My long term lead indicators were about as strong as they get over
the closing 5 months of 2008. They did signal strongly that the
economy could transition to recovery during Q3 ' 09. That plus
impulse may still prove correct, but a couple of troubling signs have
cropped up.
One of course is the powerful run up of the oil price so far in 2009.
It has doubled its low from early in the year as traders and some
commercial players anticipate an economic recovery. Now, the oil
price is extended and overbought short term, but one has to keep in
mind the inflationary impact that a sharply rising oil price has on the
cost structures of households and businesses.
The second point that requires attention is the real hourly wage in
the US. It remains strongly above the year ago level, but has been
flat since yearend, 2008 as wage rate moderation and mild inflation
pressure have eliminated progress. This too is a worry worthy issue
for the longer run. Right now, the tax cuts and a strong social
security adjustment are sheltering incomes. However, a rising fuel
and food bill can chew up these benefits over time. Now, in
the past, a flat real wage has often led consumers simply to borrow to
fund higher consumption. But we may not be able to count on that
in the short run this time.
These points add clouds to the outlook, but not storm clouds, at least
not yet. I have linked to a BLS chart on the real wage along with the
data. Chart.
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