The nation's economy is only slowing until the next wave of consumer spending inevitably lifts it again, the wisdom goes.

After all, bulls still rule Wall Street, consumer confidence hit a 29- year high last month, and the unemployment rate is near a 28-year low. Indeed, jobs are so plentiful that Federal Reserve Chairman Alan Greenspan frets about inflationary wage increases.

But at least one economist feels the 4.5% unemployment rate is masking the risky fundamental condition of consumers and should not be used as a guide to the strength or direction of the economy.

In fact, the low rate camouflages "disquieting" statistics on consumer debt, according to Lacy H. Hunt, a partner at Hoisington Investment Management Co., Austin, Tex.

Household debt equaled a record 92.4% of disposable income in the first quarter. (That excludes the imputed value of debt in the record level of vehicle leases. "The actual debt burden, inclusive of leases, could be in excess of 100% of disposable income," Mr. Hunt said. "Obviously consumers find these commitments difficult to manage.")

In the past four quarters, personal bankruptcies were at a record level, 75% higher than in 1994.

Delinquencies on home mortgages in the first quarter rose to 4.47%, the fifth gain over the past six quarters and the highest rate since the second quarter of 1991. In fact, that was the high-water mark of the 1990-91 recession.

For economic forecasters and policymakers, the hazards of relying on the unemployment rate for guidance seems clear. "No trade-off exists between the unemployment rate and inflation," Mr. Hunt said.

Besides leading to faulty conclusions about consumers, unemployment is a lagging indicator, not an advance warning sign of economic conditions, he said. Typically it does not rise until after the economy is in recession, nor fall until well after recovery has begun.

In short, if the Fed does nothing until unemployment rises, it probably will have waited too long to preempt an economic slump, he said.

Meanwhile, Mr. Hunt noted, forces unleashed by the Asian economic debacle are undermining U.S. economic growth and three forward-looking indicators suggest that U.S. monetary policy is too tight.

The Treasury yield curve has "flattened dramatically" over the past year and part of the curve has inverted-that is, the Fed-controlled overnight rate is higher in yield than longer maturities. This has been a recession warning for 40 years.

Total reserves of the banking system declined 4% over the past four quarters and have been falling since 1994. Sharp reductions in reserve growth have preceded all recessions since the early 1950s.

World dollar liquidity-the U.S. monetary base plus official foreign holdings of Treasury securities-fell 1% in the second quarter from a year earlier. Falling liquidity has signaled recession since 1976, when the official gold exchange standard ended and the era of the world dollar standard began.

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