Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, June 11, 1993                   TAG: 9306110109
SECTION: BUSINESS                    PAGE: B9   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

MORE INVESTMENT AIMED AT MACHINES THAN PEOPLE

\ American businesses are spending their profits on machinery to enhance the productivity of existing workers rather than hiring more people, according to two government reports released Thursday.

Companies surveyed by the Commerce Department in April and May said they would increase investment spending on new buildings and equipment 6.4 percent this year. If realized, the increase would be the largest since 11.4 percent in 1989.

Meanwhile, the Labor Department said the number of Americans filing for unemployment benefits dropped a modest 2,000 to 345,000 last week. Claims numbers have fluctuated in a narrow range between 337,000 and 347,000 over the past seven weeks, indicating little change in the labor market.

"One suspects there is a connection," said economist Laurence H. Meyer, a St. Louis-based consultant. "Firms are reluctant to hire. They're trying to trim the number of workers. In order to produce with fewer workers, they need different equipment."

Businesses told the government they would spend $581 billion in 1993 constructing and modernizing buildings, installing new computers and upgrading and replacing other equipment and machinery.

In 1992, businesses' capital spending totaled $546 billion, up 3.3 percent from 1991, a recession year when spending posted a rare decline of 0.8 percent.

The 1993 plans are modestly down from the 6.6 percent increase planned in the first quarter.

"The underlying support for capital spending is coming from good gains in profits . . . and low interest rates," said economist Lynn Reaser of First Interstate Bancorp of Los Angeles.

At the same time, uncertainty over health-care costs and taxes has discouraged businesses from putting their profits into expanded payrolls, she said.

Equipment spending is one of the few bright spots in an otherwise sluggish economy. In the first quarter, it increased at a seasonally adjusted annual rate of 16.5 percent, the best gain of any major sector within the gross domestic product.

The survey offered these details on capital spending:

Manufacturers of durable goods, big-ticket items lasting three or more years, planned a 5.6 percent increase, while non-durable goods makers planned only a 0.2 percent rise.

Among industries with the biggest plans were stone, clay and glass manufacturing, up 29.3 percent; auto and truck manufacturing, up 16.6 percent, and electrical machinery manufacturing, up 14 percent.

The worst projected declines came in aircraft manufacturing, down 25.1 percent; airlines, down 16.4 percent, and rubber manufacturing, down 15.1 percent.

Overall, U.S. firms plan an inflation-adjusted rise in investment spending of 9.1 percent this year, the largest since a 15.8 percent increase in 1984.