through monetary policy and a tax cut, the Congress will be under enormous pressure to fill the gap through massive spending programs.”</br></br>The Federal Reserve's Open Market Committee will update its targets for money supply growth at its meeting in mid-January in preparation for testimony by Arthur F. Bums, the Reserve Board's chairman, before the House Banking Committee in late January or early Febru-

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Bond Yields Continue To Climb: Federal Funds Rate Up Bond Yields Move Up In Light Trading Activity New Issues Down. The unequaled break of the credit markets showed no sign of stopping yesterday as bond prices continued to plummet and interest rates again climbed to their highest levels on record.</br></br>Traders in Treasury notes predicted that two-year securities to be sold today would yield more than 14 percent.</br></br>The severe setback was caused by no new developments, and it occurred on relatively light trading activity. It produced interest rates that traders found difficult to believe, but they reported no significant signs that the slide might have reached bottom. Neither Congressional testimony by the chairman of the Federal Reserve Board nor news of lower housing starts appeared to affect the fixed-income market.</br></br>"This wfs the worst," one head trader for a Government securities firm said. "There's Just no market. It was an unbelievable rout.” A municipal bond dealer described the market as a "vacuum.”</br></br>The stock market also continued to drop, pushing the Dow Jones Industrial average downward for the third straight trading day for a cumulative loss since its close last Wednesday of almost 27 points, It ended at 870.02.

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TREASURY BILLS FALL BELOW 5%: But Rates Recover as Fed Steps in Traders Still Expect a Downtrend TREASURY BILLS FALL BELOW 5%. Three-month Treasury bill rates dipped below 5 percent yesterday morning for the first time since last June, and then the Federal Reserve sold some of these short-term Government securities and rates: moved back up ai little. The reserve-absorbing action by the Federal Reserve came as Federal funds traded at 4 ~/s percent. raising the possibility that the central bank had completed its latest step toward greater monetary ease.</br></br>The Government bond market slipped a little in the afternoon and most corporate bond prices declined for the second day.</br></br>Despite the Treasury’s bill sales, the first in months, andj the sprinkling of declines inj the bond market, the credit markets seemed to remain con-1 vinced that interest rates were still headed lower. In late after- j noon, the Federal Reserve reported a $2 billion increase in the money supply and a decline in loans, and fixed-income security prices inched higher after the central bank’s figures were released.</br></br>In addition, new bond issues continued to be increased in size and brought to market sooner than expected. A S25 million issue of ITT Financial Corporation notes, for example, was enlarged to S30 million, and the Asian Development Bank’s $100 million of notes, originally scheduled for sale next Wednesday, will be sold today instead.</br></br>The ITT Financial notes, which come due Dec. 1, 1985, carry an 11 \\ percent interest rate and a price of 100 percent of face value. They are rated Baa by Moody’s and Bb by Standard & Poor’s.

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Reports on Business Conditions Throughout the U.S.: New York Chicago San Francisco Philadelphia Boston Cleveland Dallas Minneapolis Richmond Atlanta. The Federal Reserve Board’s index of department store sales eased to 112 per cent in the week from 116 per cent a year ago. The index reached 122 per cent in the preceding week. Average sales in the 1957-59 period represent the base of 100.</br></br>Remnants of Indian Summer in some sectors were held accountable for the decline. Coats and suits, children’s and junior wear and women’s shoes did poorly.</br></br>history of the local weather bureau office, which was opened in 1913. Texas’s Agriculture Commissioner, John White, estimates drought damage at $200,-000,000 to $300,000,000. Parched rangelands will not support cattle as they normally do and ranchers are being forced to buy supplemental feed or reduce herds. Although the dry weather is helping farmers in the south plains to harvest late cotton crops, winter grain in many areas is being planted in dust with the hope of rain in time to germinate the seed.</br></br>The heat wave that had ensnared New York City recently ended last week, but the cooler temperatures were too temperate and too late to salvage the week for merchants.</br></br>Consequently, volume declined from the corresponding 1962 level for the third consecutive week. Retailers estimated their volume at 2 to 5 per cent below that of last year.

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Major Indexes Close Lower After Fed Chief's Testimony. Stocks ended lower yesterday as Wall Street gave a bearish reading to comments from the Federal Reserve chairman, Alan Greenspan, about the economy and the stock market.</br></br>The Dow Jones industrial average fell 33.56 points, or three-tenths of a percent, to 10,969.22, while the Nasdaq composite index slumped 77.33 points, or 2.8 percent, to 2,684.44. The Standard & Poor’s 500-stock index declined 18.32 points, or 1.33 percent, to 1,360.97.</br></br>In his twice-yearly testimony to Congress, Mr. Greenspan said the surge in stock prices could be overdone.</br></br>“We do know that a significant part of the rise in prices reflects rising expected earnings and a goodly part of that is a very major change in the view of where productivity is going,” Mr. Greenspan said.</br></br>“What we do not know is whether it is being overdone, or to what extent it is being overdone,” he said.

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Slump Forcing Up Albany's Aid to Poor. ALBANY, Jan. 27 — In blaming New York’s fiscal slide on the national re- I cession. Gov. Mario M. Cuomo has been highlighting the corrosive effect of hard times on state revenues. But the recession is also applying great pressure to the spending side of the state budget by increasing the mandated costs of caring for the poor.</br></br>After several years of steady decline, the state’s caseloads of public welfare and Medicaid recipients started to rise steeply in late 1989, and the growth is projected to continue unabated through this year. State budget officials expect the welfare rolls, which averaged 1.28 million people in 1990, to grow by nearly 100,000 people.</br></br>Welfare and Medicaid are programs any state resident is entitled to join if he or she is poor enough. The state is required to cover much of their costs, along with the Federal and local governments. And as the economy worsens, more people qualify and the costs rise. At the current rate, the costs would rise by hundreds of millions of dollars, although plans abound in Albany for ways of cutting them back.</br></br>“You have a fabric of social programs that are means tested, and they all closely reflect what’s going on in the economy,” said Russell Sykes, a policy analyst for the State Communities Aid Association, a nonprofit group that lobbies for social service programs.</br></br>Officials in the Cuomo administration said the Governor’s 1991-92 budget, which will be released on Thursday, would include growth of about $600 million for Medicaid, a 15 percent increase, and about $130 million in welfare costs, a 12 percent increase.

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Unemployment Insurance Aiding Fewer Workers: Unemployment Insurance Aiding Fewer. WASHINGTON, Dec. 1 — The unemployment insurance system, the main Government program meant to ease the pain of recession, is much less effective than it used to be, largely because the Federal Government and the states have let it wither rather than raise taxes to sustain it.</br></br>As a consequence, barely one-third of the jobless are now receiving unemployment checks. Experts say that proportion will not rise much even if the country enters a severe and prolonged recession, a prospect many economists</br></br>At the depth of the recession in 1975, more than three-quarters of the people out of work received unemployment benefits from the Government. In the last recession in 1982, about half got benefits.</br></br>“When this recession hits,” said Representative Thomas J. Downey, “unemployment insurance is not going to be the effective tool it could and should be. A lot of innocent people are going to be hurt because of our inaction.” Mr. Downey, a Democrat from</br></br>Long Island, is acting chairman of the House Ways and Means Committee’s Human Resources Subcommittee, which has jurisdiction over unemployment compensation.

