Review and Outlook: 1978-79

Business: a time of test ahead

Large gains were made in 1978 for the third consecutive year in employment, output, income, and retail sales. Momentum was so strong at year-end that some forecasters were modifying their predictions that a recession was imminent. Again, the economy had shown unexpected staying power in the face of adversity. If activity continues to increase through March, as most observers expect, the expansion will have passed its fourth anniversary— remarkable longevity compared with past expansions. But a critical period of testing is certain in the coming months. Signs of strain can be seen in several areas.