Growing uncertainty over the strength of the current recovery is beginning to make some economists edgy about the outlook for 1978.
While no one is predicting an outright recession, some analysts, both within and outside the Carter administration, set greater-than-expected sluggishness ahead during the latter part of next year.
Increasingly, economists are beginning to harbor doubts about whether the administration will be able to meet its goal of keeping output growing at a 5 per cent rate - the pace needed to make any serious inroads against unemployment.
"We shave our '78 forecast the last time we revised it, and we'll probably do it again this time," said Otto Eckstein, a former Johnson administration economic adviser, now heads Data Resources, Inc. a forecasting firm.
Eckstein's most recent forecast called for a likely growth rate of 4.9 per cent for 1978, down several tenths of a percentage-point from his previous prediction. This time, he estimates that could drop to just over 4.5 per cent. Some other forecasters' figures are lower.
The gloomier mood is worrying the Carter administration. If the economy does slow to below a 5 per cent pace in the second half of next year, analysts say it could mean the unemployment rate would stop declining and could even edge up again.
The administration's present position is that the pessimism is unwarranted and is merely worrying businessmen and consumers unnecessarily. Charles L. Schultze, President Carter's chief economist, stressed in a speech Tuesday that the recovery still is strong.
However, Schultze added quickly that if the economy does begin to lag, further measures may be needed. And some lower-level administration economists already have begun to urge that the White House make contingency plans in case of a prolonged lull.
Walter W. Heller, economic adviser to the late President Kennedy, says flatly a $15 billion tax cut will be needed to keep the recovery on its course. He also urged in an interview that the Federal Reserve Board cae its money and credit policy to aid the recovery.
The increasing nervousness represents a visible shift from the mood only a few weeks ago, when economists generally were more confident about the outlook in late 1978.
The short-term forecast then was for a brief "mini-pause" this quarter, as the economy made its transition from the frenetic - and unsustainable - pace of the first part of the year. Then, the growth rate was supposed to bounce back and remain strong in 1978.
The consessus now, however, calls for even more sluggishness during the current quarter, with the growth rate most likely slowing to a 3 to 4 per cent pace, rebounding to between 4 and 5.5 per cent in the final three months of the year.
But economists seem divided over what will happen in 1978. While most forecasts show the first quarter hewing to a 5 per cent rate, some point to a visible tapering-off in the quarters that follow.
"The forecasts now are all over the lot," said a government analyst who has been keeping track of the predictions, Alice M. Rivlin, director of the Congressional Budget Office, agreed, "It's a very mixed picture," she said.
At least part of the new edginess stems from the latest Commerce Department survey on business investment intentions - the most recent indication of likely performance in this key sector of the economy.
The report, which showed investment likely to grow by a moderate 8.1 per cent (after adjustment for inflation), had been looked to as a benchmark for 1978 forecasts.
The problem is, it wound up neither eliminating nor confirming the doubts. While the growth rate and pattern of the expected investment was enough to rule out much serious deterioration of the economic situation analysts saw little to suggest any further pickup.
Moreover, other recent economic statistics have been decidedly discourating.The August unemployment figures showed an unexpected jump back to 7.1 per cent of the work force; inventories accumulation has been falling off, and consumer spending has been ebbing somewhat.
"The fact is that the past couple of months have shown some very soggy economic statistics," said Arthur M. Okun, former Johnson administration economic adviser. "After that kind of performance, any reasonable man has to feel somewhat less confident about the 5 per cent growth target."
Schultz conceded in his speech that the pace of the economy has been "a disappointment." But he and other forecasters assert that the underlying position of the recovery still is solid. The only question is on that small - and crucial - difference for 1978.
Officials say the question of more stimulus could be addressed, indirectly, as early as this week, when a mid level administration task force is expected to conduct another routine review of the economy.
Schultze and others still insist that no additional stimulus is needed. Administration economists point out that the economy will receive a sizable spur soon from the President's jobs and public works program, parts of which are scheduled to take effect in October. Moreover the White House already is considering allowing an effective tax cut of about $15 billion or so in the tax revision package President Carter is scheduled to unveil in October.
But that, too, is a point of disagreement among economists. While some, like Heller, say the taxrevision measure would be sufficient, others point out that congressional passage in 1978 would mean the tax cut would not take effect until January, 1979 - possibly allowing several months of extreme sluggishness late next year.
Further, not all analysts believe the outlook is all that dim, George L. Perry, a Brookings Institution economist, contends that despite the recent setbacks, the administration's 5 per cent growth target for 1978 "still has a reasonable chance" of turning out to be "a good number." And Okun counseled against "tearing up the forecast and starting all over." As of now, he said "I call myself a nervous bull."
For the short-run, economists seem agreed that the outlook does not merit any serious alarm. Murray L. Weidenbaum, a former Nixon administration economist, points out that investment still is improving, if not dramatically; housing starts are strong, and state and local government expenditures seem on track. Other analysts share that view.
Whether these prospects, along with the expected stimulus from the coming tax-revision proposals, will do the job is a judgment that policymakers will have to make in the next few months, as the administration prepares its January budget. Meanwhile, doubts over the economy's performance in late 1978.