Bruce Yandle's Economic Situtation Report Special Edition - SC Digest December 2011

Time to take the Pulse

With 2012 just around the corner, it’s time to visit intensive care and check on the 2011 economy. It’s been a rough year. We began with 9% unemployment in January and seem to be ending with the same stubborn number. The patient has not responded to stimulus. In fact, Mr. Obama’s OMB doctors say we should learn to live with it. Nine percent seems to be new equilibrium. While the unemployment rate seems frozen in place, so it is with the Dow Jones. We move into December with January’s number.

When we check the charts more closely, we discover a whole lot of shaking going on. Consider the accompanying Institute of Supply Management’s (ISM’s) indexes for the manufacturing and services economies. Recall 50 is the neutral point where the economy is dead in the water. A value greater than 50 signals growth. Up to this point, the indexes have performed the equivalent of an economic swoon. Earthquakes in Japan, hurricanes and floods in the U.S., credit agency downgrades of U.S. debt, Washington Keystone Cops political rhetoric, and European economic tremors have taken their toll. No, we haven’t crossed the dreaded 50 and entered recession territory, but we are surely close. (And for the record, I’m betting the U.S. will not experience a recession any time soon, as in 2012).

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