Economic Indicators

The weekly leading activity indicators remain in solid uptrends but momentum has cooled
very recently reflecting some volatility in unemployment insurance claims  and in industrial
commodities prices. The monthly leading data show a very sharp acceleration in the breadth
of new orders over the past three months. The US economy is off to a firm start in 2011, although
the recent strong momentum of retail sales may cool as the quarter progresses.

My economic power index -- yr/yr% in real hourly earnings + yr/yr % in total civilian employment --
remains a paltry 1.3% before adjustment. When I add in $ of extra hours worked and the 2%
cut in payroll taxes, the EPI rises to 3.6%, which is a solid enough reading as long as you
remember that one cannot simply count on an extension of a lower payroll tax after 2011.

Civilian employment, which tends to lead the payroll data, has increased by more than 200K
in each of the past two months following an extended flat period. Should the civilian data
accelerate to the 240K per month level in the months ahead, we would have an encouraging
sign that employment growth was returning to a more nearly normal level for this stage of the
economic upturn.

The Fed has added over $40 bil. to the total of Fed Bank Credit over the past week or so. The
Fed is still running behind on a straight line projection of the QE 2 $600 bil. package, but it
is encouraging that the Fed has stopped dithering and has resumed the program. I continue to
recommend that They pick up the pace of Treasuries purchases.