This post is a guest  contribution by Asha G. Bangalore * of The Northern Trust  Company

The main theme of the opinion piece by Representatives Hensarling and Ryan from Texas and Wisconsin, respectively, in today’s Wall Street Journal (Jeb Hensarling and Paul Ryan: Why No One Expects a Strong Recovery - WSJ.com) is poor economic policy choices of the current administration. To make their case they focus on the Reagan administration’s successful economic policies. The success/failure of economic policy choices can be measured by various metrics. It is well known that the federal budget deficit as a percentage of GDP during the Reagan years has been the largest in the entire post-war period ending 2008 (see chart 1). Therefore, from a fiscal perspective, the perceived success of economic policies of the 1981-1988 period is not a resounding success.

The following appeared in the November issue of Business Diary Botswana:

Despite the IMF’s recent projection that Botswana’s economy will contract 10.3% this year, the lender expects a 4.1% uptick next year such that emergency funding would not be required. Back in June the country tapped a $1.5bn “budget support loan” from the African Development Bank–the largest such facility ever granted by the Bank–in order to finance part of a budget deficit then estimated at around 13.5% of GDP, and since revised to 14%. The IMF cited a renewal of demand for diamonds as a central facet of its optimistic forecast. Furthermore, it predicted, GDP growth across sub-Saharan Africa will rise to approximately 4% next year and 5% in 2011, up from 1.1% in 2009. “We think it should be possible for sub-Saharan Africa to recover quicker this time around and have a ‘V-shaped recovery,’”

Northern Trust posted a short comment yesterday on the Fed’s announcement to reduce the term of discount window loans from 90 to 28 days, effective January 14, 2010. To put this decision in historical perspective, the Fed increased the maturity of discount window loans from overnight to 30 days on August 17, 2007, and again to 90 days on March 16, 2008.

Asha Bangalore, economist of Northern Trust, argued that the need for discount window loans had decreased significantly from the period following the collapse of Lehman Brothers (see graph below). “This [Fed's announcement] marks the beginning of a gradual withdrawal of the extraordinary support the Fed has extended to the global financial system as signs of stability have emerged,” she said.

Source: Northern Trust - Daily Global Commentary, November

The US Labor Department announced yesterday that the unemployment rate had risen to a 26-year high of 10.2% in October - an increase of 0.4 of a percentage point, even though the labor force contracted as well.

The graph below, courtesy of Chart of the Day, illustrates the unemployment rate since 1948 and provides some perspective on the current state of the labor market. As shown, Friday’s increase above the 10% level marks only the second time such a move has occurred during the post-World War II era.

Closer analysis of the chart indicates that the unemployment rate is a lagging indicator, peaking after the end of a recession. However, in the case of the previous two recessions the rate only peaked several quarters later following an improvement in real GDP. Asha Bangalore (Northern Trust) said: “A similar case is projected for the current recovery.

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Northern Trust (Nasdaq: NTRS) has been named the Best Overall Hedge Fund Administrator by HFMWeek in the magazine’s inaugural U.S. Service Provider Awards. The awards recognize

This post is a guest contribution by Asha Bangalore * of The Northern Trust Company.

The recession is behind us. Real gross domestic product of the U.S. economy grew at an annual rate of 3.5% in the third quarter after a 0.75 drop in the prior quarter. This is the first increase of real GDP after a string of four quarterly declines. Real GDP has declined in five out of the six quarters of the recession.

The Business Cycle Dating Committee of the National Bureau of Economic Research will make the official announcement after it confirms the turning point based on revisions of economic data. This recession is the longest on record in the post-war period and the deepest also. Real GDP has declined 3.8% from the peak in the second quarter

Investors are approaching the week with “itchy trigger fingers”, according to chief investment strategist for Northern Trust, Jim McDonald. After last week’s housing and manufacturing data checked the market’s 7-month advance, the pits are wary going into a week set to be dominated by more reports on leading economic indicators.

The Labor Department’s monthly report due out Friday will be paramount to many, addressing concerns over unemployment. Compounding the uneasiness will be reports on industrial output, pricing, consumer confidence, factory orders and construction spending. Investors will also be watching for new outlooks in anticipation of 3Q earnings data next month, which should indicate the relative health of companies.

Last week’s losses were chalked up to poorer-than-expected performance in commodities, home sales and durable goods orders. The DJIA, S&P and NDAQ were down roughly 2% by week’s end, despite encouragement from the Fed and a seemingly rosy unemployment report showing job

This post is a guest contribution by Asha Bangalore* of The Northern Trust Company.

The tone of the policy statement and details are largely close to expectations. The federal funds rate was left unchanged at 0%-0.25%. The statement reiterates Chairman Bernanke’s opinion that an economic recovery is underway, representing a significant departure from the August policy statement which noted that “economic activity is leveling out.” The outlook for inflation remains favorable in the Fed’s opinion due to “substantial slack” in the economy. In addition, the stability of longer-term inflation expectations was cited to rule out the case of an inflationary threat.

The last paragraph of the Fed policy statement is devoted to the outlook of monetary policy. The Fed left the stance unchanged to read as follows: “The Committee will maintain the target range for

As mentioned before, Paul Kasriel, award-winning chief economist of Northern Trust, rates highly on my list of must-read economists. Sharing a review of the economic outlook, Paul has just published a PowerPoint presentation entitled “The shoals of depression have been avoided, but the economy still faces strong headwinds”. I found it useful to flip through the slides, and I am sure you will also enjoy them.

Click here to access the presentation.

Source: Northern Trust, September 2009.

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This post is a guest contribution by Asha Bangalore* of The Northern Trust Company.

The National Bureau of Economic Research (NBER), the arbiter of business cycles, officially announced the trough of March 1991 on December 22, 1992 and the trough of November 2001 on July 17, 2003. Based on this history, there is a lapse of roughly 20 months before the Business Cycle Dating Committee has announced the date of a business cycle trough. Real gross domestic product had risen in the second quarter of 1991 (see chart 1) and the fourth quarter of 2001 (see chart 2) and stayed positive until the next recession.

Real gross domestic product is projected to show an increase in the third quarter of 2009. Real gross domestic product is a quarterly estimate.