Though their personal business experiences may differ, the directors of the First District believe that economic conditions are deteriorating and that the situation will steadily decay before improvement may be anticipated, given current policy. In September, the unemployment rate for New England was 7.3 percent; that of Massachusetts was 8.3 percent. In September 1973, these rates were 6.3 percent and 7.1 percent, respectively.

An informal census of business hiring policy has indicated that most large employers are releasing personnel. The figures confirm our reports on regional unemployment trends and foreshadow future erosion of the unemployment rate. Comparing the first eight months of 1973 with 1974, the liabilities of small business failures in Connecticut have increased from $13 million to $65 million.

Our directors also tell us of mixed corporate profit reports. However, they note that shortages are ebbing sharply in New England since demand pressures are abating. One large firm with "long order books" heretofore felt safe in pushing prices to maintain returns; recently, it was forced to rescind an announced set of higher list prices. Inventories are being generally reduced as well.

A major Massachusetts producer of cardboard boxes indicates that production is off 60 percent. One director asserts that this gives insight into the times, since virtually everything is packaged in cardboard and orders and production are geared to meet impending shipping requirements.

There is expanding activity related to aircraft engine and submarine fabrication. Defense contracts are important props for these lines. However, replacement jet engines and spare parts for private use play a critical role. Orders related to new aircraft production for commercial use are inconsequential.

The retail sales outlook is depressed. With a soft after-school season, it is hoped, optimistically, that Christmas will reach last year's figures. Major retailers in the Boston area have been announcing significant sales featuring winter lines. Supermarkets note an unusual customer sensibility to weekly specials and discount coupons.

Bankers report declining loan pressure. They indicate that deposit growth has stagnated, but a reflow of deposits to interest-bearing accounts is anticipated.

Professors Eckstein and Samuelson and Dr. Shapiro have provided their views this month. Each opened his remarks by noting the economy is not simply bad but worsening. Eckstein' s next forecast will show real GNP down 1 percent in 1975, business fixed investment off by 4 percent in real terms, output down at a 6-percent annual rate in the current quarter, and unemployment rising to 7.5 percent by mid-1975. Samuelson pointed to weaknesses which have been appearing in "boom" sectors such as paper and steel. Shapiro, who concurs that unemployment will reach 7 percent by spring, sees no prospect of a tax increase and an eight to five chance of a reduction. Samuelson cites Federal Reserve policy as a major cause of the weakness and disagrees with the minority of economists who have sought this amount of weakening in the economy. He feels the stagnation part of stagflation has gotten out of hand and accuses those of wishful thinking who think it will bring a rapid solution to our inflation problems. Those who emphasize that unemployment does not now cause as much hardship and suffering as it did at one time overlook that this is the very reason it is no longer as effective in dampening inflation. Samuelson argues for a 7-percent rate of money growth target. Eckstein and Shapiro advocate 5-percent to 6-percent money growth; both believe this would bring the prime rate to about 7.2 percent by spring. Shapiro would also like to see a 60-day wage-price freeze to be followed by a Phase II type of system of controls.