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CREDIT MARKETS Short-Term Rates May Drop Further: Seasonal Bank Factors Cited Tight Money Is Urged. Short-term interest rates may decline early next year for seasonal reasons, many analysts say, but beyond then, their forecasts are more uncertain. More accurate forecasts will not be forthcoming until more is known about the condition of the economy and the outcome of this week’s meeting of monetary policy makers at the Federal Reserve, according to analysts.</br></br>"It is hard to imagine a more difficult set of circumstances” for the Fed, commented Elliott Platt, a money market economist at the Donaldson, Lufkin & Jenrette Securities Corporation. The central bank, he explained, is faced with economic data showing the “recession is far worse than had been anticipated” but is concerned that "too precipitous a decline in Interest rates could generate a more rapid turnaround in the economy” that would disrupt the goal of a sustained drop in inflation and inflationary expectations.</br></br>Mr. Platt concluded that the members of the Federal Reserve Open Market Committee would decide at this week’s meeting not to increase the availability of reserves to the banking system.</br></br>In the Dec. 18 issue of Money Notes, Mr. Platt also explained that shortterm rates might drop below 12 percent in January, but the decline need not be a sign that the Federal Reserve has decided to make credit even more available in the banking system. The decline in short-term rates would result from a seasonal repayment of bank loans and inflow of currency to the banking system, he said.</br></br>Henry Kaufman, chief economist at Salomon Brothers, said in the most recent issue of Comments on Credit that "the economic backdrop should continue to favor a policy of monetary accommodation.” He added that further increases in the unemployment rate may provide the Fed with the opportunity to cut the discount rate from the current 12 percent level. The discount rate is the interest rate the Fed charges on loans to member banks.

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There's Nothing to Fear From Mondale. More than 150 points higher! Dreyfus Liquid Assets yields are higher than the average yields of bank money market accounts. Just one extra bank charge can make the Dreyfus advantage even greater!</br></br>Unlimited free checks ($500 minimum). Start with just $2,500. For today’s high yield, a Prospectus and information, including management fee charges and expenses, call toll free 24 horns a day, 7 days a week or write to the address below. Read material carefully before you invest.</br></br>‘For the week ending 10/3/84, Dreyfus effective (compounded) annualized rate of 11.36% based on daily compounding of the average daily dividend of 10.77%. Banks effective 0231.13 annualized rate of 9.77% based on daily stated interest rate of 9-35%- is currently yielding 7.76% tax-free. That is equivalent to a taxable yield of 15.52% if you're in the 50% bracket, 12.93% if ou're in the 40% bracket, and 11.58% if you're in the 33% racket. Quality is a top priority in this Fund, too. Before purchase, each municipal bond must pass our stringent credit analysis. We also offer you daily liquidity, free checkwriting, free exchange among our no-load funds, and a low minimum investment of $1,000. Call toll free: 1-800-638-5660.</br></br>‘Average annualized yield for the seven days ending 10/16/84, based on an average once per share of $8.27 Average maturity dunng this period was 7.5 years. Yield should be considered together with changes m share price—both will fluctuate as market conditions change Income may be subject to state and local taxes T. Rowe Pnce Investment Services. Inc . Distnbutor</br></br>Please send me a free information kit on your Tax-Free Income Fund, with a prospectus and more complete information, including management fee and other charges and expenses.

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Art Dealers Cite Softened Market, but Find No Cause for Alarm: Art Dealers Say Market Softens a Bit. Slump, recession, plummet, drop and doomsday are words often heard or heard too often to characterize not only the economy, but also virtually every other thing today. But these words are too extreme in their meaning to be applied to what happened in the art market last year and what will happen this year, according to experts.</br></br>Although dealers and auction - house representatives agree that the market has softened since 1973, they contend there is no cause for alarm. While stocks, bonds, commodities and other items have dropped dramatically in value, the art market has valiantly held its own and will continue to do so, they say.</br></br>“Art is one of the least-vulnerable markets," says Tom Norton, an executive vice president of the Sotheby's Parke-Bemet auction house. “It is one of the last to slide and one of the first to bounce back. Yet it is not an isolated bastion. What happens in the rest of the world affects the art market. Last year was not a runaway year like 1973. Prices are stabilizing. The era of mad prices has passed.” surances, figures issued late last month showed that Sotheby’s and Christie’s, another auction house, registered a 25 per cent drop in sales last autumn, compared with the autumn of 1973.</br></br>In Sotheby’s October sale of Impressionist and modern paintings, 30 per cent of the works were bought back by the owners since the prices could not be met. In another sale at Sotheby’s in December many paintings of the same kind failed to sell for the same reason.</br></br>John Marion, president of Sotheby’s, explains that the prices of Impressionist and modem works and Oriental objects were driven up at an astonishing rate since 1972, largely because of heavy Japanese and European buying against a devalued dollar.

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Blumenthal on Jobs, Inflation, Cities: Treasury Secretary Describes Carter Policy Making Treasury Secretary Blumenthal Talks of Jobs, Inflation and Problems of the Cities. WASHINGTON, April 10 — The tape recorders were whirring, the food wax plentiful and the topics ranged from energy to the stock market. The occasion was a two-hour luncheon interview last week with reporters and editors of The New York Times and W. Michael Blumenthal, Secretary of the Treasury.</br></br>He arrived virtually unnoticed — as seems to he the style of the Carter Administration — sipped a Bloody Mary, ate the fish and later, puffed a long cigar. He was expressive, relaxed and moderately responsive.</br></br>He explained, without disclosing the details, how the Administration's April 20 energy message was being developed in a series of meetings involving the President, top Administration economic officials, and James R. Schles-inger, the President’s energy assistant.</br></br>He opposed wage and price controls as an unrealistic weapon against inflation but maintained that the Carter anti-inflation package, due this week, would he effective.</br></br>The 51-year-old Treasury Secretary, whose last job was chairman of the Bendix Corporation in suburban Detroit, expressed hope that businessmen would be comfortable with the Carter Administration, but said that pro-business proposals were being made because they were “sensible’’ and not because anyone wanted “particularly to he nice to business."

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Consumer Spending: Is the Upsurge Solid?: Economic Recovery May Be At Stake. That’s good news for Administration officials, who in this election year had proudly pointed to the strong pace of consumer buying—at least until April. At that point, a two-month shopping hiatus ■set in, signaling a depressant on second-quarter gross national product totals. Bu t the resurgence started in June, which will tend to make the quarterly totals more palatable.</br></br>And it’s good news for consumers, because retailers have been urging on the spending with some good old-fashioned price competition—sales and more sales.</br></br>The only question is whether the current buying represents a return of the spending spree that developed strongly last winter and extended through March —or whether it’s simply an aberration after the depressed results of April and May.</br></br>What happened in June was that the nation’s total retail sales showed a 12 percent gain over 1975 levels in each of five consecutive weeks. In the final June week, total sales were $12.57 billion, and department store sales were up 11 percent to $1.2 billion.</br></br>Then, the Commerce Department reported last week, total sales soared 14 percent in the first July reporting week, and department stores sales were up 19 percent.

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Drivers Rediscover An Old, Old Friend. THE masses of America, hit with inflation, gas lines and soaring new-car prices, have searched and found a commuter car they can afford with ease.</br></br>It gets 26 to 32 miles to the gallon, has a 6,000-mile or six-month guarantee on the engine, is simple to repair, and runs and runs and runs as though it never wants to quit. Purchase price is a mere $2,000 or less.</br></br>No, you can't order a new one any-.more. You have to go to a junkyard or behind somebody’s house or to a used car lot to get one now. And thousands of Americans faced with the need to get from point A to point B in a wheeled vehicle have discovered that, yea, indeed, the Volkswagen Beetle is not dead after all. It only needed repair.</br></br>The rush is on to retrieve stricken Beetles — to drag them out of the grave and to have a rebuilt engine thrown in, the transmission overhauled, new paint put on, and fresh tires and brakes and balljoints installed.</br></br>These buyers don’t want to deal with new cars and a lot of expensive gasoline, and the logic of excavating the discontinued Beetle is simple — for an investment of $100 to $2,000, they can have a car that will run another 100,000 or 200,000 miles. Or maybe forever, depending on how many rebuilt blocks are put in.

