US Economic Indicators

Overview
On balance, the economic indicators are ever so mildly positive and  the trend downturn in
momentum for these various indicator composites bodes ill for 2013 without more quanti-
tative accomodation by the Fed, more aggressive lending by the banks and a willingness by
businesses to pay a living wage instead of handing out 1 - 2% wage increases to so many
workers. For business to stop impovershing the work force, The Fed and the banks need to
provide liquidity and credit to underwrite enough economic growth to help alleviate the
large slack in the labor market. Right now, cheapskate CEO's are damaging economic
potential. Official Washington needs to tread very lightly tightening fiscal policy next year.

Recovery progress has broadened out and the credit markets are thawing, but the economy
should still need policy assistance next year to draw more resources back into the game.
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Weekly Leading Indicators
The WLI I follow suggest that the economy is set either to grow slightly or possibly flatten out.
The trend of the WLI shows persistent growth deceleration from 2010 (confirmed by actual
performance). The volatility of the WLI has attenuated but is still above average on an
historical basis.

Monthly Leading Indicators
New orders measured by breadth have also been decelerating since 2010 and, like the weekly
leading indicators, are now less volatile. Improvement in orders is clear since the lull in mid-
year but has recently flattened out as manufacturing has lost momentum.

Weekly Coincident Incicators
The WCI composite is flat since making a cyclical peak in April.

Monthly Coincident Indicators
Fresher data will be available over the next couple of weeks, but my set of coincident
measures is up just 1.2% yr/yr compared to a normal solid growth measure of 3.0% yr/yr.
Distressingly, the real wage has been decelerating since late 2009, and is currently again
in negative territory. The recent expansion of consumer credit only partly reflects some
improvement to consumer confidence as many folks are using credit to buy essentials as well.
The Economic Research Institute uses indicators similar to the ones I use to argue that the
US is aleady in recession. ECRI has been good at cycles over the years although many
economists take issue with Their current call. ECRI's The Tell - Tale Chart is worth a read.

Longer Range Indicators
The longer term downtrend of real earnings because of very low wage increases for the rank
and file remains disturbing. At best, too many folks are being pushed to use credit to buy the
necessities. Continued pressure on the real wage undermines the visibility of the economic
recovery and increases business risk. A rising oil price has penalized real earnings and a
very sharp spike in oil / petrol prices could be fatal. A tougher stance from the US toward
Iran is likely next year and could well have economic consequences.

Fed bank credit and the monetary base have changed little for over a year. QE 3 has been
more nearly a dud so far, with the Fed having only fulfilled 50% of its QE pledge to date.
Private sector credit growth and broader measures of financial liquidity are improving, but
I think it is risky not to push QE 3 harder until credit and credit - driven liquidity show
more acceleration.

An ongoing ZIRP and positive yield curve would normally be cause for celebration of an
economic recovery / expansion. But the sluggish trend of broad liquidity expansion does
undercut the reliability of  ZIRP and the yield curve. The slope of the yield curve has
come down this year as a strong Treasury market reveals investor concern about the
economy's potential.