There are a lot of reasons to be optimistic about our economy’s prospects for next year, the first being that 2011 will be over. There are a few things that prompt discouraging words, of course, but it wouldn’t be economics without that.
The housing market is showing some signs of life. It is spotty, and a long way away from anything resembling good health, but its prospects for recovery seem better now than at any other time since the mortgage collapse began.
Retail sales numbers are subject to varying interpretations, and Christmas shopping is so heavily loaded with imported goods that assessing the full economic impact isn’t easy. But as an indicator of what consumers are thinking, retail sales are extremely valuable. The solid increase this year, especially as we approached the finish line, adds credibility to the impression that consumer confidence is growing. Overall, the outlook of Americans seems to be recovering some of its natural buoyancy.
The jobs picture is brightening, too; slowly and unevenly like the early light of a morning that still can’t make up its mind about what kind of day it wants to be. Still, the overall situation is much improved compared with the past few years — and seems to be developing some momentum.
The number of new jobs has increased solidly for several months now and this indicates that employers are becoming more confident in the economy. And while permanent employment increased, the number of temporary jobs declined, which also could be an indicator of increasing business optimism. Bank lending to businesses is also growing, which will help get things moving, too.
One part of the jobs picture is still troubling. The prospects for long-term unemployed are not much brighter than they had been, and the harsh truth is that we really do not know what to do about it. Certainly the European experience in trying to fix this problem with government spending is neither appealing nor encouraging.
Our free market economy owes a lot of its productivity and forward progress to job instability. In the past, though, job losses in the U.S. economy tended to be more frequent than in Europe, but of short duration. Workers laid off from one job could readily find another. This wasn’t always the case for everyone, certainly, but was typical.
Many Americans who are currently out of work, though, have been jobless for a considerable amount of time. This is discouraging enough by itself, but made worse by employers’ reaction to it. Many employers have not changed their perception of job candidates very much.
A significant number of employers still view long periods of unemployment as suspicious and possibly revealing of an applicant’s character flaws or habitual behavior — a view that might have had some basis years ago but most certainly not now. This is not your father’s economy; it’s been more like your great-grandfather’s Depression.
The other part of the jobs picture that remains gloomy is the unemployment rate for returning military veterans. Currently the jobless rate for these men and women is running between three and four times the national average for all workers. The problem is getting some increased visibility now and that might help, but at bottom we don’t have much of a plan except to hope that a more robust economic recovery will make it go away.
And even in the harder-to-take-seriously parts of our economy there was improvement, and that’s a very good sign. The oppressed workers of the NFL, for example, survived a cruel lockout and returned to the workplace with a new contract. And the oppressed workers of the NBA, after an even longer cruel lockout, also returned to their workplace, although now enduring what is clearly an old-fashioned “speed up” of their production schedule.
Even the “atmospherics” of our economy are showing signs of improvement.
One positive change, for example, went virtually unnoticed in the recent kerfuffle in Congress over extending the payroll tax cut. For the economy it is a major step forward to end the masquerade and start calling the deductions what they really are: “taxes,” not “contributions” to a retirement fund of questionable existence. When we have to make hard decisions, as in this economy, the more realism the better.
The budget deficit is finally getting some attention, if not action. And the woeful examples of Greece and Italy are there, in all their glory and grandeur, for any legislators who still don’t get it.
And, finally, we now have one less thing to keep us awake at night. After analyzing our 2011 experience one thing about the coming year is clear: We won’t have to worry about being our own worst enemy, at least not while Congress is in session.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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