Positive reports suggest recovery is almost here Hopes are rising with economy's turn for better

March 08, 1992|By Thomas Easton | Thomas Easton,New York Bureau

NEW YORK -- While Congress and presidential candidates scurry to produce fresh tonic for a sick economy, there is mounting evidence that a recovery is finally beginning to take hold.

Not everyone is confident about the future, but the past two weeks have produced a deluge of modestly positive statistical reports. Thursday, most of the big department store chains reported solid sales increases for February, with Wal-Mart and J. C. Penney, among others, disclosing double-digit gains. The residential home construction market is improving, with January building up 11 percent and sales of existing homes up 13 percent over 1991.

"It was tough last year, and last month wasn't too good, but some of the major contractors that deal with us are coming in and pricing, and that means they will start building," said Don Griffith, a hardware department manager of Bines and Crabbe, a Perryville, building supply store.

A closely watched survey of corporate purchasing managers, typically the first line in the corporate hierarchy to react to economic conditions, reflected an optimism absent for months. More than 50 percent of those polled reported increased orders. Similarly, manufacturers of heavy-duty trucks disclosed increased demand in January and early February, according to a survey by Prudential Securities.

Rail traffic, which flagged badly during the winter, also turned up sharply last month.

"Overall, this is the first positive growth we have seen since October," said Howard Keen, economist for Conrail. "One month does not make a recovery, but a recovery has got to start `D sometime, and it's consistent with strengthening indicators we are getting elsewhere."

The heavier traffic encompassed the innards of the industrial economy -- steel, chemicals and papers. During January and February, Conrail's coal exports through the port of Baltimore were twice last year's.

In New England, the most depressed area of the country, help-wanted classified advertising, has begun to rebound, and a nationwide survey on part-time employment conducted by Manpower Inc. suggests that hiring patterns are returning to seasonal norms.

Nationwide, the disconcerting series of layoff announcements that brought the Grinch to Christmas and continued into January have finally begun to decline, according to International Strategy and Investment, a New York economics firm that follows such announcements weekly.

Better news, of course, is not the same as truly good news. The economy remains far from buoyant. Overall help-wanted advertising in January was lower than at any time since 1983. Surveys of consumer confidence by the Conference Board and the University of Michigan continue to reveal widespread anxiety.

The rise in retail sales hasn't spared many stores from closing. Massachusetts-based TJX Cos. will shutter many of its Hit or Miss units, as will Philadelphia's Conston Corp. with its 16 Plus and 14 Plus outlets.

Restaurants, the great outlet for discretionary spending during the 1980s, are collectively witnessing tougher times. "No one is arguing but that there is a recession and it's impacting dining," said Tim Zagat, publisher of well-known Zagat restaurant surveys. "But the best places continue to do well."

Most of the good news has only begun to emerge in the past month or two, hardly a definitive trend. Unemployment has continued to get worse, jumping to 7.3 percent in February, the highest since the recession began and the worst in 6 1/2 years. But the latest figures also show that employers expanded their payrolls by 164,000 jobs -- more than expected. Unemployment figures could stay high, though, as companies that have laid off workers recently are wary about expanding and others that have announced intentions to lay off workers begin to cut their staff.

The massive pruning may be over. "We are experiencing less interest from the business community for meetings to plan layoffs and staff reductions," said John Stevens, managing director of the Baltimore office of Drake Beam Morin Inc., a national out-placement company. At the same time, he said, "in the first two months of this year we have seen a very definite increase in our clients who are being hired in meaningful jobs."

Equally encouraging, there are hints that the nation's financial system has begun to mend. The ever-increasing amount of bad loans appears to have finally peaked and begun to decline. Despite the massive write-offs needed to cover these bad debts, the capital position of the country's largest banks has, on average, steadily been rebuilt from close to 4 percent of assets in 1988 to almost 6 percent today.

Stringent cost controls and tighter credit standards have been instituted. Borrowers may also be getting more responsible: Mortgage and credit card delinquencies have recently declined.

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