with the two contracts at Grand Rapids signed last, on December 31.

Wage increases of from $8 to $14 a week (spread over 2 years) plus a shorter workweek were agreed to after a Newspaper Guild strike of 3 days against the Washington Star. Craftsmen of the printing trades refused to cross the Guild's picket lines, forcing suspension of publication.

Anthracite coal miners, represented by the United Mine Workers, will receive $1 a day more (soft-coal miners had won $2), higher vacation pay, and a rise of 20 cents a ton royalty payment to the welfare and retirement fund under terms of a January 14 agreement.

In Canada, the end of the year brought an end to the 87-day strike by the Mine, Mill and Smelter Workers (Ind.) against International Nickel Co. Terms of the 3-year contract give employees a 1percent raise as of January 2, plus 2- and 3-percent increases the second and third years. A $25 Christmas bonus was also included.

The United Automobile Workers also gave a Christmas bonus ($20) to certain members affected by stoppages during the Christmas season. Walkouts were at the settlement stage on January16 at International Harvester and Electric Auto-Lite plants. On December 19, Chrysler and the UAW compromised a dispute over work standards, and production of 1959 models was resumed.

STRIKE BENEFITS are not necessarily subject to Federal income tax, a United States circuit court of appeals ruled on December 23 in Chicago. The decision, which did not have general applicability, reversed a District Court decision involving a UAW Kohler local striker in holding that strike benefits paid in kind by a union were substantially in the same catetory as public assistance payments.

A 7-2 U. S. Supreme Court verdict on December 15 held that National Labor Relations Board certification of bargaining unit representation can be appealed to the Federal district courts. Judicial review had previously been limited to Board decisions respecting unfair labor practice cases. The case involved a group of Westinghouse engineers who had protested inclusion of nonprofessional workers in their bargaining group.

On January 12, the Court declared that Florida State Courts lacked authority to enjoin (in the absence of violence justifying use of police power)

the 1955 picketing by Miami hotel workers. Even though the NLRB had refused to exercise its exclusive authority in the case, the matter lay within the Board's jurisdiction. The ruling was related to the Court's November 24 holding that the Board could not waive jurisdiction over the hotel industry as such.

DONALD C. RARICK, the rank-and-file member of the United Steelworkers of America who ran a surprisingly strong race for the union's presidency in 1957 and led an organized protest against a dues increase, was overwhelmingly exonerated by his local union of dual unionism charges. He is the fifth dues increase protest leader to be cleared of! such charges.

New York City police officials and public opinion blew the whistle on Teamster President James R. Hoffa's plans to organize policemen as part of a proclaimed nationwide drive to unionize public employees. Hoffa's local organizer had threatened to halt all deliveries to police stations after the police commissioner forbade unionization of the force.

By the end of the year, all former AFL and CIO State bodies except New Jersey and Pennsylvania had merged. Idaho, on December 16, was the most recent. Merger discussions were under way by three postal unions-the Letter Carriers, the Mail Handlers, and the Postal Transport Association. Combined membership is a claimed 150,000.

The International Jewelry Workers Union, by its own request, on December 31 was placed under trusteeship of the AFL-CIO. Joseph Morris, president, and Hyman J. Powell, secretary-treasurer, resigned. Various charges have been made against officials of the union, including exploitation of Puerto Rican workers in New York City through signing of substandard wage agreements.

Whether the AFL-CIO will welcome the International Longshoremen's Association as a prodigal stepson will be decided at the Executive Council meeting of the Federation, scheduled for Puerto Rico in mid-February. The ILA was expelled from the old AFL in 1953 for permitting racketeers in positions of influence. A request for affiliation has been filed by the ILA, which has succeeded in dominating East and Gulf coast longshore unionization despite a rival organization established by the AFL-CIO.

Construction in the

1958 Economy

DOROTHY K. NEWMAN*

CONSTRUCTION ACTIVITY played a leading role in sharpening and deepening the 1957-58 recession, but has been as influential in contributing to recovery. This is in contrast with the experience of the previous two recessions of 1948-50 and 1953-55, when construction lent strength almost throughout the length of the cycle. (See chart 1.)

The Down Phase

Recent economic literature is replete with descriptions and discussions of the many faceted decline that became evident in the summer of 1957-and broadened in subsequent months-the drop in industrial production, employment, hours of work, and earnings; the rise in unemployment; and the reduction in manufacturing and trade inventories and sales plus the edging off in consumer expenditures; the cutbacks in installment purchasing; and the decline in business loans and interest rates, as bank reserves loosened and a policy of credit ease was pursued. The momentum in the business downswing in 1957-58, as in the two earlier recessions, was furnished by the durable-goods sector of the economy, and most notably by the automobile industry and its associated producers, suppliers, and distributors.

