Today I want to do a quick follow-up from the other day, when I wrote about the Economic Cycle Research Institute’s Weekly Leading Index. A couple of weeks ago, the growth rate for the leading index was at plus 4%, the first positive reading in two years and a definitive sign that the economic recovery was on track.
Most people didn’t believe that, considering the awful June employment report and news of continued layoffs. But employment has always been and will always be a lagging indicator–while it’s probably the most important measure of how people feel and of their personal financial situations, it’s useless as a leading economic indicator.
Since my write-up, a couple of additional data points have been released, and the Weekly Leading Index is growing even more positive–its growth rate has leaped from plus 4% to 6.2% to 7%! And if the recent surge in the stock market (which itself is a leading economic indicator) means anything, there’s no reason that the growth rate can’t get into the double digits, signifying a powerful recovery.
Again, the economy and the stock market are two different animals, so I wouldn’t use this data as an excuse to buy stocks. But I have found it personally useful, allowing me to shrug off the seemingly endless barrage of bad economic news and opinions out there, especially among my friends.
So next time people are dragging you down with worried outlooks on the economy, tell them to drop the pessimistic attitude and listen to the facts at hand. Things are getting better!
What about rising number of new lows?