Economic Indicators

Recent economic data confirm the sudden tumble in the stock
market over the past 7 weeks.

Weekly leading Indicators
The rapid further decline in the weekly data sets portend a deep
and perhaps lengthy downturn. The steep fall in the weeklies is in
no small measure due to the blow out in sensitive materials prices.
Because these industrial commodities markets were bubbly and are
unwinding rapidly, I have some reservations about whether this
specific action overstates the case to the downside. But since
operating rates have fallen sharply in primary processing, we have
to respect the trend.

Monthly Leaders
The breadth measures of new orders received across the economic
spectrum have tanked over the past two months and are bearish for
the economy in the short run. We are seeing a global downturn here,
with the US the leader to the downside.

Economic Power Index
This index has improved slightly to about - 1.8% compared to recent
readings of -2.0 to -2.5%. Nominal wages are still holding up, and
pressure on the real wage is receding from a deceleration of inflation
pressure. However, since job losses have increased in momentum,
recovery of a depressed real wage is being somewhat undercut.
Creation of more slack in the labor market could eventually lead to
a softening of wage growth. Capital Slack -- a measure which
econometrically combines short term interest rates, the operating
rate and the employment rate -- is widening appreciably.

More Stimulus
President-elect Obama has under development a comprehensive
stimulus package to go forth to Congress upon his inauguration. It
is logical to assume that program component trial balloons may be
floated for assessment in the weeks ahead. Obama will need to
proceed carefully so as not to undermine W., as lame a duck as there
ever has been. Good test for Obama in journeying through the
corridors of power.