Last week I greeted a couple pieces of good economic news, the reports that GDP grew 3.5% in the third quarter and house prices rose 1.2% in August, with a shrug and worries that things might be about to take a turn for the worse. So it seems only fair to point out that, this week, the news has only been getting better. The manufacturing sector is going strong, and even hiring people for the first time in 14 months. Pending home sales are way up. Construction spending is up. And while Friday’s employment report for October will surely reveal a 22nd straight month of job losses, early signs are that the losses will be smaller than in previous months—possibly even below the 200,000 mark for the first time since August 2008.
There’s a lot of noise in this data—next week may well see a run of disappointing economic numbers. Still, it’s worth considering that maybe we actually are in the early stages of an honest-to-goodness, sustainable economic recovery. David Leonhardt takes on this topic in his column today, pointing out that, since the early 1980s at least, all recoveries have been unconvincing at first and have been greeted with lots of pessimism and doubt. Then he concludes:
If someone forced me to make a prediction, I would guess that the economy would not feel truly healthy until at least 2011. Financial crises tend to have long hangovers, and this was the worst crisis since the Great Depression. But I would also make another guess. A few years from now, everyone will be talking about some obvious economic blessing that isn’t so obvious today.
It’s the Mr. Micawber approach to medium-term economic forecasting—”something will turn up.” As a congenital optimist, I tend to see things this way too. But one has to admit there’s an element of faith involved. Plus, Mr. Micawber spent an awful lot of time in debtor’s prison, and things didn’t really turn up for him until he moved to Australia.
Also, even if you buy the Leonhardt/Micawber/Fox forecast, we still have to make it to 2011. I get the feeling there will be so many economic crosscurrents and counterforces as to make the recovery seem awfully dubious for most of 2010. Still, something will turn up. Just can’t tell you when.