Welcome to the real economic recovery, perhaps. And it appears Europe won’t spoil the party.
Even though the recession officially ended in June 2009, the economy has continued to struggle to get off the floor. And to many people the downturn looked like it never ended. But in the past few weeks a number of areas of the economy – yes even housing – are showing signs of finally improving. To be sure, don’t expect any miracles. We won’t be back to 5% unemployment any time soon. And the economy did pick up steam last year at this time, only to give us a head fake.
(PHOTOS: Portraits of American Poverty)
But there is reason to believe that 2012 will be better than 2011, not worse as everyone seem to be predicting just a few months ago. Here’s why:
Remember how everyone has said that the economy won’t recover until housing recovers. Well, that’s true to some extent. And don’t expect home prices to rise very much or at all in the next year or so. But the part of the housing market that matters most to the economy – new constructions – does seem to be picking up, and is perhaps primed for more growth. In October, the pace of construction of single family rose 5%. And we may soon amazingly have a shortage of housing because of the fact that building has been so weak for a number of years. Indeed, construction of multi-family homes has been rising for some time.
Next, the jobs market. As I wrote about yesterday, the number of people quitting their jobs is as high as it has been in nearly three years. And while the number of people who are quitting is up, the number of people who have been unemployed more than 5 weeks is down from a year ago, which means people are either leaving for new jobs or finding them relatively quickly. What’s more, yesterday the government reported that the number of people applying for new unemployment benefits fell to its lowest level since April. On top of that, earlier this week there were reports that consumer spending and industrial output were both up.
Lastly, optimism for the economy is rising again. A popular mix of leading indicators for the U.S. are not only higher than for Europe, they are also higher than for China. Macroeconomic Advisers, a prominent forecasting firm, recently raised its estimate for the U.S. for the fourth quarter to an annual pace of 3.2%, compared to just 1.4% in the first half of the year.
But here’s perhaps the best news about the economy: These improvements are happening at time when more and more economists are predicting doom for Europe. If the economic mood can continue despite that headwind, then we know we are on more solid footing.