Business: Business in 1958

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to spend money on food, the industry has managed to keep the same 26% of the consumer's dollar over the years. So successful was the campaign that in 1958 U.S. housewives boosted the national food budget 9% to an alltime-record $79 billion. "The U.S. woman," says Lansing Shield, president of the 438-store Grand Union chain, "has exchanged her place by the stove for the driver's seat of a car." She loaded her shopping bag with such convenience items as instant coffee ($375 million in 1958) and frozen, precooked foods ($155 million). The trend is to ever bigger markets with ever more products to sell. This year Shield opened six stores of the future that stock 35,000 items, all sold at discount prices. All are well ahead of their break-even sales point in their very first year. Says Shield: "The typical supermarket sells 800 nonfood items, but why draw the line at 800? Why not offer the customer everything she uses regularly in her home? We will add items until the consumer tells us to stop."

Wages v. Productivity. The shifts in consumer spending were rough on many industries. Led by the drop in autos, durable goods slipped 17.8% at the worst point of the recession. Unemployment, concentrated largely in manufacturing industries, reached a peak of 5,537,000 in June, was 7.6% of the work force in August. Paradoxically, hourly wages in manufacturing went up (2.9% to $2.13 per hour) and proved still another point about the new U.S. economy. Though businessmen were in the best bargaining position in years, they did not use the recession as a club over labor. Instead, they took the long view and often avoided cutting payrolls as sharply as the facts might have justified. They even granted pay increases on the bright hope for the future rather than on the dark facts of the moment. This did not mean that management suddenly grew soft; acting together for the first time, the auto industry was willing to take a strike rather than give in to what it called the United Auto Workers' excessive demands for a 35¢-to-45¢ package increase. But when the walkout was settled, both management and union agreed that the contract was a fair one.

What encouraged businessmen most of all during the slide was the surprising jump in productivity. In 1957 manufacturing productivity rose hardly at all. In 1958 productivity jumped around 5% to 7%, and thus outran wage increases for the first time since 1955. Not only had companies mechanized and automated to cut down rising labor costs, but many a laborer, mindful of the rising jobless, had proved more worthy of his hire.

Service, Please. The new machines meant that many workers laid off during recession might not get their old jobs back. In November 1957 automakers turned out 579,000 cars with 637,000 production workers. Last November the work force was down to 490,000, but Detroit produced 500,000 cars and figured to increase that total to 590,000 units in December with the same number of workers.

But automation did not consign the laid-off worker to the ranks of the unemployed permanently. In the new economy, he must just do something else. A major effect of the recession was to accelerate the long-term trend from manufacturing to the service industries, where consumer spending was growing at the rate of $6 billion a year. Since the U.S. has more autos, planes and boats, more restaurants