Tuesday, May 11, 2010

The US Recovery

Poor Daniel Gross. He is working hard at being a cheerleader for the US economic recovery, but bad news keeps pushing the good news off the headlines.

Here's a bit from Gross's latest article on Slate magazine:
Amid all the dreadful economic news last week—the European meltdown, the insane trading glitch, the oil spill—it was easy to forget just how good the jobs report was. The report is one piece of data, and subject to revision, and you can't make too much of it. But jobs rose by 290,000, with 231,000 of those gained in the private sector. The unemployment rate increased to 9.9 percent largely because people flooded back into the job market.

And the jobs trend is just as encouraging. The Bureau of Labor Statistics revised February and March job numbers upward, from -14,000 in February to +39,000, and from 162,000 in March to 230,000. I have been arguing since December that the combination of GDP growth and unsustainably high productivity figures would lead to strong job growth. Payroll jobs have now risen in five of the last six months, and the pace of growth is picking up steam. March and April 2010 have been the first two consecutive months of 200,000-plus jobs growth since November and December of 2006. (Washington Monthly's Steve Benen's "bikini chart" is starting to look less like a bikini.)

... Many analysts and market commentators have repeatedly had difficulty foreseeing a recovery given that housing is still poor, consumers are still struggling, and credit still isn't freely available. The reality is that the recovery has taken place in spite of housing, consumers, and credit. It's been led by business, investment, trade, and exports.

Business cycles get into a sweet spot when rising production leads to more jobs, which leads to more consumer spending, which leads to more orders for production. I wouldn't say we're quite there. But the business recovery is beginning to spill over into the consumer economy. Retail sales are coming around. The last piece of the puzzle to fall into place will be housing—still dependent on government support, still plagued by big problems. But there are signs that it may stop getting worse. On Monday, the Associated Press reported that the mortgage delinquency rate—i.e., the percentage of people behind 60 days or more on mortgages—"dropped in the first quarter for the first time since 2006, according to credit reporting agency TransUnion.
I'm a pessimistic optimist. I like to see good news even when it isn't there. The fact that I'm willing to admit that my optimism runs away on me is why I'm a "pessimistic" optimist, i.e. I'm realistic to know that my wishing for good news doesn't make it so. But I agree with Daniel Gross. The recovery is under way.

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