Green Shoots and Economic Forecasting

The stock market is bellowing that "good times" are just around the corner. Economic commentators are telling us they see "better times" ahead.

Sure, there are some statistics that indicate that things are not getting as bad as fast as they were in the past, but it is hard to find the "green shoots" that imply a better future is awaiting us.

Optimism needs to be tempered by perspective. Just 5 months ago Obama's administration published a document on his stimulus plan that said that unemployment by early 2010 would peak at 8.8% without a stimulus package (and stay below 8% with it).

But the reality is that unemployment just hit 9.4% according to the Bureau of Labor Statistics.

Graph from Calculated Risk website
So why is there all this talk about "green shoots" and the worst being over? The stock market has had a relief rally (we aren't going into another Great Depression) and that has led some to think that the worst is over and everything is blue sky from here on out. Others, like Krugman, DeLong, Roubini, et. al. keep pointing out that this is the worst recession since the Great Depression and the recovery will be very, very weak. I guess that kind of glum news doesn't sell papers, so it doesn't get the media coverage.