Retail, Jobs Suggest Stronger Recovery

The usually skeptical Floyd Norris looks at the economic data, and it makes him (surprise!) optimistic:  

“The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating.

That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening . . . Why is good news being received with such doubt? Why is “new normal” the currently popular economic phrase, signifying that growth will be subpar for an extended period, and that the old normal is no longer something to be expected?”

He is right on both employment AND consumer spending. A separate Times article notes that “The nation’s retailers reported their strongest monthly sales growth in a decade, with robust gains in virtually every category of merchandise and every type of store.” And while there is still a long road to travel to return to pre-recession employment levels — I estimate 60-70 months from the recession December 2007 beginning — NFP has finally turned positive.

After acknowledging the possibility that he might be “wrong and the prevalent pessimism is correct,” Norris looks at the factors unrelated to the actual economic data causing the negative outlook:

-Over-indebted consumers and governments. -Housing collapse’s long impact. -Recoveries post 1990-’91 and 2001 were very slow to pick up any momentum. -Recessions normally make people pessimistic. -The vast majority of seers failed to see this recession coming — hence, a fear of being embarrassed by (again) by looking “foolishly” optimistic (again).

He also points out to an unusual political factor: Both Republicans and Democrats are rooting for bad news. Republicans loath to give President Obama credit for anything, and Democrats want another stimulus bill passed. Hence, a recovery defeats what the parties seem to favor as an economic means to a political end.

As to the data, Norris channels his inner quant, looking at factors not emphasized elsewhere:

• The Household Survey showed  a Q1 gain of 1.1 million jobs (best data since the spring of 2005).

• Norris looked at 7 post recession recoveries (1950-1982). He found when the 3 month performance of the Household Survey was +0.8% or better (total existing jobs), the recession was over (median 7 months, range 2 to 13 months).

The data continues to impress, yet many people are fighting both the economic numbers and the tape. Professionals who miss a 75% generational rally risk losing clients and assets. The danger for both bulls and bears is bringing their bias to the table, and missing the risk or the opportunity of the moment.

I still expect a 20-30% correction — eventually — but until the market internals get uglier, our bias remains to the long side . . .

Source:

Why So Glum? History Suggests a Strong Recovery FLOYD NORRIS NYT, April 8, 2010 http://www.nytimes.com/2010/04/09/business/09norris.html

U.S. Retailers Report Strong Gains for March STEPHANIE ROSENBLOOM NYT, April 8, 2010 http://www.nytimes.com/2010/04/09/business/economy/09shop.html


Originally published at The Big Picture and reproduced here with the author’s permission.
 
Opinions and comments on RGE EconoMonitors do not necessarily reflect the views of Roubini Global Economics, LLC, which encourages a free-ranging debate among its own analysts and our EconoMonitor community. RGE takes no responsibility for verifying the accuracy of any opinions expressed by outside contributors. We encourage cross-linking but must insist that no forwarding, reprinting, republication or any other redistribution of RGE content is permissible without expressed consent of RGE.   

2 Responses to "Retail, Jobs Suggest Stronger Recovery"

  1. Curtis Henson   April 9, 2010 at 7:34 pm

    To me, the retail gains reflect one thing. Employed, moneyed Americans have gone on with their lives and forgotten about the suffering of those who still suffer. I chalk it up the the most selfish, individualistic people on earth: Americans..

  2. villager   April 10, 2010 at 2:37 pm

    In addition to the above comment, the author is trying to extrapolate a trend from a few data points. This reeks of the cheer leading that led to this recession especially when the conditions that led to this recession have not been ameliorated.