This is Bad Economic News

Factory orders fall 1.5% in February; Manufacturing sector remains sluggish as factories hold out for further developments in Iraq war. Quoting:

Orders for durable goods — items such as cars and appliances meant to last three or more years — fell 1.6 percent, a bigger fall than the previously reported 1.2 percent drop…Orders in almost all major categories of manufactured goods were down. Non-durable orders were also down, falling 1.4 percent, their largest decline since February 2002, the department said.

Unfortunately, unemployment increases tend to follow decreases in any (or in this case, all) of these numbers. With more unemployment and less optimistic expectations as a result of these numbers, it is rational for firms to further scale back their orders, leading to further unemployment and worsened expectations… It’s the type of situation where short-term stimulus (either from fiscal or monetary policy) is usually called for, especially with inflation not an issue. Instead, we have a tax plan that (1) skews the benefits upward, (2) is phased in over time, and (3) is not alleged even by its supporters to be stimulative in the short run (except perhaps insofar as it improves expectations of lifetime income–the permanent income hypothesis).

AB