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In the Great Job Desert, Some Hidden Oases: Down but Not Out. THE news on the job front has not been good Employers have cut hundreds of thousands ot positions this year in response to the weakening economy, especially after Sept 11, and there arc more reports of corporate retrenchment almost every day The unemployment rate has risen to 5 4 percent, near a five-year high, and is poised to grow</br></br>But that does not mean jobs are impossible to find, you just have to know where to look Several industries seem immune to the current economic downturn, including health care and pharmaceuticals, education, mortgage banking and security. Many employers in those sectors are regularly adding to their work force, economists say Novartis Pharmaceuticals, which hired only about 100 people during all of 1998, is now hiring, on average, that many people each month, said Daniel S Bortfeld, the director of staffing Northrop Grumman Information Technology has 800 vacancies for a variety of positions, said Jeffrey S Shuman, vice president for human resources and administration And Countrywide Home Loans says it has more than 2,100 openings, from entry-level jobs in call centers to computer programmers and managers “Anytime wc hear about a group laying off, we tiy to make contact with that company’s human resources department,” said Lcora Gorcn, managing director for human resources at Countrywide Of course, the rate of job growth has been slowing for some time And figures released last week show that the job gains have turned into actual declines About 378,000 jobs were lost in the 12 months ended in October, according to the Bureau of Labor Statistics In contrast, about 2 3 million jobs were created in the previous 12 months College students are also feeling the effects of the slowdown Companies and organizations say they still plan to recruit on campuses, but less than they did a year ago Over all. employers say they expect to hire about 20 percent fewer new graduates in the 2001-02 school year than in the previous one, according to a recent survey by the National Association of Colleges and Employers One exception is government and nonprofit organizations, which expect to increase their recruiting by 21 percent, the survey said Many recent layoffs have been concentrated in manufacturing and temporary services — about 1 6 million jobs were lost in the 12 months ending in October, according to the Bureau of Labor Statistics But other industries have also been shedding workers, especially after the terrorist attacks on Sept. 11. The airlines alone have announced plans to eliminate more than 100,000 jobs “We’re at a cyclical turning point right now,” said Stephen S Roach, chief economist at Morgan Stanley He predicted that the unemployment rate was “headed for 6 or 7 percent by the time this business cycle runs its course.”</br></br>But economists say cyclical and other factors may work in some companies’ favor Low interest rates, for example, have created a surge in business for mortgage bankers And the job picture for security-related companies and military contractors, of course, has also improved Even before Sept 11, however, security companies were planning to increase their budgets by 5 percent, on average, with much of the new money expected to go toward payrolls, according to Security, a trade magazine The magazine recently polled corporate and government executives and found that nearly dne-quarter or them expected to hire more security workers in the next year. For the long term, economists say techno-</br></br>logical changes and global expansion will play important roles in job creation Another big factor, they say, is demographics, specifically the aging of the baby boomers "The reality is we have an aging population,” said Joel L Naroff, president of Nar-off Economic Advisors, a consulting firm based near Philadelphia that focuses on the economy’s impact on business planning "And there’s no question, as long as you can see out into the future, health care of every form,” whether pharmaceuticals, medical services, clinics or laser eye surgery, “is only at the very beginnings of its boom " Excluding government-run hospitals, the health care industry generated 282,000 jobs in the 12 months ended in October, including 446.000 government jobs — many in education — were added, followed by 142,000 in social services, 67,000 in computer and data</br></br>processing and 61,000 in finance, insurance and real estate Still, there is a lot more competition for those jobs Hot Jobs, for example, has had a sharp increase in visits to its Web site, www hotjobs com — the number almost tripled from June to August John A Challenger, chief executive of Challenger, Gray & Christmas, an outplacement firm based in Chicago, says his company’s pool of candidates has increased nearly 40 percent in the last year But he added that about S5 percent of its clients eventually received better or equivalent jobs The hiring process, though, is taking longer “You can’t walk out the door and find a job in a couple of weeks,” like the frenzy of the summer or fall of 2000, Mr Challenger said “That period is gone ” Dimitri J Boylan, president and chief executive of HotJobs. agreed “The truth is that there are many people who got laid off over the last six to nine months who haven’t gotten new jobs,” he said And many companies, no longer desperate to fill vacancies, may be refraining from dangling huge salaries in front of candidates Ms Goren of Countrywide, which is based in Calabasas, Calif, said that fewer candidates were making big financial demands “People are starting to come back to reality,” she said An exception may be job seekers with special skills m a growth area “There is still a talent war going on for critical information technology skills,” said Mr Shuman at Northrop Grumman Information Technology, based in Herndon, Va But even in such a specialized field, there is plenty of competition; Mr Shuman said his company receives about 18,000 resumes a month, many of them from people seeking information technology jobs Most of the jobs are filled within 45 days, many with former dot-com workers, he said Other openings at the company are in engineering, software development, project management and technical writing, he said The company also receives a high percentage of its work from military contracts, and it exDects an increase in such business in

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BIG RALLY ERASES MONDAY'S LOSSES: Many Leaders of Recent Dip Recover 2 to 6 Points-- Average Gains 5.40 BEST RISE IN 4 MONTHS Early Surge Leaves Ticker Behind, but Day's Volume Ebbs to 2,400,000 Long Decline Recalled BIG RALLY ERASES MONDAY'S LOSSES. Prices swept upward yesterday in the widest stock market gain in four months. They mora than recovered the Monday loss, also the largest in four months. At the close, about one-seventh of the market decline between the historic high of Aug. 9 and the final gong on Monday had been wiped out.</br></br>Gains ranged from 2 to 8 points or more mostly among issues that suffered worst in tha September sell-off. — • Continental Oil was up 8 points, Lukens Steel 4^, Alcoa 4%, United States Steel and Chrysler iy8 each, American Telephone 1%, Ingersoll-Rand . 4, Firestone, selling ex-dividend, 2%, International Paper 3% and du Pont 1^2. Bliss & Laughlin, which announced a stock dividend and hopes for a mgher cash distribution, rose 3%.</br></br>2,600,000 in Monday’s break. Of the 1,145 issues traded, 816 rose, 152 fell and 177' closed unchanged. There were three new 1956 highs and sixty-two new lows.</br></br>The New York Times combined average of fifty stocks gained 5.40 points to 321.60. Tha high for the day was 323.00, compared with a top of 354.18 on Aug. 9. The rail average climbed 2.43 to 99.80 and tha industrials 8.36 to 543.40.</br></br>Brokers were sharply divided as to the meaning of the upturn. Some appeared to think it largely technical, a natural sequence to the crumbling that set in in midsummer. It was only the eleventh gain in the thirty-seven market sessions since Aug. 9, the sixth in the twenty-one sessions since Labor Day. If the market faUs far enough, they said, there are always shorts who want to cover or investors who feel that'bargains are available.

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DEFENSE SUPPLIER RAISES PROFITS 5%: General Dynamics' Gain in First Quarter Made on Sales Rise of 12.9% COMPANIES ISSUE EARNINGS FIGURES. Despite the recession, the General Dynamics Corporation in the first quarter this year increased its sales by 12.9 per cent and earnings by 5 per cent over the corresponding period last year.</br></br>Net income for the March quarter was 59,872,366, after providing for taxes of $10,150,-000. The return is equal to 51.01 each on 9,798,191 capital shares. In the initial quarter a year ago the net income, after $10,062,981 taxes, was $9,399,-611, or $1.05 each on 8,937,595 shares then outstanding. Earnings before taxes were $20,022,-366 and $19,462,592 respectively.</br></br>Net sales of $386,419,273 compared with $342,758,297 a year ago. The backlog of un-j filled orders on March 31, based on firm orders, contracts and letters of intent, was estimated at $1,774,000,000. Contracts under negotiation on that date approximated an additional $590,000,000. The backlog on Dec. 31 was $1,750,000,000.</br></br>The company’s operations include aircraft, submarine, missile, electronic, atomic and related activities through five I divisions.</br></br>Results for both years include those of the Liquid Carbonic Corporation and its subsidiaries merged into General Dynamics on Sept. 30. The report said the larger number of shares outstanding this year reflected the call of the corporation’s debentures in the first quarter.

