ECRI Weekly Leading Index continues to show modest improvement
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.