FOR MANY, THE PAIN CONTINUES.

          A large number of middle class Americans feel left out of this slowly growing economy. There are many more unemployed workers than there are job openings. Banks have raised their credit standards, making loans harder to get, and many homeowners are still underwater on their homes. According to the Labor Department, about twelve million Americans were still unemployed in February. The low interest rate environment hasn't helped these people very much.

          Meanwhile, the JRB economic index declined again in March. This marks the fourth straight drop in our index. The + 1.40 March reading is still in positive territory and seems to indicate a muddle through economy ahead. The Federal Reserve continues on its monetary easing policy with no end in sight. Until the Fed decides to raise short-term interest rates, the chance of a recession in the year ahead is nearly zero. Consumer spending continues to be the key to a faster growing economy, and the lack of meaningful job growth is hindering spending patterns.

                                                                

     Government spending cuts and higher taxes are being blamed for the recent economic weakness.  The housing data is also showing weakness. Homebuilders' confidence is starting to decline even as the inflation figures continue to point lower.  The Federal Reserve will surely continue it's monetary stimulus as the slowdown continues.

     The JRB Economic Index slid again in February for the third straight month. The current reading of + 1.60 indicates that the economy is slowly moving forward.  At this point, we still expect  the economy to bounce along as has been the case in recent years.

Index down slightly for second month in a row.

The JRB Economic Index fell again in January. The Index reading now stands at a + 1.71 and seems to be headed lower. The lower readings of late were to be expected. The economy is recovering slowly and we believe at this point that more of the same up and down pattern we witnessed earlier will continue going forward.

We would hope that the political hurtles going forward are resolved in a positive way and not inflict pain on our economy. The economies of many European  countries continue to weaken. U.S. exports nay suffer as a consequence. The one bright spot seems to be China. The Chinese economy continues to hum along. Meanwhile here in the U.S., interest rates remain low and the Federal Reserve is not likely to raise short-term interest rates any time soon. Therefore, a recession in this country is very unlikely in 2013.

Inflation expectations still low.

            The economy continues to grow slowly. Because of the continuing hangover from the 2008 recession, the economy is slowly moving in the right direction. The November, 2012 reading for the JRB Economic Index rose again and now stands at + 2.09. In ordinary times, a reading over + 1.75 would signal that inflation could become a problem in the year ahead. However, these are far from normal times. The unemployment rate is slowly falling but remains high by historical standards. The Federal Reserve has kept short-term interest rates near zero and the business community is worried about the economy going forward. For these reasons and some others not mentioned here, the consumer is not willing or sometimes not able to spend money the way they used to prior to the start of the recession. Our prognosis remains the same. The economy will slowly gain momentum in 2013 unless some unforseen event or series of events change the course of growth. Will we shut down the government again? Will the President and Congress act to solve the long term debt problem our country faces? Will the United States, Israel or both of us go to war with Iran? Let us hope for the best possible outcomes.

       Sometimes it seems like tracking the economy is like watching grass grow. The economy does indeed move slowly. And any change in course by the Federal Reserve will prove to have a major impact on our economy. As a reminder, when the JRB Economic Index is rising above the zero line, the economy is expanding. When the Index declines from a peak positive reading to a negative reading worse than minus one; then we know that the economy is in a recession that started sometime between the peak in the Index and the minus one reading. With a current reading of + 2.09, what would normally cause us to worry about inflation, is not currently of concern. Watch the Federal Reserve closely in the next eighteen months for signs that the Fed sees inflation as a problem going forward. Nine or ten months after a rise in the Fed Funds Rate we could see a signal that the  economy is losing steam.

Index basically unchanged for September

The JRB Economic Index finished the month of September basically unchanged at a reading of plus 1.71 and down slightly from the +1.75 recorded for the prior month. Is the Index about to start a decline? Only time will tell. The debate over the fiscal cliff seems deadlocked at this writing. We believe that no matter what happens in the short-term, that longer-term the outlook for the economy seems brighter. More taxes, higher gas prices and a slow growing job market worry many people. The truth is that none of these problems bring about recessions. Recessions are brought about by poor Federal Reserve policy on short-term interest rates. Just think back in time. When the Fed lowers rates, the economy improves over time. And when the Fed raises rates for too long a period, a recession is usually upon us. Rates are now very low and the Federal Reserve has told us it expects to keep rates low for the next year or so. Therefore, the worst that can happen to the economy is slow growth in the months ahead. And who knows, if the politicians were actually to agree on a long-term plan for our debt problems, maybe the new year will see material growth and a happy new year in terms of economic growth. We can only hope.

More Upward Movement

The August reading for the JRB Economic Index now stands at a plus reading of 1.76, and is a continuation of the recent trend of upward momentum. Indications point to a bumpy up and down economic ride in the months ahead. It is highly unlikely that a new recession is on the horizon over the next twelve months. The fiscal cliff dead ahead?  Stop worrying about it. Keep your eyes on the Federal Reserve. Once the Fed starts to raise short-term interest rates, the economy could encounter problems. However, since that prospect is way off into the future, the recent course of slow economic growth is likely to continue. It may well be that the economic growth rate picks up a bit more after the election.

Up Up and Away

The May and June readings for the JRB Economic Index are again pointing higher. The June, 2012 Index reading is a plus 1.54. We expect the Index reading to continue rising for the next several months. With the Federal Reserve holding interest rates low, the chance of a new recession beginning in the coming months is practically zero. Recessions just do not start with interest rates this low.

If the JRB Economic Index rises above the peak level attained last year, it could produce a bout of inflation. At that point the Fed will be forced to raise interest rates. At this point, we would not be surprised to see our Index continue  an up and down pattern above the zero line.