The Economic Cycle Research Institute is out with its monthly U. S. Future Inflation Gauge. ECRI has maintained this measure for over 60 years. It has fallen massively over the past 18 months and is back near its lowest level in history at 79.3, at about a 51-year low. Inflation probably averaged 1% in the next 5 years after sinking to that level, only rising after the guns-and-butter Viet Nam era (1964 onward).
ECRI also reports another marginal uptick in its Weekly Leading Indicator, which remains well below its very low level of November 2008 and still at a very severe 22% below year-ago level. This suggests a continued slowing of the economy through year-end, with stabilization at very low levels of economic activity.
I intend to do a post on the ECRI and its usefulness, or lack of such, to investors, in the near future.
Consistent with the above, there is truly bad news behind the headlines of the Labor Department's unemployment report. Not headlined are two data points. The average supervisory work week has shrunk to a record low since records began in 1964: 33.2 hours.
And, consistent with the lack of work available and the very low USFIG, January's unemployment number was revised upward substantially, from 655,000 to 741,000.
Labor Department's broadest measure of unemployment is U-6, which can be found on Table A-12 of the basic unemployment report available at www.bls.gov, shows that almost 1 in every 6 members of the labor force is either unemployed, underemployed or too discouraged by labor market conditions to bother actively looking for work. While comps are difficult to obtain, it would appear that the definition of unemployment used in the 1930s is more like U-6 than the headline U-3 (8.5% in March). Given that the Obama "stimulus" program has no relation to FDR's emergency work programs, it is virtually certain that U-6 will hit 18% sooner rather than later.
(Note also that ADP's March non-farm job loss count was 742,000, exactly the current Labor Dep't count of Jan. job losses. The ADP and Labor numbers have tracked each other very well for some months now (www.adpemploymentreport.com); expect further downward revisions in the Labor numbers for Feb. and March, I'm afraid.)
Moving along to the blogosphere, it is interesting to observe how certain passionate critics of the Bush-Paulson approach to the financial crisis have stayed objective after Mr. Obama became President, and others have kind of sort of joined "Team O" while trying at the same time to be interesting and objective.
Amongst the former, I would note Mish at www.globaleconomicanalysis.blogspot.com. He has a series of posts excoriating the PPIP and has not fallen for Team Obama hype. Mish is of the Austrian school of economics and has an amazing track record of forecasting the economic downturn and the low-inflation/deflation environment. He also is a darn good market timer.
Another blogger who was definitely in the Obama hope-change camp is Yves Smith of www.nakedcapitalism.com. She has definitively changed her tune, and her site is currently displaying a variety of well-informed opinions and reports. Here is a quote from Yves herself from the conclusion of today's post, Treasury Trying to Defend Bank Gaming of Public-Private Partnership:
The dishonesty of this crowd is just breathtaking. The Bushies were blatantly high handed, while Team Obama prefers the Big Lie and assumes we are all too dumb to see through it.
Well! Obama-phile no more, it would appear.
Finally, also on NC is the overlooked report that Hedge Fund Bridgewater Says No to Public Private Partnership Program:
Now illustrating our (Ed: Yves'/NC's) latest concern, that the Treasury may turn out to be the Gang That Can't Shoot Straight, our ongoing reservation, that there may be no way to make the program work for banks and investors even with hefty government subsidies, may be coming to pass. . .
The turndown by Bridgewater is particularly significant. (Ed: They only manage $80 B!)
Is this the beginning of the end for PPIP?
What Nouriel Roubini recently called the "Made-Off" economy, with Ponzi schemes built into the system of much greater scale than the Madoff one, is currently on a glide path to a 1995 level of economic activity, if one takes the numerical ECRI weekly leading indicator as predictive. Given potent deflationary forces and "crowding out" of private borrowing by the massive projected Federal deficits, the outlook for business remains unexciting, and when brilliant thought leaders such as Yves Smith start describing Team Obama as using a technique associated with Team Hitler, one should watch out for the public to gradually adopt that viewpoint.
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