Macroeconomic Advisers forecasts Q4 GDP at +2.9%, Q1 at +4.0%

As of Thursday, January 20, 2011, 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 growth for Q4 will come in at +2.9% and +4.0% for Q1. That Q4 number is still only near 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. Meanwhile, a Bloomberg survey of economists pegs Q4 GDP growth at +3.5%. I would note that GDP gets reported over a three month period with two revisions which can vary significantly, so it actually isn't clear whether people are necessarily referring to the initial estimate due this coming week or the final report due in March. I would also note that the MA forecast is usually fairly close to the next official report. So, maybe Q4 will initially be reported at +2.9% this coming week and then revised up to +3.5% or so in March.

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

Last month 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 19 months old, slightly longer than the duration of the recession itself.

Real GDP is roughly back up to the level it was in November 2007, just before the recession began. This is still about 1% below the GDP peak in January of 2008.

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.

It is also worth noting that a significant portion of the recovery is somewhat artificial and the result of temporary government "stimulus", so it may take a couple more years before the recovery is truly "real."

-- Jack Krupansky

ECRI Weekly Leading Index rises again

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 this week from 128.1 to 128.9, it's highest level since the first week of May, and the WLI annualized growth rate rose moderately, from +3.6% to +4.1%, its highest level since the third week of May and its fifth consecutive positive reading since May, and now well 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 in December 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 of 2010, and modestly lower than the level of a year ago (131.0) when the recovery was underway in earnest. It may take another month or two (or three) before the WLI rises above its level of April of 2010. At that point private sector growth will have replaced the surge/reverse of the 2010 census temporary hiring.

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, and for how long?
• 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, pre-housing boom levels?

Now we need to factor in a fifth wildcard:

• What impact will Republican fiscal activism in Congress have on the economy, if any? It could work both ways, either cutting government spending to the point of throwing the economy into an even deeper recession, or putting the government back on a firmer fiscal footing that inspires renewed financial and economic confidence. My view is that it will net out and be more of a sideshow to the overall economy even though balancing the federal budget is an important and laudable goal.

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 (or in some cases even years.) 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 thirteenth payment to pay down the public debt of the U.S. government

I just made my thirteenth monthly payment to pay down the public debt of the U.S. government. In other words, I just finished my first year of this. It wasn't a large payment, just another $25, but it is a matter of principle, albeit mostly symbolic. It may take me another 47 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 $14,053,512,150,448.45, as of January 19, 2011, an increase of about $175 billion over 34 days, about $5.1 billion a day or $1.88 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.

Another note: A significant part of the deficit is businesses writing off losses from the financial crisis and recession as tax deductions. That may continue for awhile longer, but will gradually wind down and tax receipts from businesses will begin to pick up in the coming years.

-- Jack Krupansky

ECRI Weekly Leading Index dips slightly but 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, dipping this week from 129.0 to 128.9 (which is actually a slight rise since it was reported last week at 128.8), it's highest level since the first week of May, and the WLI annualized growth rate rose moderately, from +2.2% to +3.3%, its highest level since the third week of May and its third 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 in December 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 of 2010, and modestly lower than the level of a year ago (131.6) when the recovery was underway in earnest. It may take another month or two (or three) before the WLI rises above its level of April of 2010. At that point private sector growth will have replaced the surge/reverse of the 2010 census temporary hiring.

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, and for how long?
• 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, pre-housing boom 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 (or in some cases even years.) 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

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 128.0 to 128.8, it's highest level since the first week of May, and the WLI annualized growth rate rose moderately, from +0.8% to +2.2%, its highest level since the third week of May and its second 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 three 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 (130.6) when the recovery was underway in earnest. It may take another month or two before the WLI rises above its level of last April.

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 (or in some cases even years.) 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