Published: Sunday, August 30, 2009
THE ECONOMY
Some optimism is OK, really
The U.S. economy finally is rebounding, though hardly like a freight train — more like a hulking ship emerging from a blinding fog.
A series of government reports Thursday and Friday were encouraging, but understandably, a layer of fear still hovers over most consumers. Until that lifts, economists say, recovery will be slow. That’s because consumer spending accounts for 70 percent of U.S. economic activity.
There is reason for consumer optimism, even if most Americans have yet to embrace it:
-- We learned Thursday that corporate profits grew 5.7 percent in the first three months of the year, the biggest increase in four years. Meanwhile, companies’ inventories have been falling, meaning orders for new goods should begin to rise. That could portend good news ahead on employment, even though it has yet to show up in government jobless figures.
-- The housing market appears finally to have reached its bottom. Nationally, home sales in July reached their highest level since before the recession began almost two years ago. In Snohomish County, pending sales of homes in July were up 31.82 percent over a year earlier, according to the Northwest Multiple Listing Service. Home values, a major piece of most families’ net financial worth, appear ready to start ticking up again.
-- The stock market, that source of much retirement-fund anxiety, is on a strong upswing. The Dow Jones Industrial Average is up nearly 46 percent from its low in March.
Still, consumers remain cautious. A University of Michigan report showed consumer sentiment unchanged in August, which is to say Americans are still afraid to spend.
Now, saving is clearly a good thing. Individuals and the government have been going in the opposite direction for too long. But we doubt very many Americans have been overcome by a new sense of responsibility for their financial future. More likely, most of us who have put off purchases are waiting to make sure the recession is really ending. Trouble is, the longer everyone stays out of the stores, the longer it will take.
Don’t get us wrong. We’re not advocating a return to the recklessness — individual, corporate and governmental — that got us into this mess. Rapid growth built on over-borrowing and irresponsible financial maneuvering (remember credit default swaps and interest-only mortgages?) isn’t sustainable. Slow and steady growth based on solid, sensible principles is.
The economic waters appear to be calming. It’s OK to stick a toe in.
A series of government reports Thursday and Friday were encouraging, but understandably, a layer of fear still hovers over most consumers. Until that lifts, economists say, recovery will be slow. That’s because consumer spending accounts for 70 percent of U.S. economic activity.
There is reason for consumer optimism, even if most Americans have yet to embrace it:
-- We learned Thursday that corporate profits grew 5.7 percent in the first three months of the year, the biggest increase in four years. Meanwhile, companies’ inventories have been falling, meaning orders for new goods should begin to rise. That could portend good news ahead on employment, even though it has yet to show up in government jobless figures.
-- The housing market appears finally to have reached its bottom. Nationally, home sales in July reached their highest level since before the recession began almost two years ago. In Snohomish County, pending sales of homes in July were up 31.82 percent over a year earlier, according to the Northwest Multiple Listing Service. Home values, a major piece of most families’ net financial worth, appear ready to start ticking up again.
-- The stock market, that source of much retirement-fund anxiety, is on a strong upswing. The Dow Jones Industrial Average is up nearly 46 percent from its low in March.
Still, consumers remain cautious. A University of Michigan report showed consumer sentiment unchanged in August, which is to say Americans are still afraid to spend.
Now, saving is clearly a good thing. Individuals and the government have been going in the opposite direction for too long. But we doubt very many Americans have been overcome by a new sense of responsibility for their financial future. More likely, most of us who have put off purchases are waiting to make sure the recession is really ending. Trouble is, the longer everyone stays out of the stores, the longer it will take.
Don’t get us wrong. We’re not advocating a return to the recklessness — individual, corporate and governmental — that got us into this mess. Rapid growth built on over-borrowing and irresponsible financial maneuvering (remember credit default swaps and interest-only mortgages?) isn’t sustainable. Slow and steady growth based on solid, sensible principles is.
The economic waters appear to be calming. It’s OK to stick a toe in.
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