How will the U.S. economy recover? Every pundit in the stock market has own opinion on this. Some experts thought that economy will recover in V shape, meaning that sharp plunge will be followed by sharp recovery. So far, it seems to be the case. Some thought that we will go thru U shaped recovery. Some argued that U.S. economy will recover only in W shape (sharp plunge + some recovery + sharp plunge + sharp recovery).  Some thought it could be L shaped or Square-root shaped.

Just when you think that you heard all predictions from stock market gurus, someone comes out with the prediction of “Reverse square root” shaped recovery! Greg Ip, U.S. economics editor for the Economist, thinks the recovery will be the combination of a sharp fall down, a sharp rise part of the way back up, and a long struggle.

I don’t believe in the “reverse square root recovery” theory. Economy is already turning around. Only missing piece is the employment. I see hiring picks up everywhere. We are having difficulty filling in some positions. Number of quality resumes we get also fell down in the recent weeks. My friend in M&A firm tells me that merger activities picked up lot of momentum in the last six weeks. At this point, I will just ignore the “reverse  square root recovery” prediction.

Here is some good news for Happy Friday! Economic Cycle Research Institute (ECRI) said its Weekly Leading Index’s annualized growth rate soared to a 38-year high of 19.6 percent from a downwardly revised 17.4 percent the prior week, a number which was originally 17.5 percent.

ECRI has good reputation in predicting economic cycle. ECRI’s Weekly Leading Index is a composite index key USA weekly economic series. The limited availability of weekly data constrains the number of variables in the composite index, but this has not hurt the WLI’s predictive power. The weekly frequency of the WLI makes it a very timely gauge of the economy’s direction.

“With Weekly Leading Index growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question,” said ECRI Managing Director Lakshman Achuthan, reinstating the group’s recent warning to ignore negative analyst projections. It appears that Obama team’s policies and strategies are working!

Related Link: No double-dip recession