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'Big Ticket' Orders Drop 4.2%; Raises Fears for Jobs

June 23, 1989|From Associated Press

WASHINGTON — Orders for "big ticket" durable goods plunged 4.2% in May, the steepest drop in 10 months, the government said today, raising fears that if the decline persists factory workers will lose their jobs.

Durable goods include a wide range of items, from washing machines to warships, expected to last three or more years. Economists track the orders closely as a measure of the health of the industrial sector and of the impact of interest rates on the economy. Persistent weakness is liable to lead to layoffs at manufacturing plants.

The plunge in May "means fewer people will be needed to make things, whether it's planes or cars or washing machines," said economist Cynthia Latta of Data Resources Inc. in Lexington, Mass.

However, analysts were less alarmed by the May report than they would normally have been because orders had surged in April and because May was heavily influenced by a sharp decline in orders for aircraft and parts that still left that category at strong levels.

Rose in March, April

The Commerce Department said orders for durable goods fell to a seasonally adjusted $124.0 billion after climbing a revised 3.2% in April and 1% in March. The April increase had previously been estimated at 3%.

Excluding the volatile transportation sector, which swings widely from month to month, orders fell 2.1% in May, rose 4.5% in April and climbed 2.6% in March.

Analysts generally agree that the economy is slowing this year, but there is considerable controversy over whether the growth will continue, albeit sluggishly, or whether the country will topple into a recession.

Durable-goods orders now have fallen in three out of the last five months and their level remains $5.9 billion below the high of $132.1 billion in December.

"It doesn't resolve the issue, but I think these negative numbers certainly raise the specter of recession in people's eyes and make them much more attuned to the possibility than before," Latta of Data Resources said.

Although transportation orders in May showed the steepest drop, 9.4%, orders were weak in the other sectors as well.

Primary metals, including steel, dropped 1.5%; electrical machinery was down 4.5%, and non-electrical machinery fell 3.4%.

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