There was good news yesterday for the administration in the government's last economic report before the election. The Commerce Department reported a 2.4 percent rise in the leading economic indicators in September, the fourth consecutive monthly rise.
Last month's jump in the index suggested that the economy was firmly on the road to recovery from the worst of the recession. It followed rises of 1.7 percent in August and 3.6 percent in July.
"There is now a very substantial body of evidence that the recession has ended and the economy is growing again," said Courtenay Slater, chief economist for the Commerce Department. Asked about the potential damage to the economy from the recent sharp rise in interest rates, Slater said, however, "If the interest rate rise continues, it could become a serious threat to the recovery."
President Carter and administration officials have criticized both private banks and the Federal Reserve Board for the rise in interest rates, which has come at an extraordinarily early stage in the economic recovery. Slater commented that she was "a little puzzled" by the rates increase. "In terms of any kind of economic analysis" they should not be so high, she said.
Most economists are predicting a fairly flat economy next year, after some continued growth in the present quarter. The recession, which began very steeply, appears to have ended extremely quickly. The economy as a whole grew by 1 percent at an annual rate in the third quarter of the year, after plunging into recession at a 9.6 percent rate in the second quarter.
Slater said she expects a further moderate rise in gross national product -- the total value of the goods and services produced in the economy -- in the final three months of 1980.
Although the housing industry could be hit by further interest rate rises, Slater said a substantial rise in residential construction is known to be in the pipeline after the summer jump in housing starts.
The index of leading indicators, which gives a guide to the future course of the economy, stood at 133.6 (1967=100) last month on the preliminary data, according to the Commerce Department.
Eight of the 10 available components for the index contributed to the overall rise in September: the lay-off rate in manufacturing, building permits, changes in sensitive raw material prices, new orders adjusted for inflation delivery times (vendor performance), stock prices, changes in liquid assets, average workweek. A slowdown in manufacturing layoffs was the most important factor in the 2.4 percent monthly rise.
The two components which declined were contracts and orders for plant and equipment, after adjustment for inflation, and the money supply.
Moreover, the impact of the economic slowdown was concentrated quite narrowly in particular regions and industries. The auto and housing industries were the main victims of the recession, with the northern Mid-west industrial states bearing the brunt of the slowdown.
Although there was some spillover into other industries, particularly durable goods, the recovery began quickly enough to limit the damage. Unemployment, which was forecast officially to go on rising throughout this year, has begun to fall, and the latest figures for unemployment insurance claims suggest that the jobless total could go on down this month.