Economic Indicators

Leading Indicators
Both weekly and monthly indicators remain positive, although
there has been modest loss of momentum in both categories. The
leading indicators are still signaling a "V" economic recovery.

Business Strength Index
This index has rallied strongly since early 2009 and indicates
economic output has turned positive. The Fed prefers to tighten
credit when this index rises up into a range of 130 - 140. Current
reading is 126.7.

Economic Power Index (EPI)
The index is built off wage and employment trends. The news is
not good here. After historically strong performance over Half 2
' 08, the real wage is now running a more subdued 2.4% yr / yr.
The job market is weak, health care insurance premiums have been
strongly boosted and deflation has subsided yr / yr.

Much worse, total civilian employment continues southward, and is
now down a hefty 4.4% yr / yr. From the late 2007 peak, 5.7% or
8.4 million people have lost their jobs. This puts the EPI at a weak
-2.2% through 10/09. The low yr/yr EPI reading contrasts with
the broader real disposable income measure of +0.5% for the
comparable period and shows you the importance of tax cuts,
higher gov. spending and the automatic stabilizers in supporting
recovery from the income side.

From a micro perspective, the stock market has rewarded earnings
rebounds from harsh cost cutting by pushing up company share
prices. From a macro perspective, this policy is proving injurious
for economic recovery potential as incomes and purchasing power
are being eroded at home. Moreover, without a turnaround in
hiring, there will be pressure for another sizable gov. stimulus
program to counter the growing weakness of employment.
In the short run, companies are pleased with an abnormal surge in
productivity growth, but in the long run, the economy and the stock
market will suffer without stronger employment. Smart micro,
dumb macro. Employment link.*

Capital Slack Measure
This is a measure of the degree of idle resources in the economy.
It incorporates plant utilization, idle worker levels and interest
rates. This measure is at its lowest since prior to WW 2, and
reflects the depth of the recession experienced.

Global
The global activity and leading indicator measures are up sharply
in 2009, and very much mirror the US experience. The indicators
suggest the global economy bounced from deep recession mode over
Half 1 '09 and moved into recovery mode in Aug. Progress on
employment abroad has been much slower than the recovery of
output.
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* If link does not hold up, go to bls.gov employment series for
total civilian employment.