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Economic Scene: Capital Crunch: Capitol Quandary. BS the credit crunch real? Are banks denying creditworthy businesses the loans they need to invest the economy out of the recession?</br></br>The idea certainly appeals to the White House, which is in hot pursuit of a villain or three to explain why the stalled recovery is not the President’s fault. But many economists remain skeptical. The fall in the volume of bank loans, they point out, could be explained equally well by a recession-induced decline in the demand for credit.</br></br>Or at least it could until now. Minds are bound to be changed by the release of the first serious analysis of the crunch hypothesis, by Ben Bernanke of Princeton University and Cara Lown of the New York Federal Reserve Bank. The study, to be published in the January issue of the Brookings Papers on Economic Activity, confirms that a scarcity of bank capital has indeed affected the supply of loans. But the two economists believe that the full weight has been felt only in the Northeast. And they say the impact on jobs and incomes may be smaller than anecdotes of businesses’ drying up for want of liquidity would suggest.</br></br>Everyone agrees that the banks have been bloodied by losses on business loans in general, and commercial real estate in particular. Everyone agrees that the timing of losses could not have been more awkward, since banks are under orders to beef up their stockholders’ capital to comply with an international agreement signed by regulators in 1988.</br></br>But while the experts also agree that the fall in lending during this recession has been exceptionally severe, most acknowledge that the decline does not amount to proof that financially sound loan applicants have been given the bums’ rush. It is possible that businesses have been inclined to borrow less than usual during this recession because they are carrying smaller inventories — and because many overdosed on debt during the long boom of the 1980’s.

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FEDERAL RESERVE APPROVES A RISE IN DISCOUNT RATE: Half-Point Increase to 5% Ordered by Board Day After Phase 3 Begins EFFECTIVE ON MONDAY Move Underlines Prospects of Anti-Inflation Efforts Lifting Money Costs Rate Is a Follower Effect of Expansion Discount Rate Lifted Half-Point 'Passive Adjustment' Stressed. WASHINGTON, Jan. 12 — The Federal Reserve Board approved today an increase in the discount rate from 41/, per cent to 5 per cent at all 12 Federal Reserve Banks. The new rate takes effect on Monday.</br></br>The board emphasized in a statement that the move was a “passive adjustment to what has already happened to market interest rates” and “it therefore should not be the occasion for a further increase in interest rates.”</br></br>The move camp a day after President Nixon announced Phase 3' of the wage-price control program, in which he re-| laxed the curbs.</br></br>Money market observers had felt for some time that the Federal Reserve should increase the discount rate, which was below other short-term interest rates, but that the decision was being held up for psychological reasons associated with the general anti-inflation program of the Government.</br></br>Rate Is a Follower The discount rate is the interest rate paid by banks that borrow from the Federal Reserve when they are temporarily short of funds. An increase in the discount rate, particularly in recent years, has usually not led to a rise in the rates charged by banks to their individual and business hprrowers. This is likely to be the case this time. Recent Federal Reserve policy has been to let the discount rate follow the market rather than lead it.

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Stock Market's Problem: Not Enough Buyers: Investors Alienated Despite Economyomy. The research department at Bache & Co. felt the stock market was ripe for an upturn a few weeks ago, so Joseph Cucuzza, Bache’s chief technical analyst^ flashed an intermediate-term buy signal over the firm’s wire system.</br></br>As soon as he read the wire, William J. Alpern, a registered representative with a sense of humor in Bache’s Chrysler Building office in New York, called the analyst on the telephone and quipped: “All right, just send me two carloads of intermediate-term buyers.” • Therein lies Wall Street’s chief problem today: not enough buyers. The average investor has been alienated. Despite clear evidence of a strong recovery in the national economy, he’s still not buying stocks.</br></br>The result is another financial squeeze in the securities industry. The profits of most brokerage and investment banking firms are in a downtrend and many firms are understood to have operated with deficits in the first quarter.</br></br>While the situation has not reached crisis proportions, it’s worrying just about everybody in Wall Street. The result is a widespread epidemic of malaise that evokes memories of the bear market of 1969-70.</br></br>Large financial institutions are increasingly dominating the trading in stocks. The little guy, on the other hand, feels he is being squeezed out of the market by institutional swingers and by escalating brokerage charges. So he’s not trading, and his absence has drained the market of the vitality it used to have.

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Hong Kong Flu the Chief Culprit as Holiday Sales Lose Impetus. Unless Christmas business improves tomorrow and on Tuesday, retailers in many areas of the nation will be disappointed with the season’s results. Last week, there appeared to be a lack of animation in the pace of sales, as though there were a deflation in the Christmas spirit.</br></br>Luckily, retailers experienced an early demand for Christmas * merchandise, which started before Thanksgiving, and this will carry them through to figures that arc equal to those of a year ago. But many of the gains projected will not be achieved.</br></br>The chief culprit, according to retailers in New York and elsewhere, was the ubiquitous Hong Kong flu which appeared to keep not only customers from the store, but their personnel as well.</br></br>Many shoppers were disinclined to risk crowds, particularly ip the downtown stores. Suburban stores that could be reached by car ■fared better than the centrally located stores that depend on public transportation.</br></br>There is the possibility, too. that inflationary pressures have caught up with consumers and this could be a factor in the reduction of units sold. The bite of the 10 per cent surtax is undoubtedly being felt.

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HIGHLIGHTS: Some Government Inflation Victories and a Sour Prophecy. The Government escalated its attack on inflation last week, winning headlines and pledges from industry to do its bit. But even those leading the attack do not expect any quick success.</br></br>Barry Bosworth. director of the Council on Wage and Price Stability, made that clear with a prediction that sent the stock market reeling. He said the Consumer Price Index — one of the main measures of inflation — would show-sharp increases for April and May, with the April figure a ‘•disaster" and no major improvement until June.</br></br>The American people seem to share that pessimism. A survey by the University of Michigan showed that more people are buying cars, houses and appliances to beat future price increases than at any time in the last 25 years.</br></br>• The American Telephone and Telegraph Company, in response to Government appeals, vowed it would freeze the prices of its manufactured products and hold pay increases for 430 top executives to less than 5 percent.</br></br>• Mr. Bosworth brought pressure to bear in a labor contract negotiation, assailing the demands of Western paper workers as “outsized and alarming.” • A rule promulgated by the Occupational Safety and Health Administration. designed to cut down the incidence of lung disease from cotton dust in the cotton industry, was expected to be delayed because of its potential inflationary impact.

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YIELDS GO DOWN IN BOND MARKETS: Federal Reserve's Decision Cutting Requirements Sparks the Decline TAX EXEMPTS INVOLVED Prices of Corporate Issues Rise, Then Settle Big Supply Cited Bond Market Yields Dip As Tax Exempts Ease. ' The Federal Reserve’s decision to cut reserve requirements against savings deposits lowered interest rates sharply on short-term funds employed to finance public housing and state projects.</br></br>Corporate bond prices rose briefly, but then settled back ,as traders interpreted the Federal Reserve’s action as something of a move toward monetary ease but one not important enough to take their minds ■off the big supply of new issues for sale over the next few weeks.</br></br>Duke Pwr 8%s00 Bristol My 8%s95 Travelers 8.70s95 Conti Can ,8%s90 Union Pac 8%s85 CaroPBL . 8%s00 Bll T Pa . 8%s06 BklvnUnGs 9%s95 World Bnk 8%s95 Inland St 8%s95 Penney ...8%s95 So Bell . .9.05s03 Del Edls. 9-lSsOO Genl Foods.8%s90 Monsanto .9Vas00 RCA . .. .9%s90 Beth Stl . .9s2000 000 of notes to finance public housing projects at an average interest rate slightly below 4.17 per cent. A month ago, similar notes were sold at an average rate of almost 4.88 per cent.</br></br>Michigan sold $42-miIlion of one-year notes at an average annual interest cost of 4.35 per cent, well below the 4.60 per cent that investment bankers and state officials had expected.</br></br>4.46 per cent an hour before the Michigan note offering and two hours before the Housing Assistance Administration financing. “The market got stronger and stronger each hour,” a tax-exempt note dealer reported, describing the change in short-term rates as “one of the greatest one-day improvements” he had ever seen.

