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With rare unanimity, however, economists warn that the upturn, whenever it comes, will be painfully slow and gradual. Robert Ortner, chief economist of the U.S. Department of Commerce, ; observes that after past recessions the total output of goods and services on average has jumped 7% in the first year of recovery. "This time it will be less than that," he says. That is putting the case very mildly; many private economists guess that the upswing will be only half as vigorous as it traditionally is. Walter Heller, a member of TIME'S Board of Economists, has compiled a self-mocking list of words that he has used so often to describe the expected recovery that even he is tired of hearing them. Some entries: reluctant, weak, wobbly, fragile and anemic.
One reason for the reluctant, weak, wobbly, fragile and anemic upswing is that interest rates, despite their declines, are still much too high to encourage any big revival in such credit-sensitive industries as housing and autos, which are the ones that traditionally lead a vigorous recovery. Some economists speculate that this time the business upturn will be sparked by the buying of smaller-ticket items: clothing, furniture, even computer games. They see the 1% rise in retail sales in July as a hopeful sign of increased consumer spending.
The slow recovery and the relatively high level of interest rates also mean that it will be a long time before the economy gets much help from new business investment, which is the prime creator of jobs and a major engine of growth. Companies have a lot of idle factories and equipment to put back to work before they can think seriously about any new spending. Moreover, the staggering pile of debts built up during the past few years of inflation, recession and no-growth will need to be decreased before much new borrowing can occur. In the past six years, American manufacturing and other nonfinancial corporations have doubled their total indebtedness to $1.2 trillion, a figure that exceeds the federal debt, and in industry after industry the ratios of assets to borrowing have deteriorated dangerously. The debt load doubtless will crush more companies into bankruptcy even in the early stages of a recovery.
The biggest questions hanging over the economy are longterm. Will the recovery, disappointingly weak though it may be at first, continue beyond a year or so and lead to a sustained period of increasing production, incomes, jobs and living standards? That would belatedly vindicate President Reagan's view that the recession was the bitter price that had to be paid for future healthy growth. Or will the upturn sputter along at half-speed through many months or even years of continued high unemployment, until the economy slips into a new recession? Some liberal economists warn that this may happen, and conservatives by no means dismiss the possibility.