The author’s case for optimism :
* Sometime in 2010, consumer spending must take over. The average personal saving rate has risen to 4.5% of disposable income so far this year from 2.7% in 2008. That’s higher, but a long way from the 8%-10% saving rates the doomsayers have foreseen. A saving rate near 5% is consistent with 3%-4% GDP growth in 2010.
* The amazing performance of productivity during the recession. To be sure, that performance had a downside: While real GDP was falling 3.7%, payroll employment dropped 5%, devastating many American families. But by definition, that discrepancy means that productivity—output per hour of work—rose substantially during the recession, which is pretty unusual.
The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate.
* While payrolls continued to decline in November, it was by only a scant 11,000 jobs; and the job counts for September and October were revised upward. The data now show a clear trend that suggests that net job creation may be only a month or two away.
* Less than 30% of February’s $787 billion fiscal stimulus has been spent to date; over 70% is still in the pipeline. Pessimists dote on the fact that the rate of increase of stimulus spending has probably peaked and will be lower in 2010. True. But the level of GDP will continue to get support from fiscal policy, and a second job-creation package (”Please don’t call it a stimulus!”) looks to be in the works.
* The Federal Reserve’s stupendously expansionary monetary policy. It is well known that interest rates work on the economy with long lags. But the Fed’s last rate cut came a year ago. History suggests that the time lag is closer to two years than to one. So even the normal policy lags are not over.
* The Fed, Treasury, FDIC and others have created a bewildering variety of stents and bypasses to get credit flowing again. The credit markets are now healing, though slower than we would like. Hence there is still monetary stimulus in the pipeline.
* “Quantitative easing” is still in play. One example is the mortgage-backed securities (MBS) purchase program, which is adding MBS to the Fed’s balance sheet and providing vital support to the mortgage market.
“* The amazing performance of productivity during the recession. To be sure, that performance had a downside: While real GDP was falling 3.7%, payroll employment dropped 5%, devastating many American families. But by definition, that discrepancy means that productivity—output per hour of work—rose substantially during the recession, which is pretty unusual.”
So this means that people are willing to work like slaves for bare pay? Yay! The employers win! Not gonna get many votes with that continuing though.
The credit markets are unfreezing? Please....
None of the important data supports that conclusion.
The only way that one could pretend our economy is out of the recession is if they completely ignore the credit market. That would be too bad, since the credit market is what is causing all of the problems - and I fully believe that the big banks did it intentionally.