June 14, 1972
Each passing month has been accompanied by a shrinkage in the number of Seventh District residents who remain skeptical that a broad recovery of activity is indeed under way. In fact, interest in the general business outlook has subsided to its lowest ebb in years, as more and more firms observe improved demand for their own products and services and business loan demand picks up. Remaining doubters commonly cite the national unemployment rate—prominently featured in newspapers and by television commentators—which they accept as an equivalent substitute for the trend of employment.
More firms are adding workers or stretching workweeks. The volume of help wanted advertising has increased in the Chicago area in recent months from a low plateau in 1971. But the overall supply of workers, including most skills, remains ample. City governments in Detroit and Milwaukee are much concerned about the extent of unemployment in their central areas. Many students and teachers are expected to fail in their search for summer jobs.
Vigorous demand continues for trucks, trailers and some types of
construction equipment. Orders for smaller machine tools have
improved substantially. Some district producers of defense equipment
are hiring again on a modest scale. Shipments of all types of big-ticket consumer
goods—household durables, recreational equipment,
lawn and garden equipment, power tools—are very strong and above
forecasts. Record sales of autos are creating shortages of some
favored models—"the worst in many years," according to one large
Chicago dealer.
Steel producers are somewhat more optimistic. Imports are less of a problem than had been feared, with currency realignments and new trade agreements partly responsible. Steel output in the Chicago area has moved closer to the high level of a year ago than is the case for the nation. Demand for steel sheets is far outrunning demand for heavy grades, reflecting the level of usage in the motor vehicle and consumer goods fields.
Permits granted for apartments in the Chicago area have been running well below last year, but real estate circles report a recent improvement in demand for apartments from both renters and buyers. Sales of moderate-priced existing homes are completed in very short periods after being placed on the market, but sales of high-priced homes (over $100,000) are quite slow.
Major construction projects in the Chicago area have been held back by strikes. The elevator constructors' strike continues, halting steel erection. A lathers' strike stopped most work for two days as other trades honored picket lines. A masons' strike is threatened. Construction laborers in Indiana and Illinois recently settled for an immediate boost in total compensation to about $7.50 per hour. While huge office buildings will add substantially to the supply of office space when completed, the vacancy rate for office space in the Chicago loop is two and one-half times the relatively low rate of two years ago.
Retail beef and pork prices are being pushed up as the volume of marketings of cattle has lagged expectations. One large district retail food chain recently announced a boost of 6 to 8 percent in beef prices, citing higher wholesale prices. Poultry and eggs are in good supply. Crop prospects are favorable with growing conditions "better then average" despite a late start.
Some of the largest district banks report loan demand higher than anticipated "across the board." The reversal in business loans has been "dramatic" with a substantial year-to-year decline in 1971, replaced by a substantial increase this year. A large share of the recent rise in business loans has been in term loans—three to seven years to maturity—in competition with capital markets. These loans feature many variations in rate terms and other features, depending on preferences of the various banks and their customers. Savings inflows are holding up well in view of the improved level of retail sales. Two large Chicago banks are outrunning competitors for savings by offering stuffed animal "mascots"—a lion and a kangaroo—as premiums for opening new accounts.