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PORTER GIVES PLAN: It Seeks Cost of Living Cuts to November '47 Level, Other Controls EXCESS PROFITS TAX ASKED Wolcott, Assailing Proposals, Says President Has Powers Now to Check Inflation TRUMAN REQUESTS A PRICE ROLLBACK. WASHINGTON, July 29—President Truman asked Congress today for price rollback authority and other anti-inflation powers, but the proposals ran into such angry criticism as to leave no doubt nearly all were doomed,</br></br>Paul A. Porter testified in the President's behalf before the House Banking and Currency Committee. The former OPA chief asked for selective price controls with supporting wage controls, regulation of installment credit, greater deposit reserves to reduce bank credit, priorities and allocations, tighter rent control and regulation of commodity exchanges. All these were lumped into one bill. An excess profits tax proposal was offered in a separate bill.</br></br>Chairman Jesse P. Wolcott, aftgr hearing Mr. Porter’s statement, seized the initiative and for an hour taxed the witness with ques-| tions that openly charged or clearly implied that the Administration failed to use the anti-inflation authority now available, pursued an “easy money" policy and a lflose or inconsistent policy on export controls.</br></br>i Mr. Wolcott said with some asperity that if the President got together with the Federal Reserve •Board on a.credit control program at least half the problem. would be solved.</br></br>“This Congress,” said the chairman, "would look with favor on a program to help the Federal Reserve curtail the flow of credit.” He insisted that the President could invoke installment credit controls without legislation.

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The Stock Market Is Still Pressing the Reset Button. DEPENDING on whom you ask, the recent stock market sell-off can be attributed either to inflationary fears or to the slowing economy. But some people say it’s also tied to a longer-term problem facing investors: the fact that five years after the stock market bubble burst in 2000, unleashing one of the grisliest bears in history, there are still signs of froth.</br></br>“You might think that with the stock market significantly lower after all this time, investors would be chastened,” said Ben Inker, director of asset allocation at GMO, an investment management firm in Boston.</br></br>But it often takes six or seven years for returns to revert to their historical norms, he said. Despite the recent bear market — from its peak in March 2000 to its trough in October 2002, the Standard & Poor’s 500-stock index lost nearly half its value — blue-chip stocks have still posted average annual gains of 13.2 percent over the last 20 years, according to Ibbotson Associates, the investment consulting firm.</br></br>Given that equities are coming off of one of the biggest bubbles in recent history, it may take much longer this time for stocks to reset to their norms. That may mean a prolonged period of below-average returns.</br></br>Mr. Inker has very low expectations for stocks. Over the next seven years, he predicts, domestic equities will deliver average annual returns of only around 1 percent. Assuming inflation of around 2.5 percent, that means a real return of minus 1.5 percent a year.

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Money Supply Up Sharply: Increase in Week Of $2.7 Billion Was Unexpected Narrower Measure Also Higher Money Supply Up Sharply. The Federal Reserve Board announced a sizable increase in the money supply yesterday, providing what analysts said was even more reason for the Fed to have raised interest rates recently in an effort to slow the expansion of credit and money in the economy.</br></br>In the week ended Sept. 17, m-uj, consisting of currency in circulation plus checking and check-like deposits at banks and savings institutions, expanded by $2.7 billion, to $409.1 billion.</br></br>The increase surprised many analysts, who had expected declines in the latest money supply figures. M-1B had been increasing more rapidly than desired by monetary officials, however. The category has grown at a 17 percent annual rate over the latest quarter, compared with the Fed's 9 percent growth target for the third quarter. Narrower Measure Also Higher</br></br>The Fed also said yesterday that M-1A, a slightly narrower measure of money that consists of currency plus checking accounts at commercial banks, rose $2.5 billion in the week ended Sept. 17, to $386 billion. This category has expanded at a 14.2 percent annual rate over the latest quarter, compared with the Fed's growth target of 6J£ percent.</br></br>The rapid money supply growth has prompted the Fed to tighten its monetary policy recently, money market analysts conclude. The latest sign of that tightening was in the Federal funds market, where banks and others

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New Fear in Silicon Valley: New Fears In Silicon Valley. Joseph Costello, the president of SH>A Systems, at a company meeting. The software company’s public stock offering has been put on hold because of the plunge in the stock market.</br></br>SAN FRANCISCO, Oct. 25 — The stock market plunge has dismayed the nation but it has had a special impact in Silicon Valley and other technology centers — and not only because technology stocks were some of the hardest hit.</br></br>Consider the case of Joseph Costello. After four years of excruciatingly hard work, he was on the brink of becoming a millionaire. His software company, SDA Systems, was about to sell its stock to the public for the first lime. And if the company had gone public later this month, Mr. Costello’s stock would have been valued at more than $1 million.</br></br>But with the stock market disaster, the SDA Systems offering has been put on hold. The postponement has shaken not only Mr. Costello but SDA Systems’ entire work force of 150 or so, all of whom own its shares.</br></br>“People have put in their blood, sweat and tears over the last four years, and they want to see their payback,’’ Mr. Costello said. He is president of the San Jose, Calif., company, which makes software that helps engineers design computer chips. “That’s one of the incentives of Silicon Valley."

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Dow Surges 44.01, To Record 1,971.32: Dow Surges 44.01, to Record 1,971.32. So far, Wall Street loves 1987. The stock market had one of the best days in its history yesterday as the Dow Jones industrial average soared to a record level that is within reach of the vaunted 2,000 mark.</br></br>“Today is amazing!” said Jack Baker, head trader for Shearson Lehman Brothers, as he tried to catch his breath at the end of a hectic day that saw the closely followed Dow move up a record 44.01 points, to 1,971.32.</br></br>The size of yesterday’s increase surprised many experts, especially since it followed a 31.36-point jump in the Dow on Friday, the first session of the new year. In the two business days since 1986 became history, the blue-chip average of 30 stocks is up nearly 4 percent.</br></br>Market experts think the turning of the calendar may very well have had a major effect on Wall Street, especially since investors are now working under a new set of tax laws. New Tax Law Cited “With the change in the tax law, it was the first time that people were forced to take long-term capital gains," said Peter DaPuzzo, a senior executive vice president at Shearson, referring to the fact that the tax rate on profits made in the stock market rose on Jan. 1, compelling many investors to cash in before then.</br></br>This phenomenon, Wall Street experts say, weakened the stock market at least during December, and perhaps even earlier. It created a pent-•up demand for equities.

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Traders Ponder Fed's Moves as Dow Fails: Traders Ponder Fed's Moves as Dow Falls. How gradual is gradual? Is Alan Greenspan, chairman of the Federal Reserve Board and famed gradualist, preparing the markets for speedier increases In interest rates, greasing the stock and bond markets' already slippery decline?</br></br>That Is what stock and bond traders are asking themselves in the wake of the Fed’s third quarter-point Increase in its short-term interest rate target this year, to 3.75 percent yesterday.</br></br>The second rise, on March 22, came 46 days after the Feb. 4 increase. But the third rise comes just 27 days after the second. Already traders are spec- ulating about a fourth increase before the Federal Open-Market Committee, the central bank’s policy- making arm, meets in 29 days on May 17.</br></br>The next increase may be, traders say, another quarter-point jump in the Federal funds rate, the Fed’s target short-term interest rate. Or it may be an even more substantial jump in the symbolically important discount rate of 3 percent, which the Fed has not changed since July 1992.</br></br>sensitive industries, especially housing, are likely to be hurt, just from the uncertainty. Lumber used in housing fell sharply in futures trading yesterday. “The correction is far from over,” said Katherine R. Hensel, chief investment strategist for Lehman Brothers, who sees two to six months more of declining stock prices.

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Jobs for Summer Go Unfilled as Teen-Agers Shun Low Wages. ATLANTA, June 3 — As the summer job season approaches, many employers in cities and suburbs around the nation are encountering a conundrum: Despite statistics showing high unemployment among teen-agers, especially blacks, there are more openings than there are young applicants to fill them.</br></br>With Atlanta schools about to close for summer, for example, only 380 applicants have signed up for the 1,000 full-time jobs listed by the city’s Summer Youth Employment Program.</br></br>“We’re perplexed and, quite frankly, we’re scared,” said Rosa Long, who has run the program for low-income youth since 1978. “If we can’t fill those Jobs this year, how are we going to get commitments from employers next year?”</br></br>Many of the jobs that are going unfilled around the nation are in the suburbs; most are minimum-wage, entry-level positions at fast-food restaurants and retail stores, which historically have relied on young, unskilled workers to meet their labor needs. The problem is most visible in summer, but it is not just a seasonal phenomenon; minimum-wage jobs have been hard to fill in some suburban areas around Atlanta and New York, for instance, for two years, officials say.</br></br>As a result, competition among employers to hire and keep teen-agers and other workers is so acute that some fast-food chains are paying wages as high as $6 an hour, offering recruitment bonuses and furnishing free transportation to and from work. In New Jersey, scholarships as well as recruitment bonuses and transportation are among the incentives, said Fred Seman, chief of labor market information for the State Department of Labor.

