Contact

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.

News

 

Stimulus: Now the hard part


President Obama on Tuesday signed the $787 billion American Recovery and Reinvestment Act into law.

But he's far from being able to declare "mission accomplished."

"Today does not mark the end of our economic troubles," Obama said before signing the bill at the Denver Museum of Nature and Science. "But it does mark the beginning of the end -- the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs; to provide relief for families worried they won't be able to pay next month's bills; and to set our economy on a firmer foundation."

Indeed, even though debate over the legislation was fraught with partisan fighting and what some characterize as strategic missteps by the nascent administration, getting the law passed was the easy part.

Far more difficult will be gauging whether the legislation's trademark initiatives -- which include improving physical infrastructure, investing in energy projects and providing financial relief for families by way of tax cuts and increased government benefits -- are really doing the trick.

The first step is to stem the recession in the near term. In the longer term it will be to put the economy on a path to sustained growth and greater efficiencies in energy production, health care and other areas.

So how will we know if it's working? What will be the signs? The president and economists say the biggest marker will be an improvement in the jobs picture.

"That's bottom line number one, because if people are working, then they've got enough confidence to make purchases, to make investments," Obama said last week before the bill's passage. "Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers. So step number one, job creation."

The official benchmark estimates from the White House: 3.5 million jobs will be created or saved over the next two years, and over 90% of them will be in the private sector.

But measuring the numbers of jobs saved as a result of the economic recovery package promises to be an elusive task...

As for gauging how many jobs are created, economists say they will keep an eye on a number of measures.

Lakshman Achuthan, managing director the Economic Cycle Research Institute, said starting later this year he will look to what his group calls its Leading Employment Index as one gauge of stimulus effectiveness. The index is a composite of factors, including the number of initial jobless claims and hours in the average work week, as well as how many industries are adding jobs. As of January, the index was still falling, Achuthan said...
VIEW THIS ARTICLE ON CNN