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The upshot of all this is that the unemployment rate in July hit 9.8% of the work force, the highest figure since 1941. Hard times are spreading into Sunbelt areas that once thought they were immune to the recession. In Texas, the unemployment rate was officially estimated at 7.3% in July; Nolan Ward, chairman of the Texas employment commission, thinks that the true rate was 8.4%. In any case, the state fund out of which unemployment benefits, which average $123 a week, are paid is in danger of running dry by year's end. Republican Governor William Clements, who is in the midst of a hard campaign for reelection, has called a special session of the Texas legislature next week, at which he will propose that the state borrow $250 million to $300 million from Washington for two years at 10% interest to continue payments. That is a prospect that Clements, an archconservative, finds abhorrent, but preferable to tapping the state's general revenues or increasing the payments that Texas employers make into the fund.
Nationally, there are no signs that the drop in interest rates has stemmed the tide of bankruptcies among debt-burdened companies. Quite the opposite: Dun & Bradstreet, the credit-reporting authority, counted 572 companies that went bust in the week ending Aug. 19, the highest weekly figure in 50 years. So far this year, bankruptcies total 15,133, a rate that seems likely to push the figure for all 1982 to the highest point since 1932, the worst of all Great Depression years.
What is especially maddening to policymakers and businessmen trying to read this soggy mess of economic tea leaves is that nearly all the signs are ambiguous.
For example, a small rise in the second quarter in total output of goods and services would normally be hailed as a signal that the recession is ending. This time, however, too much of the production wound up in unsold stockpiles of autos, metal and all manner of other goods. The result: new production will now have to be held down until those unwanted inventories are sold off. Even the decline in inflation, though it is the healthiest of all signals for the long run, has negative short-term aspects. While no corporate chief would ever admit it publicly, Wall Streeters insist that some of their confidants among company leaders whisper that they could use a few more months of price rises at a 10% annual rate so that they can pay off their firms' debts with cheap dollars.
Most striking of all, the drop in interest rates and the accompanying surge in the stock market began as a rather surrealistic reflection of black pessimism. The major reason for the first cracks in rates and the market boom was the expectation that business will be so weak in the coming months that it will drive down the demand for loans. The result of that would mean lower interest rates. Thus the market to a large extent has been exuberantly celebrating an expectation of bad business.