ECRI Weekly Leading Index continues to hang in there

I know, this sounds like a broken record, but it is true. The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) continues to be relatively weak, but also continues to show incremental improvement, rising moderately this week from 124.2 (revised up from 123.9) to 124.3, it's highest level since May, and the WLI annualized growth rate rose moderately, from –5.5% (revised up from –5.7%) to –4.5%, its highest level since June, and moderately above the psychologically important -10.0% level that some pundits (but not ECRI) view as the threshold for a recession. The bottom line continues to remain that the WLI has remained roughly flat since the beginning of July (a low of 120.4 in mid-July.) That is not great, but this is at least not a worsening of the outlook. The much-feared double-dip recession is being kept at bay. In fact, ECRI has "officially" made the call that there will not be a double-dip recession in the near future, saying that "With the WLI steadily gaining ground since the summer and now hitting a 24-week high, the much-feared 'double dip' has turned out to be a mirage."

The WLI is well below its peak in April, and modestly lower than the level of a year ago (127.3) when the recovery was just getting underway in earnest.

We had a massive bulge of stimulus, which peaked and is now somewhat dissipated. The moderately negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here for a couple of months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

Four big wildcards for the economy:

• Will income tax rates rise in 2011 and provide a new drag on the economy?
• Will unemployment initial claims finally fall off to a non-recessionary level?
• To what extent will Fed quantitative easing give the economy a boost?
• How big a drag on the economy will come as the original congressional stimulus package (two years old in mid-February) winds down?

-- Jack Krupansky

Macroeconomic Advisers forecasts Q3 GDP at +2.3% and Q4 at +2.0%

As of Wednesday, November 17, 2010, Macroeconomic Advisers (MA), the group which provides the data on monthly GDP for the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC), is now forecasting that annualized real GDP for Q3 will come in at +2.3% and Q4 at +2.0%. These are rather sluggish growth rates, still somewhat below the 2.5% rate that most people would consider the minimum for a healthy economy. Nonetheless, the economy is still growing and recovering from the financial crisis and recession of 2008.

Those "hoping" for a double-dip recession will continue to be disappointed.

The economic recovery  from the recession trough of June 2009 is now 17 months old, 1 month short of the duration of the recession itself.

According to my own calculations based on the MA data, the level of annualized real GDP for the month of September (the most recent month provided by MA) was –1.46% below the peak of GDP in January 2008. At its worst in the recession, in June 2009, GDP was down –3.66%. In other words, we have recovered 60% of the GDP loss. Despite lingering employment problems, that is a reasonably strong recovery of GDP.

-- Jack Krupansky

Made my eleventh payment to pay down the public debt of the U.S. government

I just made my eleventh monthly payment to pay down the public debt of the U.S. government. Not much, just another $25, but it is a matter of principle, albeit mostly symbolic. It may take me another 46 billion years to pay it all down all by myself at this rate (and assuming the deficit went to zero immediately), but, as I said, it is a matter of principle and a sense of personal responsibility. It is our debt, not somebody else's.

According to the U.S. Treasury web site, the total public debt outstanding was $13,719,547,683,746.40, as of November 10, 2010. It was $13,615,674,949,267.90, as of October 7, 2010, for an increase of about $104 billion over 34 days, about $3.1 billion a day or $1.12 trillion per year (annualized daily deficit.)

Here is what I wrote back in January 2010 when I made my first donation/gift/contribution/payment:

Everybody is whining and complaining about the ballooning debt of the U.S. government, but who is actually doing anything about it? Well, for starters, ME! Yes, that's right, I, Jack Krupansky, just did something to reduce the U.S. government debt. Really. No kidding. I actually paid down a small slice of this debt. Granted, it was a rather small slice, but a slice nonetheless. Okay, sure, it was only $20, but the point is that at least I am one of the very few people willing to stand up and DO something about the problem, rather than be one of the whiners and complainers who refuse to acknowledge that it is their debt and their problem, not just the fault of mindless politicians in Washington, D.C. After all, every politician ultimately answers to voters and most of the so-called wasteful spending of the U.S. government is simply politicians responding to the demands of their consistituents (voters.) Maybe my one small contribution to paying down the debt won't really make any difference to any of those whiners and complainers, but for me it is a matter of principle. I consciously choose action rather than the inaction and lack of responsibility of the whiners and complainers.

If you have any sense of principle, you too can pay down a slice of the U.S. government debt yourself at Pay.gov. You can pay via credit card or debit transfer from a bank account.

So do the right thing and show all those whiners and complainers (including so-called "tax protesters") how mindless and spineless they really are. PAY DOWN THE DEBT! And that has to start at the grass roots with us individuals before politicians will ever pick up the lead.

For the record, the only real way out of the deficit is not to merely cut expenditures or raise taxes or some combination of the two, but through economic growth, which includes a healthy amount of immigration in addition to unemployed workers going back to work and young people entering the work force. Sure, we need to manage the federal budget more carefully as well and make difficult choices about the size of government and tax rates, but the big focus has to be on achieving sustainable economic growth. In truth, nobody, including all of the Nobel laureate economists, knows what that sustainable rate really is or how to get there.

-- Jack Krupansky

ECRI Weekly Leading Index continues to hang in there

The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) continues to be relatively weak, but also continues to show incremental improvement, rising moderately this week from 123.1 to 123.9, it's highest level since May, and the WLI annualized growth rate rose moderately, to –5.7% from –6.5%, moderately above the psychologically important -10.0% level that some pundits (but not ECRI) view as the threshold for a recession. The bottom line is that the WLI has remained roughly flat since the beginning of July (a low of 120.4 in mid-July.) That is not great, but this is at least not a worsening of the outlook. The much-feared double-dip recession is being kept at bay. In fact, ECRI is "officially" making the call that there will not be a double-dip recession in the near future, saying that "With the WLI steadily gaining ground since the summer and now hitting a 24-week high, the much-feared 'double dip' has turned out to be a mirage."

The WLI is well below its peak in April, and modestly lower than the level of a year ago (129.1) when the recovery was just getting underway in earnest.

We had a massive bulge of stimulus, which peaked and is now somewhat dissipated. The moderately negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here for a couple of months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky