Finally Some Good News

I've been meaning to write about a book I read over the summer called Ahead of the Curve by Joseph H Ellis. It's by far the best book on the economy and the business cycle that I've ever read. Mr. Ellis was a retail analyst at Goldman Sachs for 30 years. In his book, he uses charts that measure different parts of the economy that go back to 1960. They track year-over-year percentage differences. Everything is measured the same way over the same time period, and measured against each other, so you can see how one part of the economy affects the other.

The book was written in 2004, but the really nice thing about that is the charts are constantly updated here. According to Mr. Ellis, the first sign of a recovery after a recession is an upturn in real wages, followed by consumer spending. Real wages are defined as the buying power of the dollar. With falling commodity prices it makes sense that real wages would be rising. Rising unemployment is a trailing indicator and therefor meaningless as an indication of recovery. The real wages versus consumer spending chart is here. Notice the green line at the extreme right of the chart.

We're still at least 2 months away to know if this really means anything. Real wages need to keep rising in order for consumer spending to turn. But, it's the first good sign I've seen in a very long time.