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Long-Term Treasury Yields Soar: Rates on Bills Fall As Stocks Are Sold. Prices of long-term Treasury bonds took their worst battering yesterday since the days just before the 1987 stock market crash, although bargain hunters prevented the interest rate on the benchmark 30-year bond from moving higher than its level of May.</br></br>Short-term Treasury issues, however, rose in price as investors abandoned a plunging stock market and shifted funds to Treasury bills and other short-term investments in a “flight to quality.” Treasury bill rates fell to their lowest levels since “It was the worst day in the bond market since the 1987 debacle," said Brian J. Fabbri, chief economist at Midland Monatgu, the investment banking arm of the Midland Bank, London. "The impact of rising oil prices hit the long-term bond market harder than it did the overall stock market, mainly because bond investors fear inflation much more than they do the prospect of a recession.” Erosion of Value</br></br>Fears that higher inflation will erode the value of fixed-income securities caused the price of the Treasury’s benchmark long bonds, the 8.75 percent issue maturing in 2020, to plunge as much as 3 points, or $30 per each $1,000 of face value, before bargain hunters trimmed the loss. Late in the session, the long bond was offered at 99 17/32, down 2 17/32. Its yield climbed to 8.79 percent, the highest since May 10, when it was 8.84 percent. At Friday’s close, the long bond’s yield was 8.55 percent.</br></br>In Chicago, the spot September Treasury-bond futures contract also plunged the daily permissible limit of 3 points, to 90 14/32, before recovering to close at 90 25/32, down 2 21/32 on the day.</br></br>It was the worst price decline since Oct. 12,1987, when the spot December bond futures contract plunged 4 points. One week later, the stock market, as measured by the Dow Jones industrial average, plunged more than 500 points. But the crash caused the same bond-futures contract to soar 13 points in a matter of days.

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Martin Assailed for Cooling Off Inflation at Expense of Builders. WASHINGTON, July 31 (AP)—Senator Joseph S. Clark, Democrat of Pennsylvania, was sharply critical today of William McChesney Martin Reserve Board, for trying to cool off inflation by “taking it out of the hides” of homebuilders and small-business men.</br></br>I Meanwhile, Senator Hugh Scott, Republican of Pennsylvania, said that “everybody except the President is supposed to be prudent in operating the Federal Government and I don't think the President has shown any desire whatever to start any sort of drastic economy at any level where he can control it.”</br></br>Senator Thruston B. Morton, Republican of Kentucky, disagreed with the assertion by Senator Clark that the tight-money crisis was manmade. He said supply and demand were joperating to push interest rates up, particularly in home con-! struction.</br></br>The three Senators outlined their views on a radio-television program taped here for use on Pennsylvania stations.</br></br>Senator Clark said he was in strong disagreement with Mr. Martin’s policies and did not believe they were going to work.

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Republicans Worry About Effects of Jobless Rate. Unemployment rates in Congressional election years and subsequent losses of seats in the House of Representatives by the President’s party</br></br>Year/ President's Party Highest Monthly Unemployment Rate in First Half of Year Next to Last Last Unemployment Unemployment Rate Rate Announced Announced Before Before Election Election Loss of House Seats by President's Party</br></br>WASHINGTON, JAN. 14 — The rising unemployment rate menaces thousands of Republican candidates in the 1982 elections, leaders of both parties agree. With 9.4 million Americans now out of work, incumbents and challengers alike are in jeopardy, they say.</br></br>But Republicans say that if unemployment does not get too much higher than December’s 8.9 percent, and if economic recovery is visible by Election Day, as most economists expect, voters | will not punish them severely. They ; argue that just how particular economic factors affect votes is uncertain, and they count on other factors to help them.</br></br>But the 8.9 percent rate is the highest announced in an election year since the Government began issuing monthly statistics in 1948. It is well above the previous high of 8.2 percent, made public in January 1976, in a period of recovery. Both parties expect it to get higher, and it has provided a unifying theme for otherwise divided Democrats.

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OUTLOOK ON THE ECONOMY: Wow! I'm at Greenspan's Desk Ben Bernanke's (Fictitious) Chats With His Predecessor. C After 18 years in office, Alan Greenspan [will hand over the chairmanship of the Federal Reserve to Ben S. Bernanke early next year. Probably no other single event in 2006 is more likely to affect the future economy than that change. Based on their writings, what might they say to each other in private if either i were to let his guard down?</br></br>Wow! I just arrived for my first day at work, and I’m sitting right at your desk in .your old inner sanctum. Needless to say, it’s ;a bit daunting to take over the most powerful economic job in the world — especially ‘.when your predecessor is revered as an omniscient oracle.</br></br>i; Just a quick question: I found the keys to ;your desk, but where are all your secret formulas? I looked in ail your drawers, and ev-lery one of them is empty.</br></br>!; Actually, I took my secrets and plan to .publish them in a best-selling book —• you •won’t believe the advance I’m getting. I’m .kidding, Benny! You know I love to kid you.</br></br>;: But take my advice: don’t get locked into •models and rules. The economy is too complex to be captured by any model and changing too much to be nailed down by any rule.

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Deficit Put at $220. 7 Billion, Less Than Forecast. WASHINGTON, Oct. 24 — James C. Miller 3d, President Reagan’s budget director, disclosed today that the Federal budget deficit for the fiscal year 1986, ended Sept. 30, amounted to $220.7 billion.</br></br>While that is $10 billion less than the Administration predicted last August, the deficit figure is more than $8 billion above last year’s record.</br></br>The new figure, to be reported officially Tuesday, means that deficit spending in the years since Mr. Reagan took office has officially crossed the $1 trillion total that economists have been</br></br>Congressional Representatives also-said it would also make It next to impossible to meet the goal of reducing the deficit to $108 billion this fiscal year: under the budget-balancing law.</br></br>Representative William H. Gray 3d, Democrat of Pennsylvania, who is chairman of the House Budget Committee, said a reduction of such a magnitude was unrealistic.

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Despite U.S. Recession, an Optimistic L.I. Forecast. HAUPPAUGE, L.I. — Long Island’s economic tempo can be expected to improve modestly in 1983 despite the continuing national recession, according to Chemical Bank’s annual economic forecast.</br></br>“While some big national industries have been faltering, the success of smaller firms in Nassau and Suffolk County has caused the region’s economy to run counter to the national pattern,” said Jerome Gilbert, Chemical’s Long Island economist.</br></br>He said the growth of these smaller concerns was the key to the area’s stability, making it “an oasis of relative strength.”</br></br>Mr. Gilbert was the keynote speaker here last week at a luncheon at the Colo-nie Hill for about 1,200 Long Island officials and business exeuctives. The host of the luncheon was Robert McBride, Chemical’s senior vice president and head of its 90 branches in Nassau and Suffolk Counties.</br></br>“The region is a spawning ground for new businesses that grow,” Mr. Gilbert said. “And jobs have been created by these smaller enterprises. ’ ’ 1983. He said that residential housing should show strong expansion, especially homes for first-time buyers; that electronic equipment manufacturing, which began to pick up during the second half of 1982, should maintain the upward trend in 1983; that retailing, ex-

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Economic Scene: Some risks are more manageable than others. Can we design markets to change that?. UNEMPLOYMENT is up. Housing sales are weak-I enlng. Oil prices continue to fluctuate, and the stock market remains volatile. There’s no doubt —we live In risky times, yet our tools for managing risk -are limited.</br></br>If— We can do something about the stock market: those “ewith low tolerance for risk can put their money in invest-u-ments with more stable returns. There are also ways to '..manage the risk from oil-price fluctuations: buy or sell 1 oil futures to lock in a particular price.</br></br>But what about unemployment risk or housing price risk? There are financial markets that help us m anage ,.fluctuations in corporate profitability and commodity prices. But there are no markets to help manage risks '...from fluctuations in labor markets and housing mar-1’kets, even though these have a much bigger impact on 'mmost peoples' financial security.</br></br>Rffal R. Varian is an economics professor and dean of the -School of Information Management and Systems at the "“.University of California at Berkeley. E-mail: “ hal@sims.berkeley.edu.</br></br>known for his previous book "Irrational Exuberance,” which forecast the demise of the 1990’s bull market. In his new book, Mr. Shiller turns to the role of financial institutions in managing risk.

