I use a very stripped down version of the coincident economic indicator to include real retail
sales, industrial output, civilian employment and the real wage. Measured yr/yr, this indicator
was a positve but modest 2.1% for Feb. '12. This compares to a much stronger 3.9% reading
for the 12 mos. ended Feb. '11. The indicator captures the substantial erosion of recovery
momentum over the past year. On a positive note, the momentum of the coincident indicator has
been improving since late 2011 on stronger sales, production and employment.
For the prior month, both real retail sales and production came in with moderate readings -- 4.0%
for production and 3.6% for retail. These are solid enough after 30 months of economic recovery.
The yr/yr pace of increase in employment has moved up to 1.8% -- its best showing during the
recovery -- but 2% or a little stronger would be more representative of a nicely improving labor
market. The real wage declined yr/yr by 1.0% through Feb. and is still too weak to provide
solid support for consumer confidence. Under normal circumstances, where business properly
recognizes stronger labor productivity, the real wage should be advancing by 2% and the current
dollar measure by 5%. Imagine the outrage in the executive suites of corporations if directors
were handing out real wages that were headed down.
The US economy has ticked up here in early 2012, but a continuing negative real wage casts a
large cloud over the visibility of the economy going forward.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!