Wednesday, August 27, 2008


Has the U.S. economy started to enter a phase of stabilization? The following are indicators that point to this being the case.

  • According to the Commerce Department/U.S. Census Bureau orders for durable goods or big-ticket manufactured goods rose for a second month increasing in July by 1.3% over June, which posted an equal level of increase. The July increase included jumps in orders for commercial aircraft, motor vehicles and transportation equipment. (Read more.)
  • Consumer confidence is recovering. The Conference Board's index that measures consumers' moods rose to 56.9, which is the highest reading since May. The Conference Board's inflation expectation also dropped to 6.7%, the lowest level since March.
  • The US dollar is on the rise against foreign currencies.
  • Oil and gas prices are lower, and overall demand for oil in the US is down more than 5%.

When combined, these positive economic happenings indicate that we are starting to see signs of stabilization in the economy. Even with oil prices rising on fears that current weather issues could halt production in the Gulf of Mexico (where 25% of the US oil is produced), gasoline prices remain stable due to the aforementioned drop in consumption. This trend will give consumers disposable income that could be used for going out to eat, shopping for back to school, etc. This potential boost in consumer activity could lead to businesses needing to add staff, which in-turn would start to aid the labor economy. Given that current productivity levels are as high as they are, companies are likely going to have to add staff to meet the need of any increased demand for their products and services.

I am by no means trying to say that I believe we are solidly on our way to economic recovery as yet. The overall economy has a long way to go before we can use the good "R" word. Based on the information that is available, I personally think we are witnessing the economy beginning to stabilize. Once we experience a multi-month decline in the unemployment rate and the weekly jobless claims consistently fall below the 400,000 level, we can be confident that recovery has begun. I personally believe that this will come to fruition in 2009.

What are the key economic indicators that you watch closely and are important to your business or industry?