Monday, February 16, 2015


     Our Index rose again in December. The + 2.26 preliminary reading for December is a good sign that the economy is on sound footing. It would also appear that wage growth is forthcoming.  Inflation remains low and worker productivity is still solid.
     The talk about a Federal Reserve rate hike later this year is concerning to us.  While a rate hike in the Fed Funds rate at this point in the economic cycle would not be a worry in the near term, any hike now could prove to be a mistake in the longer term.  What normally happens after a Fed Funds rate hike, is that about 9 months later the economy starts to stall and the economic cycle starts a downward movement. This course of action only makes sense if the Federal Reserve can spot a downward movement in economic activity, and therefore lowers rates before a recession occurs.  Unfortunately, the Fed's record for spotting a downtrend in the economy is not a good one.  It would be better if the Federal Reserve left interest rates alone until inflation (and our Index) rise to much higher levels before contemplating an increase in the Fed Funds rate.  

Sunday, January 18, 2015

JRB Economic Index up for 9th straight month.

      Our Index continues to climb.  The November reading of + 2.09 is up for the 9th month in a row. The unemployment rate continues to decline and gasoline prices have fallen below two dollars a gallon at the pump. The world economy is not growing as fast as in the United States.  The worry in Europe is that falling prices may lead to deflation and eventually a new recession in many European countries.

     The chances of a recession in the United States starting in 2015 is virtually zero.  It would be on average about nine months after the Federal Reserve started to raise short- term interest rates here, that a protracted downward bias in our Index would occur. After that, our Index would have to fall to a reading below minus one to validate that a recession had started.  Basically, recessions begin when the Federal Reserve raises short-term rates and fails to lower the rates again after the economy begins to weaken.  Let's hope this time is different.

Monday, December 15, 2014

Our Index Rises again in October

         The JRB Economic Index rose again in October. The new + 1.91 reading is a continuation of the recent trend in the Index. The U.S. consumer seems to be in a good shopping mood this holiday season. Recent events however are putting a damper on the good economic news. The price of oil is falling dramatically.  This is good news for U.S. consumers, as lower prices at the pump translates into a boost in spendable income during the Christmas season. Countries like Russia however, are not happy about falling crude prices.  Oil is a huge contributor to the Russian economy.  How low will oil prices go? At this point it's hard to say. Our guess is that within two years the price of oil will rise back to the mid-seventy dollar range as demand for crude oil rises over this period of time. 

     Our outlook for 2015 is that the Federal Reserve will be hard pressed to raise interest rates during the year.  With the global economy (ex the U.S.) experiencing lackluster growth, we can see the possibility that low inflation and low interest rates will be around for the foreseeable future. The truth is that the Fed should wait until inflation gets much higher before they begin to tighten.  The Fed knows how to cure inflation. They simply raise short term rates and inflation will subside. A Fed tightening coming too soon could lead the U.S. into another recession. Let us hope the Federal Reserve takes a well deserved vacation, and keeps the current Fed Funds Rate unchanged throughout the coming year.

Friday, November 14, 2014

Incoming Data Is Encouraging

          According to the Job Openings and Labor Turnover Survey (JOLTS), companies continue to hire more workers.  Job openings in August were the highest in nearly 14 years.  If this trend continues, we expect to see more job turnover in the future.  The more jobs available, the more confidence workers feel about leaving their present job and searching for a higher paying one.  This would be good because such turnover may lead to higher wages down the road. Real wage growth has been lacking in this recovery.  All-in-all, the economic climate continues to improve.

       Our Economic Index chart (above) is moving ever closer to the +2.00 range where it peaked last time. The last peak in our index was lower than the previous peak.  Will we see a continuation of the rolling trend or will we see a breakout in the index?  Only time will tell.

Thursday, October 9, 2014


The JRB Economic Index rose again in both July and August. The current reading of + 1.59 in August is a continuation of a recent trend in economic activity. The last two times the Index has risen above the + 2.00 line, a downward action has followed. Perhaps this time will be different. Only time will tell.  The economy seems to be trending in the right direction in recent months and perhaps the longer term picture is improving as well.

Tuesday, September 2, 2014


The JRB Economic Index rose to +1.25 in June, 2014.  The rise is a continuation of recent economic growth. Corporate income continues to rise and with it the stock market. Some wage growth in the coming months would be a welcome sign.  The Federal Reserve will probably not raise interest rates until the job situation improves.  We don't expect a rate hike until late 2015 at the earliest.

Friday, July 25, 2014

The Upward Trend Continues

The JRB Economic Index continues its upward trend. The May, 2014 reading of +1.09 indicates slow but steady growth in the economy.  The unemployment rate is declining and automobile sales are climbing. Let us hope this economic progress continues well into next year.