ISM index

The Double Nickel in the ISM was bad enough, indicating our current boom has all the elements of a recession, except for the numbers--yet. The price of Sweet Crude stands at $67.45/barrel, and Prices at the Pump are still going up. Chavez in Venezuela is taking Steps towards Nationalization of the Oil industry there. Nigerian rebels are still shutting off substantial output from there. Pending Home Sales here is 5% below last Year's numbers. We might stay with a ISM index reading of 55 or less for the rest of the Year.

What will this do for the Economy?
Understand that an Reading above 50 means expansion of the economy. But how good is the expansion? This Author estimates that every Point above 50 means about another 40k New Jobs created per month. A Reading of 55 gives Us about an increase of about 200k New Jobs per Quarter--suffering from the element of Job destruction as well, due to Job completions in Contract work, seasonal changes, Layoffs, Downsizing, Phase-Outs, etc.

Another element intrudes in the Above matrix--the Cost of Energy. Energy is required through every segment of Production, Distribution, Advertizing, and Retailing. The Energy Bill is huge, with multiplex payout through every Production segment. The exact price of Energy impact is debatable, with Product resilency evident only in its Price elasticity. Business Management and Labor Costs are resistent to reduction, and are even an impetus for Price increases as Energy Price increases impact their own personal Living Costs. Management will shut down Operations which are unprofitable, and Labor will accept loss of Job before loss of Wages. Energy Costs are currently high enough at present to cut 40k Jobs per month. An Index reading of 55 could mean slow strangulation. lgl