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U.S. RECESSION INDICATORS ARE ALL POINTING SOUTH

When it comes to life's certainties, data revisions rank right up there with death and taxes.

With that caveat in mind, it appears the four indicators used by the National Bureau of Economic Research's Business Cycle Dating Committee to assess turning points in the economy have peaked.

Not by very much, mind you. And not for sufficiently long for the BCDC to make a determination that a recession has begun. The committee typically waits anywhere from six to 18 months after a recession has started to make it official.

As it stands, though, the four indicators are off their highs, with industrial production and real personal income less transfer payments peaking in September, real manufacturing and trade sales in October, and, most recently, employment in December.

"When all four kind of go south - as well as a fifth, Macroadvisers' monthly GDP index - it's a strong signal saying we need to start worrying," says Maurine Haver, president of Haver Analytics, a provider of databases and software products for economic analysis.

Start worrying? Worrying seems to be in full bloom. The economy has become the No. 1 issue for Americans in an election year, according to opinion polls.

Our elected representatives have heard the people's cries. The House of Representatives passed a $146-billion fiscal stimulus bill. The Senate Finance Committee has its version in the works.

President Bush and his Treasury secretary, Hank Paulson, are pumping out plans as quickly as aggrieved parties (homeowners, financial institutions, consumers, businesses) can ask for help, even as they tout the economy's fundamentals as "strong."

In other words, aside from a house of cards built on a mountain of debt, everything is fine.

To be fair, the recent highs in the four recession indicators are hard to discern on a long-term chart with the naked eye.

"They haven't really rolled over significantly," Haver says. "We are looking at values lower than a couple of months ago."

The same holds true for the monthly gross domestic product index compiled by Macroeconomic Advisers, a St. Louis forecasting firm, from the same underlying monthly source data the Commerce Department uses for its quarterly report. Macroadvisers' GDP Index peaked in September, according to Ben Herzon, a senior economist at the firm. The modest decline from September through November "is not conclusive," he says.

It may not be conclusive, but the prefix on "forecast" is there for a reason.

"Our bet is that the U.S. economy has entered a recession," Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago, writes in his latest published forecast. It's a recession that will be "dominated by weakness in household spending," defined as the sum of personal consumption and residential investment expenditures, he says.

Some economists are adamant the U.S. economy isn't in or going into recession based on record new orders in December. After all, today's orders are tomorrow's output. Industrial production may yet exceed its September high.

It isn't likely to be sustained, given the tightening of credit standards, pullback in spending and signs of softer demand from overseas. This isn't the backdrop of a healthy economy.

But current indicators may fall victim to data revisions as well. Those changes may turn peaks into valleys - or mole hills into mountains.

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