Fellow Shortrunners,

     Given the myriad of mixed economic data, no one is clear on what to do with the US economy at the moment.  With fears of a double-dip recession, it seems that Congress is likely to pass another tax cut, costing somewhere in the range of $300 billion.  This is much smaller than the original proposal by the Bush administration.  The proposal had its wings clipped mainly by the lukewarm response of Federal Reserve Chairman Alan Greenspan who recently cautioned against large budget deficits.  As a republican, his blunt failure to support the administration's budget proposals took many off guard and swayed a portion of the right against sizeable cuts.  It also started a round of speculation as to whether Bush might look elsewhere in nominating a new Fed Chairman.

     This speculation is not new.  Analysts have often attributed Bush Sr.'s failure to be reelected to the jobless recovery of the early 1990's and an apparent lack of accommodative monetary policy under Greenspan to spark growth.  Fortunately for the US economy, there appears to be no further bad blood between the Bush family and the Chairman.  In both instances, it can be argued that Greenspan was in effect doing his duty as Fed Chairman, trying to remain independent of political pressures.  This is the mark of a good Fed Chairman, and the respect Greenspan commands in the market makes him equally valuable to the economy as a source of constancy.  His handling of several crises, including the Asian Financial Crisis has won him international support and thus credibly given the US Fed international respect and position.  It appears that the President recognizes this.

     On Tuesday, the White House said that Greenspan would likely be nominated to serve another term as Fed Chairman.  The new term would last until 2006 and make Greenspan one of the longest serving Chairmen in history.  On Wednesday, in a Federal Reserve press release, Greenspan suggested that he would accept the additional term if nominated and approved by the Senate.  The exchange between the Fed and the White House should silence speculation as to other possible successors for the time being and hopefully should provide greater stability to the financial markets in the short-term.

Economic Releases
The data section provides charts and data for the most important economic indicators.

Index of Leading Indicators: -0.2%
Release Date: 4/21

• The Conference Board's Index of Leading Indicators fell for the second straight month in March.  The rule of thumb applied by economists is that 3 consecutive months of decline in the index means that a recession is coming.  Given that there has been some serious uncertainty concerning the war and that March's decline was rather small, fears of another recession have been waning.

Durable Goods: 2%
Release Date: 4/24

• In spite of continued weakness in auto sales, advance orders for durable goods rose 2% in March, buoyed by government activity.  Private sector demand was still up, rising some 1.3% during the same period.  Continued strength in new orders is essential for the US manufacturing sector, which is looking to avoid another prolonged recession.

Jobless Claims: 455,000
Release Date: 4/24

• Initial jobless claims rose slightly last week from a revised 447,000 to 455,000.  The economy has yet to see any significant improvement in the labor market since the end of the war as many had been hoping for.  Continuing claims, a measure of long-term unemployment, rose on a week over week basis as well.

Gross Domestic Product: 1.6%
Release Date: 4/25

• During the first quarter of 2003, US GDP rose at an annualized rate of 1.6%, a slight improvement on the previous quarter.  Most growth estimates predict continued growth for the US economy and strong performance relative to the EU area and to Japan.  The release included weak consumer sales growth, declining business investment (bad news for longer term growth prospects), and few signs of price pressure.

New Home Sales: 7.3%
Release Date: 4/25

• After a week February in which sales fell over 3% (a revised figure from a much larger drop), new home sales expanded rapidly during March, rising some 7.3%.  The housing market continues to be a boon to the US economy and will likely remain heated as long as mortgage rates remain at historical lows.

Existing Home Sales: -5.6%
Release Date: 4/25

• March's existing home sales release was not as peachy as that of new home sales.  Existing home sales declined 5.6%, though still remaining historically high.  Furthermore, sales of existing homes showed strong price appreciation, something that has been worrying many economists because it could represent a housing price bubble.

ECRI Weekly Leading Index: 119.1
Release Date: 4/25

• The ECRI WLI edged off its large gain from the previous week, dipping from 119.4 to 119.1.  Economists for the ECRI remain optimistic about the future of the US economy and look to overall economic recovery in spite of a weak labor market.

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