A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.



Rebate Checks Too Late to Avoid Recession

Tax rebates are starting to arrive in bank accounts. But many economists doubt that they will keep the economy from recession.

The stimulus package, passed with overwhelming bipartisan support earlier this year, will give rebates to about 130 million Americans, costing the U.S. Treasury more than $110 billion. Married taxpayers earning $150,000 or less will get up to $1200 while single taxpayers earning $75,000 will receive up to $600.

But since the measure passed Congress, there have been growing signs that the U.S. economy has already fallen into recession.

"This is will not avert a recession, because it is too late," said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. "For this to have kept us out of what was an avoidable recession, it needed to happen a couple of months ago, in January or February."

In the past three months, employers have cut 232,000 jobs from their payrolls. The unemployment rate has climbed to 5.1% from 4.7% as recently as November.

Another 80,000 job losses are forecast to be reported in the April employment report this Friday, according to economists surveyed by, while the unemployment rate is expected to climb to 5.2%.

In addition, leading retailers have reported disappointing sales. Auto sales have tumbled 8% from year-earlier levels in the first quarter. Home prices and sales have also continued their slide.

Finally, rising food and energy prices have hit consumer confidence. With that in mind, Achuthan thinks that people who will be receiving rebates will probably use them to pay bills or deal with a tighter budget brought on by higher prices. In other words, there won't be the type of incremental spending that could actually spur the economy...