There is a growing economic spectator sport in this country: When will the U.S. economy get up off the mat and turn the corner? The answer is of more than casual interest to the 308,745,538 residents of our data-driven nation. Here are 11 key numbers you should be watching:
1. Consumer confidence. The most widely watched measure of how consumers feel about the economy is provided each month by the Conference Board, a business policy group. Would you believe that its confidence index stood at 111.9 in the summer of 2007? Now, it's less than half that level—52.5. But if we still have a long way to go before happy times return, at least we've made progress in the past two years. The reading in February 2009 was a dismal 25.3.
2.Number of initial weekly jobless claims. This number needs to keep falling if we are to make sustained headway against a truly chronic unemployment problem. The number has been headed down, and was at 388,000 nationally in the last weekly report of 2010. The U.S. Department of Labor also tracks jobless claims by location. You can check out trends in your state and see how it's faring. Healthy progress on the jobs front is a powerful harbinger of more consumer spending and tax revenues.
3. Gross domestic product (GDP). This is the most inclusive record of economic activity. The quarterly GDP reports tote up the value of all goods and services produced in the United States. Economists would like to see GDP growth in the 4 to 5 percent range during the early stages of a recovery. That would make a big dent in unemployment. But so far, we've had trouble generating even half that level of growth. During the third quarter, GDP rose at an annual rate of 2.6 percent. The current value of U.S. economic activity was running at an annual rate of $14.7 trillion during the quarter.
4. Consumer price index (CPI). As long as inflation stays low, the Federal Reserve can continue trying to stimulate the economy by providing business with credit at effectively zero interest rates. So far, the economy has been so weak that there has been little pressure on consumer prices. They rose by only one-tenth of 1 percent in November, and are up by only 1.1 percent during the past year. However, strong economic activity in China and other developing nations has raised price levels for raw materials and food, and we may see some of this inflation later in the year.
[See 2011 Tax Outlook for Seniors.]
5. U.S. Treasury bill rate. The three-month treasury bill is a convenient way to monitor current interest rates. It is not, however, a way for investors and senior savers to pad their assets. Yields on T-bills are now 0.12 percent, or an anemic one-eighth of 1 percent.
6. Household formation. According to an informative piece in the New York Times, a big cause of economic stagnation is housing, or rather the lack of it. The newspaper reported that fewer than 400,000 new households were formed in each of the last two years ending in March, compared with the typical average of about 1.4 million a year. Financially strapped Americans are staying put or moving in with parents or other family members. This raises the number of multigenerational households, but it doesn't add to demand for new housing. No new homes means no new construction jobs, no new appliances and furnishings, and all the other things that are produced and bought when a new household is formed. The pace of new household formation is a good way to spot a stronger economy.
7. Trade deficits. With U.S. demand weak, the big action in economic growth increasingly is shifting overseas. Hundreds of millions of consumers in China, India, Brazil, and other growth spots are prospering. Like their American counterparts, they want new cars, homes, electronics, and other fruits of the good life. If the United States wants to return to anything like the good old days, it will have to substantially boost its exports. Having run trade deficits for decades, this is no small task. The good news is that monthly trade deficits have been shrinking. October's imbalance was "only" $38.7 billion.
8. Federal budget deficits. Trade deficits are puny compared with the granddaddy of all shortfalls: the federal budget deficit. The deficit totaled $1.3 trillion in the budget year ended last September. Through the first two months of fiscal 2011, the deficit amounted to $291 billion. Each month of continued big deficits adds that much more fuel to the movement to cut federal spending and perhaps raise taxes. What's more, if the rest of the world doesn't soon see some evidence that the United States is serious about deficit reduction, the institutions and individuals holding trillions in U.S. government debt could turn nasty. That would mean higher interest rates, which of course would put yet more pressure on the deficit.
9. Forty-nine. Remember this number. It's the size of the Republican majority in the U.S. House of Representatives. If Republican leaders can control the behavior of their 242 Congressmen as well as they did last year it will have a big effect on legislation and, of course, the economy.
10. $2,840 and $6,448. Those are the beginning and ending annual drug expense levels in 2011 for the so-called "doughnut hole" in Medicare drug plans. The health reform law will provide hefty subsidies in 2011 for folks in the doughnut hole—50 percent off the price of branded prescription drugs and 7 percent off the price of generics.
11. Here come the boomers! As baby boomers begin turning 65 this year, we've seen a flurry of stories about 10,000 people a day celebrating their 65th birthdays and arriving at the long-predicted age of retirement. That's a "true fact," but a misleading one. The pace of births during the baby boom years was relatively small for boomers born in 1946 and picks up steam, peaking in the year 2025. This year, only about 7,600 people will turn 65 each day, according to U.S. Census Bureau projections. In 2025, the total is projected to be 11,690 a day. Also, Americans did not suddenly begin having babies in 1946. The numbers of people turning 65 began rising in 2007, and by 2010, averaged 7,170 a day. So all that boomer hoopla involves celebrating about 430 more 65th birthdays every day in 2011—a rise of 6 percent from 2010.