The 1957-58 drop in construction appears on the face to mirror the general decline. The outward signs, however, are misleading. In the first place, a substantial part of the drop in new construction activity was caused by widespread

March. Besides, not all types of construction trended lower during the downswing (on a seasonally adjusted basis), and for most of those which did, the recession was a neutral, incidental, or, at most, an accelerating influence. In some cases, easier money market conditions in the down phase may be credited with having stimulated construction of some types, such as certain State and local public works and Federal housing for the armed services under the Capehart provisions of the National Housing Act. For projects which take a relatively long time to complete, such as large, private industrial and commercial structures and many highway, public utility, and Federal military and conservation projects, the trend, either up or down, during this past business downturn was determined well before the summer of 1957, when the recession is recognized to have begun. In short, there was no concerted falling off in construction activity which reflected a change in the economic climate, although the construction decline which occurred clearly intensified the economic downswing and gave early impetus to it. The drop in construction activity resulted from a combination of diverse influences, including the severe winter weather, which, when they converged, caused a slump coinciding with the business recession.

Private Nonresidential Building. The decline in contract awards for private industrial building in 1957, when expenditures on new plant were at their peak, resulted in the sharp drop in work underway in 1958. Although the contract-awards downtrend was accelerated during 1957-58 by dwindling markets and increasingly excessive capacity in some lines, the decline had already set in when the 1957 crest in construction underway was reached, and plans were then being

*Of the Division of Construction Statistics, Bureau of Labor Statistics. 1 Although large segments of the statistical series that measure the dollar value of new construction put in place are insensitive to unusual weather conditions, because they are derived by phasing the total value of contracts awarded over a defined construction period (in a priori proportions by month), others are derived partially or totally from information on actual progress of the work. Among the latter are most Federal and federally aided construction projects, all of which showed a much greater than seasonal decline during the winter. In addition, extreme weather conditions slow down applications for building permits (see p. 4), and the start of construction in non-permit-issuing places. Both housing starts and outlays for new dwelling units, which are derived from information from these sources, dropped much more sharply than usual during the 1958 winter season. See Construction Volume and Costs, 1915-56, A Statistical Supplement to Construction Review, Derivation of the Estimates, Appendix B.

curtailed. Similarly, if contracts trend upward in 1959, as many expect, the effect on the value of work put in place in 1959 will be small and will be felt most in construction activity in subsequent years.

On the other hand, in the trough of the recession, during the second quarter of 1958, a rise in store and mercantile building was foreshadowed by an increase in contract awards, although work put in place had dropped off between November 1957 and February 1958. Influential in this instance were easier credit conditions, born of the economic downturn, in addition to the marketing needs of growing suburban communities and customers drawn to the Nation's improved and expanded highways.

Office building continued to rise throughout the business lull, but has since declined as large projects begun in 1956, and in some cases earlier, were being completed. Relatively few new structures were begun in 1958, so that a decline in work underway is forecast for 1959.3

Public Construction. Sharply rising public bond sales between 1957 and mid-1958, when the cost of financing was favorable, supported substantial gains in hospital construction last year. Moreover, outlays for other types of State and local public construction were sustained by the backlog of need for administrative and public service or community facilities for growing populations and requirements for other facilities, such as ports to connect with the St. Lawrence Seaway in the Great Lakes States.

Substantial cutbacks in military and other Federal works contracts during 1957 induced a decline in federally financed construction underway during the recession downtrend. The Senate Concurrent Resolutions of March 1958, urging acceleration of civil public works and military construction programs, and efforts of executive

For a discussion of the ponderous nature of the long construction cycle, and of short-term movements in construction, see V. Lewis Bassie, Economic Forecasting (New York, McGraw-Hill Book Co., Inc., 1958), pp. 303-322. 'See Outlook for New Construction in 1959 (in Construction Review, December 1958, pp. 4-7).

departments earlier in the year to expand construction under existing authority to spend were unable to reverse the trend immediately. A change in policy, however, inspired by the first Russian satellite launched in October 1957 and by the deepening recession, prevented a more precipitate downtrend, and helped to support the later economic recovery. However, contract awards for Federal construction failed to rise above the levels of the fourth quarter of 1957 until March 1958. (See upper panel of chart 2.)

