THE ECONOMY: Unemployment: Rosy Pink

By year’s end the U.S. will achieve “the highest level of employment and the lowest level of unemployment ever experienced in peacetime,” predicted Labor Secretary James P. Mitchell to a gathering of New York businessmen last week.

No man to kid himself about unemployment problems (TIME, March 2), Mitchell was basing his rosy-pink prediction on a recent Labor Department finding on the current high unemployment rate.* The finding: as business picks up, many industrial employers are paying for overtime instead of hiring or rehiring additional workers. Reason: liberal labor contracts have added so many fringe-benefit costs to each employee that it is cheaper—up to a point—to work fewer employees overtime than to add others. For evidence, the Labor Department points out that from January 1958 to January 1959, the number of production workers employed in U.S. industry actually declined by 1.7%, while the number of production man-hours rose by 1.3% as the average industrial work week edged upward from 38.7 hours to 39.9.

As orders pile up and confidence grows during 1959, Mitchell & Co. reason, employers will come around to deciding that adding workers makes more sense than adding overtime. Then hiring will turn up, and the unemployment total will start shrinking fast.

* Figures for February, due to be released this week, are expected to be close to January’s 4,724,000, highest January unemployment since 1941.