So what state is America in?

IT FEELS like there are nearly as many statistics to help measure the state of the US economy as there are mosquitoes buzzing around the Florida Everglades. Four wet and warm hurricanes have caused an explosion in the birthrate of those pesky insects. The prospect of a nail-bitingly close Presidential election has led to an explosion in statistical analysis trying to find out whether the world's largest economy is improving or heading further south.

Politicians, analysts, economists, journalists and others are trying to make their voices heard and their opinions matter as 2 November draws closer. Polls show that the US electorate believes the economy is as big an issue as Iraq, so it's no wonder the spinmeisters are out in force. Of all the hard figures that are analysed, none is as important as the monthly job creation numbers and the unemployment percentage. They come out at the same time, and are usually the only ones that can motivate newspaper editors to move an economy story from the business section to the front page.

The last release of the two pieces of data before the election takes place tomorrow. The figures, for September, will be muddied because of the hurricanes and their disruption of the economies in the south-eastern United States, but no one is sure how they will be affected. Were more jobs created for the cleanup or did more people file unemployment claims as their jobs were shut down because of the devastation?

Job dissatisfaction

The consensus estimate is that the economy created 150,000 jobs in September and that the unemployment rate will be unchanged at 5.4%. If that is the case, it will mean the country will have 763,000 fewer jobs than when President Bush took office four years ago. He will be the first President in decades to stand for re-election without creating a single job.

His challenger for the Presidency, John Kerry, will try to ram that point home tomorrow when the second of three debates between the two candidates takes place. He will also point out that 150,000 jobs are not enough to sustain the organic growth of the US workforce.

Bush's take on the jobs data will be to say that most of the job losses came at the start of his term and were a result of the dot com bubble bursting. He will say more than a million jobs have been created this year.

The ballooning of the federal budget deficit will also be a topic tomorrow. The Treasury Department has reported that the deficit hit $436.9bn (£245bn) - a record high in dollar terms although not as a percentage of gross domestic product - in the first 11 months of the fiscal year ending on 30 September. The deficit was 9% larger than the $400.5bn for the same period last fiscal year. Estimates are the deficit will get a little better in the short term before ballooning to $2.3 trillion over the next 10 years.

The prospect of short-term improvement led the White House to say that it was 'a sign of the economic growth that is a result of President Bush's leadership on tax relief'. Kerry replied: 'Only George W Bush could celebrate over a record budget deficit of $420bn.'

Nice idea, but what about the detail?

Both camps say they want to cut the deficit in half by 2009 but experts say neither side has a viable plan. Bush wants more tax cuts and Kerry wants to increase spending, particularly in health care, and neither side adds the costs of Iraq and Afghanistan into the equation. 'They're really both sort of in denial,' says Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group.

While the budget deficit has not been totally ignored by the media, there has been little serious analysis of the huge trade deficit and its knock-on effect on the current account deficit. Last year's trade deficit of $489bn was partially funded by US trading partners lending the US money to pay for imports, causing the current account deficit to grow to $542bn or 4.5% of GDP. It's even worse this year. The US Commerce Department says the trade gap with China alone is running 28% ahead of last year's $124.1bn and this has driven up the current account deficit to a record 5.7% of GDP.

A worrying deficit

That deficit has experts worried. 'That's like a corporation running up everincreasing negative cash flows, or like a homeowner paying for his monthly expenses out of his mortgage account. The more they spend, the more they owe,' says Annex Research president Bob Djurdjevic.

'Prosperity based on everincreasing indebtedness is an illusion of prosperity. It is fool's gold.'

Says Steven Roach, Morgan Stanley's global chief economist: 'Never before has the world's dominant economic power lived this far beyond its means.'

The doomsday scenario is that foreign banks will stop buying US securities, driving down the value of the dollar and forcing the US Federal Reserve to prop it up by raising interest rates. That in turn will stop consumer spending dead in its tracks and throw the country into recession.

But consumers are happy

Consumers, meanwhile - happily unaware of their role in such a scenario - have continued to spend, using cash from inflated property prices to buy as much as China and Japan can manufacture. That may be changing though. Retailers are reporting growth at the lower end of their expectations, and consumer sentiment surveys show declines.

The fact the jobs market hasn't come back and petrol at $50 a barrel translates into $2 a gallon at the pumps - a huge price when an SUV only gets 12 miles to a gallon - is undermining confidence. The Conference Board, a forecasting organisation, recently said its index of the mood of US consumers fell to 96.8 from 98.7 in August.

With the holiday shopping season set to begin three weeks after the election, retailers are hoping the Bush Administration and Fed chairman Alan Greenspan are right, and that the slowdown in jobs growth in the summer and the knock-on effect were just temporary setbacks. Most of the evidence is to the contrary. GDP is down from 4.5% earlier this year to 3.3% in the third quarter and the bond markets, by keeping interest rates low, are telling Greenspan he is wrong.

The Fed chairman though is not alone in his 'emporary slowdown' view. Bear Stearns chief economist David Malpass says: 'We think we are in the early stages of a multi-year expansion characterised by solid US and global growth.'

He sees an upbeat future, fuelled by falling unemployment, global growth and continued benefits from tax cuts.

But his colleague Francois Trahan, the company's chief investment strategist, reads the tea-leaves differently: 'Leading indicators of the economy will likely continue to lose momentum for the remainder of the year into 2005.'

Confusing, yes, but no matter how the politicians and economists develop their spin, it is difficult to find any surveys or statistics that show anything other than a troubled economy.