Evening star., 1946-09-06
Business Seen Gloomy
On Prospects for lo47
Investors Wonder If Another
Wave of Strikes Is Coming.
By David Laurence

wave Oh Str1keS Is Looming.
By David Lawrence
The facts of Americas economic life
are well known to the economists and
statisticians, but only when there Is
something like a stock-market break is
much attention paid in retrospect to
these facts by the general public.
Thus, the severe decline in earnings
in heavy-goods industries attracted.
relatively speaking, little attention at
the end Of the first six months of this
year, but now that the third quarter Is
nearly over and the prospect for the
fourth quarter is not much better, 1t is
beginning to dawn on many people that
1946 might as we'll be crossed off as a
poor year from profit standpoint for
many businesses.
The important point, however. is that
investors look ahead and ask If l947 is
going to be any better They scan the
horizon and ask themselves If the fac
tors which made 1916 be- year are
absent or still present.
In the face of uncertainty, they are
cautious and conservative. Are major
strikes really over or is there another
wave coming? This Is the big unan-
swered question Of the hour.
One of the fairest and most objective
OF the economic bulletins of today-and
depended upon rather widely in business
and industry-is that which is issued
by the economic staff of the National
City Bank of New York This bulletin
for August has in it some pertinent
statements which may have been over
looked during the summer or may have
been taken to heart by investors when
they started surveying things after La
Dor Day.
Significant Paragraphs.
Here are two significant paragraphs:
In contrast with the favorable show
ing OF industries not seriously held back
are the results in most of the heavy
industries, where the costs of strikes
and reconversion have brought sharply
decreased earnings or actual operating
deficits. The United States Steel Corp,
for example, stated that it's direct costs
OF the steel and coal strikes were $46,-
900 900, exclusive of the loss OF income,
and that it was forced to dip into re-
serves to the extent of s2s, 900 900 during
the first half year.
An indication of the difficulties that
many companies have been I'D against
Is given in the General Motors Corp.
report, which states that at the end o.
June the flow of materials and supplies
was curtailed by strikes in the plants
OF 83 suppliers and stresses how short
ages OF only few essential supplies
and in some cases of only one can have
GRIPPING effect on an industry other
wise prepared with manpower and ma
chimes to produce at new high vol
umeS'
1t Is further pointed out that cur
rent earnings cannot be taken as
reliable measure of the probable posi-
war level" because of income-tax credit
this year or carryback provisions of tht
law which will not be available in 1874,
Railroad Situation.
Then comes the situation in the raj,
loads, OF which the banks bulletin saws
Railroad earnings declined sharp.
turing the first half year as a result
he railroad strike, the substa ntial de-
'hne IN the volume of freight an,
fassenger traffic from around the pesr
wartime levels. and the wage increase.
mace retroactive to January l. For 8
OF the important railroad systems ths
nave reported thus far, total operating
revenues in the first six months de-
clined from 81, 1850, 900 900 to s2,175 ooo-
900, or by "a per cent After taxes there
was last year 1945) a net income of
s2l7,ooo,000, but deficit of $4,000 600
this year.
Inc railroads have asked for a Is Der
cent increase in rates. but have been
granted only 6la per cent thus far
increases in rates mean increases in
shipping costs, which are in turn re-
nected Elm price increases The labor
spiral took its toll, first, in the heavy
cost of the strikes and, second, in the
imposing of higher fixed charges. This
has been happening in the heayy-eoods
industries, which now must produce a
record high volume and get a substan-
tlal increase in output per man. But
in the manufacturing industries the
hourly earnings had increased by April
to point SGT per cent above the 1899
average, whereas the increase in pro-
ductlVity is estimated at not much bet
ter than 10.5 per cent. That's what II
was from 1899 to 1945.
Wage unit costs were believed to have
reached their all-time peak this sum-
mer but, with the prospect of further
wage demands and with no certainty
that the buyers of durable goods will
accept them at the new prices except
on a necessity basis for while, the
durable goods industries are face to
face with serious situation unless
labor can increase its productivity and
restrain itself from further wage in
creases.
1T Is because labor union leaders have
indicated that they do not intend to
apply these restraints that confidence
IN the economic future is being shaken,
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