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Consumer Prices Dip 0.1% But Food Costs Show Rise: U. S. Consumer Prices Dip 0.1% But Food Costs Show an Increase. WASHINGTON, Jan. 22—The United States Consumers’! Price Index dropped a tenth of a per cent between mid-Novem-j ber and mid-December, the Bureau of Labor Statistics reported! today. It was the second consecutive monthly drop, making a total of a half of a per cent, but Ewan Clague, chief of the Labor Department bureau, said the price trends definitely “are not behaving like' a business recession." 114.9, which was 0.7 per cent higher.„than._ a ..year earlier and 12.9 per cent above the pre-Korean level'of June, 1950. The base of 100 equals thi price average in the 1947-49 period.</br></br>Hr. Clague said the November-1 December drop was insignificant! and was evidence of “continued stability.” Seasonal factors usually push average prices down at. this time of year, but Mr.. Clague said the strength shown in food prices might bar the seasonal declines in the index for January and February. He mentioned pork and coffee specifically.</br></br>The recent rises in coffee prices were not reflected in the December figures released today. Coffee accounts for 4 per cent of the average family's food budget.</br></br>Decreases of 0.9 per cent for transportation and 0.2 per cent for apparel were responsible for the December decline. Food prices went up 0.3 per cent, halting the decline that had been in progress since August. The food index for December was 112.3, which was 1.3 per cent below a year! earlier, and 11.7 per cent above the pre-Korean level.</br></br>I Prices of fruits and vegetables .in the forty-six cities surveyed i were up 1.7 per cent on the average, led by a sharp increase in fresh tomato prices. Advances in pork prices, averaging around 3 per cent, more than offset decreases of about 1 per cent or less in prices of beef and veal, lamb, other meats, poultry, and fish.

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Sidelights: Analysts Ponder Dividend News Biggest Tax Collection Utility Industry. There was a flurry of favor-1 able dividend actions yesterday and the stock market went down. On Tuesday, there had been a spate of disappointing dividend news and the market went up. Analysts can make of that what they will, and they probably will.</br></br>At any rate, yesterday the American Zinc, Lead and Smelting Company declared a quarterly dividend of 25 cents a common share, up from the preceding rate of 12% cents a share. The directors said that with the increase in dividend they do not contemplate paying a stock dividend this year.</br></br>Inc., directors voted a regular quarterly dividend of 7% cents a common share, compared with 10 cents each half year earlier.</br></br>Avon Products, Inc., declared a payment , of 50 cents a common share. The company paid 45 cents a share each in June and March, when the rate was raised from 40 cents. The Dover Corporation raised its quarterly dividend to 25 cents a common share from 20 cents and the Garland Knitting Mills, Inc., dividend went up to 17% cents a share on the Class A common j stock from 12% cents.</br></br>[ Directors of the Sunshine Mining Company voted a payment of 10 cents a common share, up from 5 cents in preceding quarters. The company paid an extra of 5 cents last March. Vulcan Mold and Iron Company raised its dividend to 7% cents a quarter from 5 cents.

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Optimism Gives Way To Caution on Stocks. Stock market Investors are edging Into 1985 as they cast nervous backward glances at 1984—a puzzling and disappointing year for equities—and wonder if history will repeat itself. Thus, contrary to the usual start-of-the-year optimism, caution reigns as the operative word on Wall Street.</br></br>"When it comes to the stock market, 1885 will be a classic case of first the bad news, then the good news,” said Standard & Poor’s Outlook. “With the economy expected to slow to a crawl in coming months and concern over fiscal and monetary policy lingering, stocks are likely to bead lower early in 1885 before rallying sometime in the second quarter.”</br></br>Market strategists at Merrill Lynch concur. “We believe that a generally cautious approach is indicated on an intermediate-term basis,” said Robert J. Farrell, chief market analyst for Merrill Lynch.</br></br>The firm’s strategists said that during the early months of 1885 the Dow Jones industrial average could “test” the lows reached in July 1884, in the area of 1,080. Thereafter, they expect the average to reach new highs “in the 1,400 to 1,500 area” by December. " Blue Chip Barometer 1,211.57, down 3.74 percent for the year. Its 30 components are blue chips, and, in a year when investors emphasized quality, the industrial average fared far better than most indexes of lesser-grade stocks.</br></br>However, the New York Stock Exchange’s composite index of common stocks outperformed the Dow, which suffered from large losses in such issues as Union Carbide, Bethlehem Steel and International Harvester. The Big Board index ended at 98.38, up 1.28 percent.

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THE AUTOMAKERS: Detroit, With Its Sales Falling, Is Urged to Help Spur Economy. Yesterday in Detroit, Stephen P. Yokich of the United Auto Workers, left, chatted with William Clay Ford Jr., chairman of Ford Motor, and Dieter Zetsche, chief executive of Chrysler. At rear were Representative David E. Bonior and Lt. Gov. Dick Posthumus of Michigan.</br></br>DETROIT, Sept 19 — Two top Bush administration officials made an unscheduled visit to Detroit today to urge the auto industry to do what it can to help stimulate an economy on the brink of recession.</br></br>Donald L. Evans, the commerce secretary, and Elaine L Chao, the secretary of labor, met with top executives of the Big Three automakers — General Motors, Ford Motor and the Chrysler Group — which had already lost market share this year to foreign manufacturers before the terrorist attacks last week on New York and Washington.</br></br>Since then, the automakers have reported stagnant sales, as well as some production troubles and parts shortages because of transportation problems. Now their quandary is how best to cope with new sales declines by increasing incentives to make vehicles cheaper or by cutting production Most analysts say that the Big Three have the most to lose as auto sales slump over all “They are expected to bear the brunt of any sales weakness,” Stephen J Girsky, an analyst at Morgan Stanley, wrote in a report this week He added that companies like Honda and Nissan were still more attractive investments Investors seem to agree Shares of G M are down 18 9 percent since the attack, while Ford is off 15 3 percent and DalmlerChrysIer, the parent of Chrysler, is down 21 percent Ford said last week that it would cut production by 110,000 to 120,000 vehicles The company had problems as parts made in Canada and Europe were hindered from reaching plants m the United States because of bor-</br></br>But the Bush administration would prefer that automakers, instead of making fewer vehicles, address weakening demand by making vehicles cheaper to buy, even if such a step cuts into profits After the meeting today, G M. said it would offer interest-free loans over three, four or five years to buyers of all its 2001 model cars — an offer it has not made before — and offered three-year interest-free loans for its 2001 trucks and 2002 cars and trucks. The plan, Keep America Rolling, had been in the works since last week "We don’t think this is the time to make your numbers by retrenching, by cutting back or by being like a turtle crawling into its shell,” said William J Lovejoy, GM's group vice president for vehicle sales, service and marketing

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Income Rose In November, U.S. Reports: 0.8% Gain Doubled Consumer Spending. WASHINGTON, Dec. 24 (Bloomberg News) — Personal income rose eight-tenths of 1 percent during November, the biggest gain since June 1996 and double the size of the month’s increase in consumer spending, the Commerce Department said today.</br></br>“There's not much inflation out there,” said Cynthia Latta, an economist at DRl/McGraw-Hill in Lexington, Mass. “With all the sales we’re seeing, there’s no rush to buy because the price might be better tomorrow than it is today.”</br></br>Because consumer spending accounts for about two-thirds of the nation’s economic output, trends in income and consumption can be an indication of future business activity and provide clues about the Federal Reserve’s inflation stance.</br></br>The November report is also a gauge of consumer spending at the beginning of the holiday shopping season. Earlier this month, the Government reported that retail sales had increased two-tenths of 1 percent in November, less than expected.</br></br>November was the 13th consecutive month in which personal income increased. The gain of eight-tenths of 1 percent was larger than October’s revised increase of six-tenths of 1 percent.

