Today’s Glimmers of Economic Hope
Because I am optimistic about our economy, about Americans and about America, I have been writing about the “glimmers of economic hope” I see day after day, week after week, in our efforts to dig ourselves out of the economic mess we find our nation in.
Sometimes the glimmers are quite encouraging, sometimes they are faint, transient and hardly noticeable—but glimmers of hope they are.
Of course I am aware of negative economic developments; of temporary setbacks; of legitimate warnings that not everything is well; of purveyors of doom and gloom; and, alas, of those who would want our economy to fail.
This is a free country and Mr. Limbaugh et al have the right to hope for the worse.
But, by the same token, I and millions of Americans have the right to hope for the best for our country.
Of course, I am not an economic expert and I have made that abundantly clear.
While I periodically point to additional signs of recovery, the performance of the stock market over the past several months has been, in my lay opinion, one of those glimmers of hope.
And today was another such day.
U.S. stocks rallied again, sending the Standard & Poor’s 500 Index to 942, its highest close since November 5, raising the Dow Jones Industrial Average by 221 points to 8,721, the highest since January 8. The NASDAQ composite index rose 54 points, or 3.06 percent, to 1,828.
Let me hasten to add that there are many legitimate experts who still have some very grave concerns about our economy; who believe that the economy has not bottomed out yet; who foresee continued economic collapse; who even see us following “the Great Depression route.”
They view the ongoing market rally as a bear market rally. They predict continued volatility, say that we will be “retesting” the lows we have seen, and that such retesting could be frightening—that panic could return.
Most of these experts provide impressive theories and statistics to back up their predictions.
As a “non-expert,” all I can say or do is hope that the markets will continue to steadily move upwards, that other economic indicators will validate that our economy is truly recovering, and continue to highlight those glimmers of economic hope.
Here are today’s.
From Bloomberg.com:
Manufacturing in the U.S. shrank less than forecast in May as new orders increased for the first time since the recession began, a sign that companies are growing more confident the slump will end this year.
Spending on construction in the U.S. unexpectedly rose in April as the housing slump eased and more commercial projects got under way.
And globally:
China’s manufacturing expanded for a third month, driving stocks to the biggest gain since March and adding to evidence that the economy is recovering.
Europe’s benchmark Dow Jones Stoxx 600 jumped 2.9 percent, the biggest gain in two months, and the MSCI Asia Pacific Index advanced 1.9 percent to the highest since October. The MSCI Emerging Markets Index, up 61 percent the past three months, posted the steepest advance in almost a month with a 3.8 percent climb.
A U.K. manufacturing index rose more than economists forecast in May to the highest in a year, adding to signs that the recession may be past its worst.
Some are not at all convinced.
Donald Luskin, in his WSJ.com “Attention, Economic Optimists: Not So Fast,” has a cautious, albeit mixed message:
Today, our economy is definitely showing signs of coming out of a near-depression. Ironically, all our recovery has to fear is the recovery itself. What I mean is that there is the risk that recovery will get in its own way — that it could stall itself out before it really gets going.
We really are looking at the beginning of economic recovery here. The banking crisis is definitely over with the Treasury and its “stress tests” having finally blundered into a formula that has helped troubled banks get back on their feet. New jobless claims, historically an excellent coincident indicator of the end of recessions, appear to have peaked. New orders for capital goods have turned positive for the first time since before last summer’s financial crisis, and that’s an excellent leading indicator of an investment revival.
However, read his words of caution here.
My readers offer words of caution, too.
One reader consistently keeps me straight with doom and gloom news about the economy, and warns that “the day-to-day movement of the DOW is absolutely meaningless.”
Fair enough, but when one adds up all the “meaningless” upward movements of the Dow for the past several months and one comes up with a total upward movement of around 2,000 points, or close to 30 percent, from its lows since shortly after Obama inherited this mess, it is difficult to call them “meaningless.”
Anyway, let’s hope for many more of those “meaningless” upward movements of the markets and, more important, for additional favorable economic indicators that will eventually convince even the most skeptic readers that we are well on our way to recovery.
13 Responses to “Today’s Glimmers of Economic Hope”
Luskin has been foolish e.g. here, but I'm flabbergasted that he has such a nuanced point in this piece…a nuance that the Fed doesn't seem able to comprehend.
“The Fed is trying to achieve aims that are not internally consistent, namely, prop up asset prices by directing credit to preferred sectors, and create positive inflation expectations.”
Dorian — While I share in some form of optimism that we may be on the uptick of this mess, I'm not so sure anyone affiliated with GM shares in that optimism with today's bankruptcy. This from the NYT:
The company will also have to shed 21,000 union workers and close 12 to 20 factories, steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.
