Friday, May 22, 2009

Just a quick thought on LEI 

Leading economic indicators were up 1% for April, and some reports indicate that this means the recession will ease. Not so fast. We are better off than many other countries (as James Kwak noted), but out of the woods is a stretch. We would want to see a sustained increase in LEI for a few months before we even forecasted an end to the recession is "soon". CBO director Doug Elmendorf is still pouring cold water on the economic outlook. I'm a little confused over his statement that somehow we get growth in the second half of 2009 but no improvement to unemployment until the second half of 2010. You can only get GDP growth by an increase in some inputs or by an increase in productivity, and their last economic forecast included a deceleration of productivity growth to 1.4% from 1.8%. What's going to increase GDP if not a pickup in employment? Investment?

The Fed forecast for GDP continues to revise downward, by the way.