Don't Mistake the Economy's Sparklers for Fireworks (WaPo thinks there's good economic news)

Washington comPost ^ | 7/3/2009 | Steven Pearlstein

[SeekAndFind]

As we officially enter the second half of 2009, some stock-taking is in order.

Has the economy hit bottom, and is the recovery about to begin?

Is it safe to get back into the stock market?

Is it time for businesses to stop cutting and start investing?

Can the government begin letting up on monetary and fiscal stimulus?

The right answer to all of these questions is probably "no."

Certainly the economy and the financial system are in much better shape than almost any of us would have predicted as the year began. The midterm outlook is nowhere near as rosy as suggested by the consensus forecasts from Washington or the second-quarter rally on Wall Street.

Given the size of the credit bubble, the amount of overcapacity that was allowed to develop and the staggering amount of wealth that has been lost, it would be foolhardy to expect the recession to be so shallow or the recovery so robust.

Government policies, certainly, have helped to moderate the pace of the adjustment and prevented it from spinning out of control. But the process of de-leveraging balance sheets and getting spending in line with incomes is nowhere near complete. Until they are, unemployment will continue to rise, businesses will continue to fail, and the economy will alternate between growing slowly and not growing at all.

We got a hint of all of this yesterday when the government reported the loss of 467,000 more jobs, bringing the number of jobs down to where it was back in March 2000. Stock markets here and around the world fell sharply on the news. And with tax revenue evaporating, some of the biggest states are being forced to curtail basic services and pay their bills with IOUs.

That's not to say there aren't some positive signs.

[SeekAndFind]

Here are the positive econmic signs according to the Washington Post :

* Monthly job losses have slowed * Households have cut back on their debt * Some businesses have been able to float new issues of stocks and bonds. * Housing prices have begun to bottom out in some of the hardest-hit markets

* Consumer confidence has recently improved.

* There are signs that manufacturing activity has begun to pick up, and even auto companies are suggesting their sales have bottomed out.

* Stock prices -- long viewed as a leading indicator -- rebounded nearly 40 percent from their lows of early March before giving back some of gains in the past two weeks.

According to the author, One way to look at these developments is that they foretell a strong and sustainable recovery after an equally sharp recessionary decline.

[kittymyrib]

“Certainly the economy and the financial system are in much better shape than almost any of us would have predicted as the year began...”

No wonder newspapers are in deep financial trouble, with such a total misreading of what is really happening to the economy.

[Jagman]

There's pony in there somewhere, but I think he's still grasping at turds.

Consumer confidence just plunged earlier this week, we're heading for +10 percent unemployment and those with jobs are making less, housing values continue to fall, and the car market decline may be slowing, but jeez, nobody is making money, not even Toyota (which is doing worse than most).

And by the way, Obama pretty steadfastly claimed that his stimulus would have begun to turn this all around by now.

[DB]

“Government policies, certainly, have helped to moderate the pace of the adjustment and prevented it from spinning out of control.”

And he knows this how?

Borrowing a trillion or more dollars has “moderated” what exactly. The consequences for that borrowing are just beginning.

Taxing energy, taxing employers, taxing capital, taxing health care all benefit the economy how?

Bailing out the irresponsible by taking from the responsible benefits economy how?

Virtually all current government policy is stifling recovery. Soon the minimum wage is due to go up by a double digit percentage. That will also cause additional job losses because employers will simply be unable pay more when they are barely hanging on as it is.

The country is being run by idiots.

[DB]

http://www.powerlineblog.com/archives/media/stimulus-vs-unemployment-june-dots.gif

[laconic]

I’m reminded of a friend who started losing his hair in his 20s (back when it used to bother young men if they went prematurely bald). He went to some phony “trichinologist” (a “hair doctor” who is not one) who charged him a fortune for some glop that the “doc” billed as a “hair restorer”. Every month he visited this phony and the latter told him every visit, “you’re making such wonderful progress” until he went slick bald. I guess the “trichinologist” now works for the Obama Press Office which also goes by the name of the Washington Post and which tells us in a throttling down economy “you’re making such wonderful progress”.