By Leonard Rhoades

Federal Reserve Chairman Ben Bernanke summed up the US Economy well by making this profound statement, “We’re not out of the wood yet!” A recap of March 2010 economic news would support that statement as the economy has shed over 8.2 Million Jobs since the start of the recession. However, with that said, revisions for January and February report showed upwards of an additional 62,000 jobs created. By far the best news came in March 2010 with the non-farm payrolls report showing an additional 162,000 jobs created. Everyone with a brain understands the need for jobs for without workers generating production and purchasing goods how sustainable can any recovery really be. Evidence by the stock market advances it appears Wall Street anticipates job creation being further stimulated sometime this year.

A continued bright spot for the US Economy seems to be indicators that continue to show positive strength such as the ISM manufacturing and non-manufacturing. Some would argue that these two indicators should be monitored closely for any potential future economic strength or weakness. The ISM Manufacturing Index is released by the Institute of Supply Management which tracks the amount of manufacturing the prior month. The most recent reading was the strongest since 2004.

The big news no doubt came from Washington as Health Care reform passed making history. How this will translate to the economy know one at this point really knows. Providing health care for some 32 Million Americans currently going without has to be considered a huge relief. However, without question many pundits would argue the potential tax consequences could offset Health Care reform benefits. Considering the current federal deficit of over 1.4 trillion the argument of adding further burden could cripple the economic recovery…keep in mind much of the health care reform benefits do not take affect for several years.

Our own proprietary signal for the economy provided a normal reading for the month of April 2010 = 47.78

Recession Probability Analytics is a quantitative, completely mechanical and emotion free way of looking at the strength of the US Economy. When the reading is high, it warns of coming slow – downs and serves as a warning sign to investors. While its use is flexible, it is generally a good idea to use caution when investing in higher risk US assets, such as stocks and high yield bonds when the reading is in red. When the indicator reads “above 50″ we feel there is a high probability the US Economy will worsen in the following month, and therefore, stocks should be invested in with caution. Generally, when this occurs, we reduce stock exposure by 50% on our investment strategies. When the indicator reads “below 45″ we feel there is a high probability the US Economy is within its normal range and therefore should be able to sustain growth.

• Recession Probability Analytics Factors
• Case-Schiller Home Price Index
• Initial Jobless Claims
• Chain Store Sales
• TED Spread (difference between 3 mth. Labor and t-bill)
• Fed Funds Futures
• Core Capital Goods Orders
• Survey Of Business Confidence
• Consumer Comfort Index