For the past year, the economic signs have been decidedly mixed. One week consumer confidence would go up, but manufacturing production would drop. The stock market would go up, but retail purchases would go do. Recently, the job market has been showing signs of life, but the economy in the first quarter, as measured by gross domestic product, was weaker than expected. Down, Up, Up and back down again. That’s how it has been going in this turnaround.
But in the past few days we have gotten three indications that the economy is building strength. Of course, the most watched, and arguably the only real important, gauge of the economy comes out of Friday – the monthly jobs report. And if the jobs number is bad, then all this is moot. But these early signs are a good indicator that the jobs report will show that the economy is continuing to improve. Here’s why:
1) On Monday, we got word in the Federal Reserve’s month banking survey for April that loan officers said their willingness to make consumer loans was rising. In fact, the percentage of banks that said they had become more willing to lend was the highest that it has been since 1994. To be sure, I have always found the loan officer survey to be a tricky one. This doesn’t mean that the number of banks that were willing to make loans is higher than is has been in 17 years. That number is still relatively low. All it is saying is that the number of banks switching from from not willing to lend to willing to lend is rising quickly. Nonetheless, the lack of credit was one reason we have heard over and over again as to why small firms weren’t hiring and expanding. So this is a good thing.
2) The number of people of applying for food stamps is leveling off. Yes, it’s still very high, and in February the number of American receiving government food assistance was 44.2 million. But the growth in people applying for benefits ballooned in the recession and in the past few months has been leveling off. The most recent reading is the smallest increase in that assistance program since the start of the recession. Personal bankruptcies are, too, dropping. Now, it is possible the reason that is happening is because people were using personal bankruptcy as a means to defend against foreclosures. And banks in the past few months because of problems of servicing loans have slowed the foreclosure process. Still couple the food stamp news with the personal bankruptcy news and the financial condition of the most strapped Americans seems to be improving. Again, another good sign.
3) Lastly, car sales in April were up 17% from a year ago. Not only that, but some of the biggest jumps in sales came from US car manufacturers. GM sales were up 26% from a year ago. That’s likely good news for the job market. Chrysler, too, reported that it turned a profit in the first quarter for the first time in five years. A car, unlike say food or toilet paper, is the type of purchase you make when you feel like your economic situation is improving, or at least is not going to immediately get worse.
Alone, none of these economic signs guarantee that the economy is getting better. But the fact that there are all pointing in the same direction, the correct one, toward improvement, is a good sign.