Top 3 for Monday

1. Data Dump Week, Keep Growth in Perspective: There is a breadth of economic indicators out this week, just not today. NFIB, Beige Book and retail sales are the most important releases. They all should show growth. They all should show there is reason to be optimistic. They all should not show enough growth to spurn job growth. The NYT had a Sunday article attempting to address why job growth remains sub-par given the record profits for most US companies.

There has been an increasing length of time between the end of a US recession and the return of the jobs lost over that recession. In 1990-91, it took 23 months. In 2001, it took 38 months. The article makes this sobering point: “At the current rate (of job creation), the economy will need 72 to 90 months to recapture the jobs lost during the Great Recession. And that does not account for the five million jobs needed to keep pace with a growing population.” This dichotomy between profits and jobs is not likely to persist as there will be an inflection point where stagnant employment reduces profits. A point all optimists should keep in mind.

2. China’s Exports Fall. The Chinese trade surplus missed expectations by a wide margin as exports dropped 37% to $13.1 billion. Exports were up 17.9% vs 2009 at $154.2 billion and imports climbed 25.6% to $141.1 billion. The fact that the imports kept up is a good sign that Chinese demand for goods and services will continue. The fact that exports dropped is a bad sign that global demand is falling and will eventually lead to slower Chinese growth.

3. Illinois Remains Debt Poster Child: From the land of Lincoln, we have a state struggling to figure out how to patch a massive $13 billion hole in its state budget. According to Thomson Reuters, Illinois bonds have the highest spreads to US Treasury debt of all the states. Last week, Moody’s warned of decreasing investor appetite for municipal bonds and Illinois was at the top of the list of which states could be hurt. The latest plan for solving the issue is to raise personal income taxes by 75% to 5.25% and to raise corporate taxes from 4.8% to 8.4%. The corp. tax hike coupled with other taxes will raise the effective Illinois tax rate to 11%.

Governor Pat Quinn and Democratic leaders thought they had a deal last week, but now it appears to be unwinding and may not be passed during the lame duck session that ends today. If passed, it will take the worst path for job creation as it doesn’t address any material spending cuts and discourages companies and individuals from staying in the state. Indiana is posting billboards close to the border inviting Illinois citizens and corporations to move.

This originally appeared on andrewbusch.com on January 10, 2010.