On the first, the recession will not be mild if case precedent holds, particularly if the Economic Cycle Research Institute's (ECRI) weekly leading index is predictive. The index fell to a record-low -29.2% last week from -28.2% registered earlier in the month. It was the index's lowest reading since 1949.
A turn in the ECRI's leading index would suggest that the U.S. economic cycle has bottomed, so says economist David H. Wang. So far, there's little indication of a turn.
On the policy front, a consensus appears to be forming that the Obama Administration's fiscal stimulus package should be upwards of $400-500 billion. If that's the case, it would please Wang.
"Given the amount of wealth and income taken out of the economy by the decline in housing and stock prices and job lay-offs, we will need a stimulus of at least $500 billion to counteract the major contraction forces affecting the economy," Wang said. "And the more concentrated the stimulus, from a time standpoint, the better. A $500 billion infusion over three months would create more GDP bang for the buck than two $250 billion packages spread over five or six months."
Wang actually wants a larger stimulus package -- upwards of $600 billion. At this juncture, it's not likely that the new U.S. Congress will go that high, "but it may be needed, followed by another stimulus package in about nine months, if the economy still is not in recovery mode."
Economic Analysis: As one might sense, jobless claims weighed on the record-low ECRI's weekly leading index. Further, given the depth of the U.S. economic downturn, probably a GDP contraction of 2.5-3.0%, substantial stimulus will be needed to create robust growth conditions. Mild U.S. economic growth conditions will simply get the U.S. economy back to zero GDP growth -- not nearly enough to increase revenue / earnings at an adequate rate, nor enough for a nation with an expanding pool of adults eligible for work.
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Reader Comments (Page 1 of 1)
12-01-2008 @ 11:25AM
Virgil Bierschwale said...
Articles like this one never cease to amaze me and the reason why is that you are looking for the American economy to bottom while our companies continue to offshore our jobs.
The reason that it won't bottom until we stop the offshoring is because the American consumer accounts for 70% or more of all purchases from American retailers, manufacturers and raw material producers.
No matter how much credit you throw at people or how many stimulus checks you throw at them, it just plain won't work because people need jobs.
My estimate is that we are between 15 to 20% unemployed right now.
Using a figure of 200 Million working age people, 20% would be 40 MILLION people that can't contribute to the American economy.
Even at a 50,000 per year average salary, that is a large amount of money that our communities, counties, states and country are missing that is needed to meet their budgets assuming a tax rate of 25%
And if you take 75% of that amount away from our retailers, manufacturers and raw material producers, you will quickly see why they are coming hat in hand asking for bailouts.
We are doing this to ourselves and all that is necessary to stop it and make America prosperous once again is to put our people back to work making things.
But to continue using the methods of measuring the economy that worked before is ludicrous because the main ingredient (the American consumer's Money) has been greatly diluted and you need to allow for this change in figures, yet nowhere do I see a report that shows me from the IRS the reported salaries for EVERYBODY broken down by age group.
It would be very interesting to see a chart that shows the last 60 years average income and average income by age group and average income by blue collar or white collar
Where do we track this stuff ?
How do you plot a strategy when you don't even have accurate data ?
Virgil
http://www.KeepAmericaAtWork.com
12-01-2008 @ 1:07PM
Marc said...
Why is it that only irresponsible and negligent people and organizations are being helped out? Why are stupid people being rewarded while financially responsible individuals will be left holding the bag while their stupid counterparts go riding off into the sunset with their bailout bought houses, boats, and cars?
Why should I be paying taxes to support this kind of incompetent behavior? Bailing out people who outbid me on houses with ridiculous prices that did not reflect real values and now causing inflation to eat into my wealth is capitalist how?
How about anyone that doesn't get a bailout or works for an industry that got/gets a bailout doesn't have to pay taxes for the next thirty years?
People need to lose their houses left and right; companies need to fail left and right. All that will happen if there are not consequences for these actions is that the house of cards will be supported artificially and will grow larger, just to collapse harder. I pity the generation that will suffer for the outright incompetence of the baby-boomers, aka, "The Most Irresponsible, Incompetent, Degenerate, and Selfish Generation".