Is everyone being unduly pessimistic about the economy?The New York Times' Floyd Norris
thinks so. Examining the indicators, he says the
U.S. economy is showing the same signs it did when on the rebound from
the past two recessions. So why do politicians still sound so downcast about the economy? The only explanations
he can think of are that economists "embarrassed by missing impending
disaster," are "[hesitant] to appear foolishly optimistic again," while
at the same time, both political parties stand to profit from
Republicans are loath to give President Obama credit for anything, and no doubt grate when he points to his administration's stimulus program as a cause of the good economic news, as he did in North Carolina.
Democrats would love to give the president credit. But much of the Democratic Party wants another stimulus bill to be passed, notwithstanding worries about budget deficits. Chances for that are not enhanced by the perception the economy is getting better.
So is Norris right about the economy? A few agree that politics does play a role in lingering pessimism, but there are many who disagree as well.
- Partly Right, But Proceed with Caution "He's right that the American economy has almost certainly exited recession," says Ryan Avent at The Economist. But he's "silly in chiding Barack Obama for being cautious about declaring as much, given the state of the labour market." Furthermore, "now is no time to declare victory and take a vacation." He graphs employment with population growth in mind to point out just how miniscule Norris's 0.8% increase in employment actually is.
- Seconded: What About Jobs? The New Republic's Jonathan Chait also objects to Norris's arguments when it comes to employment. Norris, writes Chait, assumes that "the recovery will bring a relatively quick resurgence in jobs." But that's not what actually happened in the last two recoveries.
- Jobs Indeed The Atlantic's Dan Indiviglio argues that, between "the structural changes in the economy and depths of underemployment," the "steep recovery" in employment Norris is counting on seems unlikely.
- Fair Enough Finance blogger and quantitative research expert Barry Ritholtz ultimately shares Norris's optimism, although he expects a downswing--"a 20-30% correction"--from current highs. "The danger for both bulls and bears is bringing their bias to the table, and missing the risk or the opportunity of the moment."
- Darn Right I'm Pessimistic On Yahoo! Finance's Tech Ticker, Howard Davidowitz delivers a memorable Cassandra monologue, whose "bottom line,"after going through the indicators, is this:
We're headed to financial instability; our credit rating will be under siege; the dollar will be headed not to be the world's reserve currency in five to six years. We're weaker than we've ever been. We look more and more like Zimbabwe than we did before, and I see nothing on the horizon to fix it.