It’s awfully hard to feel optimistic about the economy right now. The Eurozone crisis is intensifying and horrifying. In Washington, Republicans are killing jobs bills and seem eager to hold back the economy on purpose. Bank of America this morning increased its odds of a U.S. recession from 35% to 40%, while economists at the Federal Reserve Board of San Francisco put the odds even higher.
And yet, the hints of progress are there. Neil Irwin reported today that “a variety of economic indicators are pointing in a more positive direction.”
On Thursday, the Commerce Department said the number of permits to build new housing units rose 10.9 percent in October, compared with the 2.4 percent gain analysts had expected, suggesting that home-building may be finally picking up. And the Labor Department said the number of people filing new claims for unemployment-insurance benefits fell last week to its lowest level since April, continuing a two-month downward trend.
Earlier in the week, new reports showed strong results on two key measures of economic activity in October: A 0.5 percent gain in retail sales and a 0.7 percent gain in industrial production. Also welcome news: Inflation is becoming more subdued, with consumer prices falling 0.1 percent in October. That leaves the Federal Reserve more flexibility to take action if the economy worsens.
Putting all the recent evidence together, forecasting firm Macroeconomic Advisers projects that the economy will have grown at a 3.2 percent annual rate in the final three months of 2011, compared with a 1.4 percent average pace of growth through the first nine months of the year.
These aren’t the only positive signs The Philadelphia Federal Reserve Bank’s employment index is the highest it’s been since April, while retail sales, industrial production, auto sales, and apartment construction are all looking up, defying and/or exceeding expectations.
Annie Lowrey recently noted “it certainly doesn’t feel as if things are getting better,” but they are.
Bernard Baumohl, chief global economist at the Economic Outlook Group, said in a report, “We have certainly seen an unambiguous string of upbeat news on the U.S. economy and that is certainly comforting.”
So, is it time to start feeling a little better? No, probably not. For one thing, Europe still threatens to cause a global recession, and there’s nothing we can do about it. For another, congressional Republicans appear determined to pursue policies — including an increase in the payroll tax — that will serve as a drag on the domestic economy in 2012.
What’s more, the hints of progress are really only relative to where we’ve been, and we would need to see significantly stronger growth to get us back to where we were before the recession began in late 2007.
Still, is it better to see some encouraging economic news than discouraging? You bet it is.