Economic Indicators

Leading Indicators
The weekly indicator sets remain at very depressed levels but
improved over the course of March. The indicators rose up through
the deep crash downtrend lines in force since mid-2008, and when
measured yr /yr, momentum, although depressed, has improved
steadily since Nov. '08. That's a decent positive. However, the
indicators themselves have not improved enough yet to call for a
positive reversal.

The monthly indicators too are depressed, but bounced up sharply
in March, reflecting a large rise in US manufacturing order rates.
The bounce in total new order breadth is the strongest since 3/03.
One swallow does not make a summer, but I'll take it for now.

Global new order breadth remains at very low levels with no
improvement despite the rise in US manufacturing. The global
new order data does show stabilization since last Nov., however.

The Economic Power Index for The US has weakened modestly
recently following a large positive surge since last Aug., when
inflation pressure fell away and allowed the real wage to rise
markedly. The real wage is still strong by historical standards, a
continuing plus for the economy. The employment side of the ledger
has turned awful, now -3.5% yr / yr through Mar. This is of
course undercutting purchasing power and the creation of slack in
the labor market can be expected to weaken the growth of the wage.
The decline of the full Power Index overstates the case as it does
not include safety net income from a more robust social security
payout and jobless benefits. Ahead, worker compensation will benefit
from a modest reduction of tax witholding -- a plus.

On balance, the sharp increase in the real wage has worked to
stabilize the economy despite a new consumer penchant to save more.
We need to see a continued more balanced approach between
spending and saving to see the economy regain more positive traction.

New mortgage purchase applications bounced positive in Mar. on
a seasonally adjusted basis -- another small but favorable sign.

My long term leading indicator remains positive and still signals
economic recovery by mid-2009. One indicator, the real oil price, is
turning negative reflecting a substantial recovery so far in 2009. You
have to watch this closely, as a speedy rise in the oil price, if
sustained, will ultimately damage the broader economy.

The capital slack measure shows a continuing large build in idle
economic resources and underscores why a substantial and vocal
contingent of economists want to see much higher levels of pro-job
government spending.