In view of the large amount of Federal aid contributed to highway programs, the rise in the amount of road construction, particularly in the first half of 1958, was disappointing. This was the result not only of poor weather conditions, but also of a chain of events which had their beginning upon passage of the Federal-Aid Highway Act of 1956. The interstate highway program initiated by this act in effect supplanted most projected toll highways, and plans for a number of these projects were abandoned in 1956. In that year, a substantial amount of work was underway on about nine major toll turnpikes. Few were begun, however, in 1956, and only one was started in 1957-the Illinois system. The latter, as well as 2 or 3 important extensions under construction in 1958 have been completed, or virtually so.

The $400-million drop in toll-road work in 1958 about equaled the decline in State contributions for highway work in 1958. Matching funds used on the Federal-aid program, both the interstate and regular programs, rose by about as much as the decline in money spent on State and local roads financed independently with tax-derived funds. Thus, except for the reduction in tollroad work, State contributions to highway programs were about the same in 1957 and 1958. Total highway expenditures, however, were up about $380 million (all in Federal funds) in 1958, against $550 million in 1957, and most of the rise took place in the latter half of the year.

Residential Building. About two-fifths of the decline in the dollar value of new construction put in place from the fourth quarter of 1957 to the first quarter of 1958 was in residential building.

For a more complete discussion of the toll-road movement in relation to the new highway program, see L. Jay Atkinson and Edmond L. Kanwit, Economic Aspects of the New Highway Program (in Survey of Current Business, December 1956, pp. 19-25).

Based on revised unpublished estimates for 1956.

It will be argued that surely here is seen the influence of the recession, particularly consumers' reluctance to invest in new housing and builders' reluctance to undertake many additional projects in an uncertain market. There is little doubt that the recession must have had some impact, since data on housing starts, when related to information for a large group of labor market areas, show that declines in the early part of the year tended to be steepest in areas in which unemployment was greatest. In attempting to appraise how much of

the decrease was due to economic conditions, however, it becomes clear that the business downturn may not have been as important as some other factors.

There is ample evidence, for instance, that residential building permit activity was greatly affected by the severe weather. February, with rare exceptions, even when construction is sliding generally, shows some increase over January, as a harbinger of the spring and summer construction season. The unusual drop in building-permit activity for all building construction, but particularly in housing, between January and February 1958, was in large part a reflection of the abnormal cold and widespread storms. About two-thirds of all dwelling units authorized by permits in any month are begun in that month, so that a drop in permits authorized has a substantial effect on housing starts and on work put in place in any period. Although permit activity rebounded in March, the February and March totals were the only ones in 1958 to show a decrease from the previous year. This was not true of January or April, for example, when all other economic indi

cators were still lagging, but just of the months when weather conditions were extreme. The freakish nature of the construction slump is particularly well illustrated by comparing the trend in aggregate weekly man-hours in contract construction (seasonally adjusted), with the same measure in other industry groups (chart 3).

In general, financing for housing begun in February and March had been arranged several months before. The backlog of mortgage commitments for Government-assisted housing, which is the most volatile segment of the housing market, increased in the fall of 1957 and declined only moderately in the following winter. Yet, in February and March, the seasonally adjusted annual rate of housing starts fell well below the million mark, which had been the approximate level for 7 months before, and the level to which the rate rebounded immediately after.

To be sure, dwelling units represented by requests for Veterans Administration appraisals were at unusually low levels in the latter months of 1957, foreshadowing a decline in winter starts under the VA guaranty program. At the same time, however, the number of dwelling units for which applications had been filed for FHAinsured loans were higher than comparable 1956 figures. Both trends can be traced directly to elements in the financing and credit structure of the period. The cost of credit continued high almost throughout 1957. The first notable decline was in December. The maximum permissible interest rate on VA-guaranteed mortgages was unchanged (41⁄2 percent) until April 1958, when the Emergency Housing Act of 1958 was passed, and the interest rate was raised to 4 percent. On the other hand, the maximum statutory interest on FHA-insured mortgages was raised to 5 percent by the Housing Act of 1957 in August of that year, whereupon applications for these mortgages rose strikingly, and applications for VA appraisals slumped coincidentally, and did not rise again until after the 1958 Emergency Housing Act was passed. Housing begun under conventional financing increased slowly but steadily during and beyond the 1957-58 winter, certainly revealing no marked weakness in the housing market.

The downtrend in housing starts under Government-assisted programs in the fall and winter of

These data are not available by type of construction.