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ALONG THE HIGHWAYS AND BYWAYS OF FINANCE. Financial circles thought last week that the stock market might be peeking around that highly interesting corner where it frequently has found itself since late 1946. The market is now practically plumb on that sidewise line from which every important move has originated, in one direction or the other, over the past two years.</br></br>Professional traders have assumed at least a temporarily mildly bullish position. That may or may not mean something. Certainly greater evidence from that section is needed to fortify any opinion that a break-through is at hand. Price levels which previously invited profit-taking have yet to be reached and volume of trading as an indicator has still to assume a positive, constructive complexion. * * *■ *</br></br>Wilma Soss, president of the Federation of Women Shareholders in American Business, Inc. (which has among its foremost members such women as Ruth Bryan Owen Rohde and Hortense Odium) asks: “What is so laughable about a woman on the board of a bank?” Her questidn was posed because of bantering of words that followed the suggestion at a recent stockholders’ meeting of a New York bank.</br></br>6,000 women officers of banks; forty-one directors, nineteen chairmen of boards, 117 presidents, 328 vice presidents, while Nellie Tay-loe Ross, former Governor of Wyoming, is Director of the United States Mint.</br></br>“Many men are beginning to recognize the value of a woman on the board in an economy where women not only provide half of the risk capital (which is increasingly hard to get) but have a plurality of political voting power,” she points out.

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Banks Raise Prime Rates to 21 % As Some Other Interest Levels Fall: Prime Rate Raised to 21 % From 21% Prices of Treasury Issues Up Doubts on Holding Advances Rate Reduction in Michigan. Most large banks raised their prime corporate lending rates yesterday to 21^ percent from 21 percent. But there were increasing signs that the upward spiral of interest rates was coming to an end.</br></br>"This could be the last gasp” of rising Interest rates, said Norman Robertson, a senior vice president at the Mellon National Bank, "before the economy contracts and rates tumble. ”</br></br>The higher prime rate, which determines the interest cost of business loans, has caused financial strains at many businesses and is the main reason that most economists expect the economy to slump early in 1981, analysts said.</br></br>Nancy H. Teeters, a Federal Reserve governor who has been the sole dissenter against central bank policies that have sent the interest rates to their historic highs, asserted that the economy had moved into a stage of pronounced weakness, partly because of excessive monetary restraint by the Federal Reserve.</br></br>Tumultuous trading in the credit markets yesterday was cited by analysts as an indication that the long-awaited decline of interest rates might already be under way. Some interest rates were lower, and Treasury bill rates plunged one and a half percentage points.

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What Inflation?. 239,000 jobs. And the average hourly wage rose by nine cents, the biggest one-month jump ever recorded, a level “noticeably above the inflation rate,’’ as The New York Times reported.</br></br>Pandemonium on Wall Street! The yield on the 30-year Treasury bond leaped a quarter of a point, finishing at 7.18 percent. And stocks plummeted: the Dow Jones industrial average dived 114 points.</br></br>Amid the commotion, one could hear the bond bears roaring their message that, with inflation sure to surge, the Federal Reserve must raise short-term Interest rates. Many of the bears said that had the Fed’s Open Market Committee known at its meeting last Wednesday what the secretive Bureau of Labor Statistics would announce two days later, it would surely have raised them. Some urged the Fed to correct this “error” immediately without waiting until the next regular meeting in August.</br></br>Nonsense. There is no cause for alarm. The evidence does not portend surging inflation. To begin with, the annual rate remains low: 2.9 percent in the year that ended in -May. Inflation is not accelerating. Instead, productivity growth appears to be picking up. If this pattern continues, it will permit wages to grow for some time, with little effect on price inflation.</br></br>The decline in unemployment also means little. Some economists still hold to the notion of a “natural rate of unemployment” at 6 percent or a slightly lower figure, below which

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Economic Scene: Bank Foresight And Hindsight. SBN his testimony before the Joint Economic Com-Bj mittee of Congress this week, Paul A. Volcker, H chairman of the Federal Reserve Board, ran into bipartisan crossfire over the failure of the banking regulators to deal with the problems of the Continental Illinois Bank and Trust Company long before it had to be balled out. Senator Alfonse M. D’Amato, the conservative New York Republican, said he thought the Federal regulators had done "a miserable job in allowing the situation to come to this.”</br></br>Mr. Volcker said complaints about the regulators’ failure to act sooner were “easier to make” in retrospect. He Insisted the bank had been adequately supervised and said its problems were "unique.” Preventing it from crashing, he said, was necessary to avoid troubles for other, sounder banks.</br></br>But in taking that position have Mr. Volcker and other regulators been validating the charge that the huge and unduly risky lending of large international banks resulted in large measure from their assumption that they would not be allowed to fail?</br></br>The new study by Stephen Clarke, “American Banks in the International Interbank Market,” published by the Salomon Brothers Center of New York University, suggests that the combination of the assumption that big banks would be rescued by their national governments and the lack of public information about the problems of the banks has helped to create a situation of financial weakness and overexposure in high-risk loans that Is by no means limited to Continental Illinois.</br></br>“If it is assumed that troubled institutions will be supported by their monetary authorities,” says Mr. Clarke, a retired officer of the New York Federal Reserve Bank, “little effort Is required to determine the extent of the banks’ exposure to weak firms or countries. While insouciance about such information applies especially to the big banks in the major countries, it tends to infect the whole market.”

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BONDS ARE STEADY ON LIGHT VOLUME: Rate Cut by Maine Bank on Commercial Loans Spurs Only a Modest Rally Credit Markets: Prices Hold Steady. The money and capital imarkets held steady yesterday, resting after their pronounced moves toward higher prices and lower interest rates earlier in the week.</br></br>There was something of a tendency for the fixed-income securities market to slip in a reaction to the Commerce Department’s report that its broad index of leading economic indicators rose significantly in July.</br></br>Later yesterday, near the close of trading, a small bank in Portland, Maine, reduced its lowest rate on commercial loans to lYi per cent from 8 per cent, touching off a modest rally that seemed centered on industrial company bonds.</br></br>However, both these moves were low-keyed, ard most bond prices closed yesterday near their Wednesday levels.</br></br>"The market was dead today,” one tax-exempt bond dealer said after the close. “It’ll probably be dead Friday, too.”

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Civic Austerity. The budget cuts planned by Mayor Beame for the next seven months portend drastic reduction in municipal' , services, resulting in certain hardship unless the city ' agencies, the unions and individuals cooperate in boost* ing productivity.</br></br>The Mayor’s acknowledgment lhat the city faces a budget deficit of $430 million in this fiscal year—-a figure that may well prove too low—means that economy is inescapable. The challenge lies in deciding what and where to cut and also in improving performance standards to counterbalance the worst effects of the surgery.</br></br>Only about $4 billion of the $Il.l-biliion expense budget is under the Mayor’s direct control; but all of the' savings will have to come out of that part—-with police, fire and sanitation in the front line-sunless Mr. Beame can get the cooperation of such legally sheltered agencies as the Board of Education, the Board of Higher Education and the Health and Hospitals Corporation.</br></br>Even if they do enlist, the Mayor's retrenchment problems will remain staggering. The irony is that, at the very time New York is finding it necessary to contemplate outright dismissal of middle-management personnel, policemen, teachers and other municipal employes, there is . agreement by the Ford Administration and Congressional leaders of both parties that creation of thousands of public employment jobs at state and local level is a sound and necessary antidote against the deepening recession.</br></br>We subscribe fully to, the desirability of a vastly expanded public employment program, but it is obviously ’ incongruous to be appropriating billions of Federal dollars -for make-work jobs when New York and other, cities are being told Federal resources are not available to pay for a bigger share of such basic responsibilities as welfare and education. More Federal money in those areas would ease the pinch on this city’s overstrained budget.

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