Forty percent of the company’s 6,000 dealers will close, the workers’ union will be forced to finance half of its $20 billion health care fund with stock of uncertain value in the restructured G.M. and bondholders, including many retirees, will get 10 percent of the equity, with warrants that could allow them to get another 15 percent.
http://www.nytimes.com/2009/06/02/business/02au…
That's a lot of people who most certainly are not all that optimistic, especially when the President says they are making a “sacrifice for the next generation”. This doesn't even account for all the parts manufacturers, or any other business that is even remotely related to GM. This most certainly is not very positive.
jchem:
Of course, the GM bankruptcy, with the resulting job losses and other heartbreaking ripple effects, is a tragedy—a national tragedy, I would say.
It is a consequence and sadly part of the economic crisis our country is presently going through.
Ditto for Chrysler, etc..
I just hope that some of these glimmers of economic hope we are seeing, including on a day with such other sad news, are real, lasting and will hasten our recovery and prevent any more similar catastrophes.
I realize, these glimmers, if lasting, have come too late for all those thousands of harworking GM and affiliates people.
Jchem:
Re-reading your comment, I now realize that you may have been commenting from a different perspective.
If you are saying that, regardless of any “glimmers of econonmic hope,” this wasn't a good day for GM workers and perhaps not a good day to be procaliming good economic news, you are correct.
While I did not consciously connect the two events, I should have been more sensitive to the timing of my post, and I apologize for any perceived insensitivity on my part.
Dorian
S&P closing Prices
Dow Jones swaps Travelers, Cisco for Citigroup, GM
Unemployment in U.S. Probably Surpassed 9% in May
Wait 'till the employment outcome of the GM bankruptcy…
I am sure that the 9.2% of the labor force that is unemployed are partying tonight because the DOW went up 200 points.
Thar's great news, Don Quijote
Thank you
You 're welcome.
Dorian — All I was saying is that sure, there are some glimmers out there and reasons to be a bit more optimistic than say, 3 or 4 months ago. I never fully understood the inner workings of the stock market or how it can be an indicator of anything; perhaps that's just my lack of knowledge. I've always felt that the number one barometer to the economy is unemployment. If people don't have jobs, the last thing they probably care about are the numbers of the stock exchange, polling data, or what anybody else has to say concerning the economy. Just as “all politics is local”, I get the sense the same may be true with regards to personal finance. If I don't have a job, nothing else matters. Fortunately, I do, but I cannot say the same for all the folks who just saw their livelihood crushed into bankruptcy.
jchem:
Thanks for your comments.
As I have made it perfectly clear, I hope, I am not an economic expert, just an ordinary American who is optimistic about America and our economy and, thus–rightly or wrongly–seeks signs to confirm such hope and optimism.
But you do pose an interesting issue: the rising unemployment and whether unemployment is a lagging or leading indicator of the economy.
I have to be frank, I don't know. But economists fall on both sides. Most claim that “unemployment is the most popular lagging indicator, because it shows whether companies anticipate things getting better or worse. If companies believe things are bad and getting worse, unemployment will rise. If they are more optimistic, then unemployment will fall”
There are others who feel that this “ain't necessarily so.”
For example, in “Employment a Lagging Indicator? Not Always. Using Outdated Economic Data and Trends for Future Financial Models. Just Because Stocks Rebound doesn’t Mean the Fundamentals are Good” you'll find an interesting discussion on this, and–as a bonus and as the title implies–also about “just because stocks rebound doesn't mean the fundamentals are good.”
http://www.mybudget360.com/employment-a-lagging…
Another piece, “Unemployment Not Lagging Indicators,” starts as follows:- “It is conventional wisdom pontificated ad nauseam on business channels like CNBC and Bloomberg that employment figures are “lagging indicators” of the state of a country’s economy.” and goes from there
. http://laborupfront.blogspot.com/2009/04/unempl…
But back to the GM bankruptcy and ensuing unemployment.
Seeing the market jump to some of the highest levels in a while, on a day whent GM formally files for bankruptcy and when tens of thousands of people lose and will lose their jobs, makes me think that the markets have seen this coming for a while, had already “discounted” this and that the impact on our economy and on jobs would have been worse had we not bailed out GM, and others, initially, and had we just let GM go under a few months ago, when our economy was in a much more dire state. Just a personal opinion.
But, as you say, “If people don't have jobs, the last thing they probably care about are the numbers of the stock exchange, polling data, or what anybody else has to say concerning the economy.”
Very sad and what a shame our country finds itself in such a state.
Thanks again,
Dorian — thanks for the links; I'll need to do a bit of reading.
As I mentioned above, I am optimistic; I'm just not sure what measures to use to justify it when there are so many conflicting ones out there. I'm really not sure what would have happened had we let GM go into bankruptcy in the beginning; it wouldn't have been good, that's for sure. On the other side of it though, the Feds could have saved billions of dollars that were otherwise thrown into the black hole.
Regardless, I'm an ordinary American as well and keep hoping for better days ahead for us all.
Jachem:
Perhaps we might have saved money by just letting GM (and others) fail back then…
But I am just concerned that the psychological/emotional. and even real financial impact of that happening, when we were at the verge of total economic collapse, might just have been too much for our national psyche, and the economy. We'll probably never know
Dorian
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