ECRI Weekly Leading Index continues to show modest improvement

Continuing my ongoing but true "broken record": The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive and has almost started showing signs of life lately. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) continues to be relatively weak, but also continues to show modest improvement, rising moderately this week from 127.3 to 128.0, it's highest level since the first week of May, and the WLI annualized growth rate rose moderately, from –0.1% to +0.8%, its highest level since the third week of May and its first positive reading since May, and more than 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 fairly 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 recently "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." And just two weeks ago they said that "With both the WLI and its growth rate rising to their best readings since May, a 'double dip' back into recession remains off the table, notwithstanding self-serving recession warnings that feed fear itself."

The WLI is clearly showing signs of life, but is still well below its peak of 134.7 in April, and modestly lower than the level of a year ago (130.4) when the recovery was underway in earnest.

A year ago we had had a massive bulge of stimulus, including the hiring of census workers, which peaked and is now rather dissipated. The slightly 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 remain weak for awhile, but 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:

• When 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?
• How much more will state and local spending and employment decline as these governments continue to shrink down to sustainable levels?

Still, even with all of those clouds hovering over head, the outlook for the U.S. economy is at least reasonably positive.

BTW, all of the financial turmoil in Europe (which is mostly just talk of financial trouble) will result in very little negative impact on the U.S. economy.

BTW #2, state and local government revenue, spending, and employment (and debt too) have already been on my radar for quite some time. There is no new and different impending crisis beyond the severe economic drags that have already been known for many months. And contrary to some claims, there is no "complacency" on this issue. State and local governments do have a lot of painful decisions to make, but their fortunes follow from the overall U.S. economy rather than drive it. As national employment gradually recovers, state revenues will then show incremental improvement.

-- Jack Krupansky

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

I just made my twelfth 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 (and 263 million years beyond that) 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 $13,878,837,351,150.62, as of December 16, 2010, an increase of about $159 billion over 36 days, about $4.4 billion a day or $1.62 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. We'll stumble our way in that general direction. That's the way we do things in America.

-- Jack Krupansky

ECRI Weekly Leading Index continues to show modest improvement

Continuing my ongoing but true "broken record": The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive and has almost started showing signs of life lately. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) continues to be relatively weak, but also continues to show modest improvement, rising moderately this week from 126.5 to 127.4, it's highest level since the first week of May, and the WLI annualized growth rate rose moderately, from –1.4% to –0.1%, its highest level since the last week of May, and more than 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 fairly 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 recently "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." And just last week they said that "With both the WLI and its growth rate rising to their best readings since May, a 'double dip' back into recession remains off the table, notwithstanding self-serving recession warnings that feed fear itself."

The WLI is well below its peak of 134.7 in April, and modestly lower than the level of a year ago (130.8) when the recovery was underway in earnest.

A year ago we had had a massive bulge of stimulus, including the hiring of census workers, which peaked and is now rather dissipated. The slightly 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 remain weak for awhile, but 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 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?
• How much more will state and local spending and employment decline as these governments continue to shrink down to sustainable levels?

Last week I had fifth wildcard at the top of that list, "Will income tax rates rise in 2011 and provide a new drag on the economy?", but with the tax deal signed, sealed, and delivered that is no longer a lingering problem.

Still, even with all of those clouds hovering over head, the outlook for the U.S. economy is at least reasonably positive.

BTW, all of the financial turmoil in Europe (which is mostly just talk of financial trouble) will result in very little negative impact on the U.S. economy.

-- Jack Krupansky

Macroeconomic Advisers forecasts Q4 GDP at +3.0%

As of Wednesday, December 15, 2010, Macroeconomic Advisers (MA), the group which provides the data on monthly GDP used by the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC), is forecasting that annualized real GDP for Q4 will come in at +3.0%. Q3 GDP came in at +2.5%. This is still at the low end of minimally acceptable economic growth 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.

Former Federal Reserve Chairman Alan Greenspan rubbed salt into the wounds of the double-dippers by telling Bloomberg that "The U.S. economy unquestionably has some momentum. The fourth quarter looks good. The growth rate could be 3.5 percent or more" for the final quarter of this year." Greenspan also told Bloomberg that he expected GDP growth of 3% to 3.5% in 2011.

The economic recovery  from the recession trough of June 2009 is now 18 months old, the duration of the recession itself.

Despite the progress of the recovery, we still have a long way to go  to get to full health with most of the 8 million workers who lost their jobs in the recession still looking for work. I continue to refer to this as a "mini-depression" even though the recession itself is long over. It could be five to ten years before all of those workers have returned to productive participation in the economy.

-- Jack Krupansky

ECRI Weekly Leading Index continues to show incremental improvement

Continuing my ongoing but true "broken record": The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive and has almost started showing signs of life lately. 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 125.3 to 126.4, it's highest level since May, and the WLI annualized growth rate rose modestly, from –2.4% to –1.5%, also its highest level since May, and more than 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 recently "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." And just this week they said that "With both the WLI and its growth rate rising to their best readings since May, a 'double dip' back into recession remains off the table, notwithstanding self-serving recession warnings that feed fear itself."

The WLI is well below its peak of 134.7 in April, and modestly lower than the level of a year ago (130.1) when the recovery was starting to get underway in earnest.

A year ago we had had a massive bulge of stimulus, including the hiring of census workers, which peaked and is now rather dissipated. The modestly 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 remain weak for awhile, but 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."

Five 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?
• How much more will state and local spending and employment decline as these governments continue to shrink down to sustainable levels?

Still, even with all of those clouds hovering over head, the outlook for the U.S. economy is at least reasonably positive.

BTW, all of the financial turmoil in Europe (which is mostly just talk of financial trouble) will result in very little negative impact on the U.S. economy.

-- Jack Krupansky