29 May The Recovery is Real?

The stock market shooting through records. Consumers watching their 401(k) accounts grow in value. Housing prices are rising. The gross domestic product is rising, slowly. I’m barely an armchair economist but it seems we are still missing some key elements to a substantial recovery, some of which Jim Kramer discussed on TV this morning. First, and most obviously, the unemployment rate remains stubbornly high. To the extent corporate profits are higher it is mostly due to cost cutting rather than dramatic increases in sales. So there has not yet been massive hiring.

Small business also is not yet growing in any noticeable way. In addition, housing starts, an important indicator, remain relatively slow. So is slow recovery ok? Maybe. Slow and long lasting might have some benefits over a short-lived high flying economy. But so many people are still struggling with no job or are underemployed or worse, have stopped looking altogether. This affects consumer confidence, which is a real key to getting folks to buy stuff and thereby drive the economy.

Let’s hope the stock market continues positively as a leading indicator of what is coming. But presumably it will correct at some point, as it typically does, so watch out for that. And let’s also hope that the job market improves soon.