The Economy: Six Signs of Hope
Spring is here and the economy could be turning over a new leaf
April 1, 2010
Although the unemployment rate has been hovering at 9.7 percent for the third month in a row, the national debt has ballooned to 11.4 trillion, and there are over 4 million delinquent mortgages in the country, the good news is that not all news about the economy is bad. In the past few weeks, there’s been a glimmer of hope when it comes to jobs, consumer spending and the housing market. Maybe it’s not enough to blow your whole paycheck in celebration, but with the glass having been half empty for over two years now, perhaps it’s time to shine it under a new light.
1. Jobless claims fell to an 18-month low.
In the week ending March 20, new applications for unemployment were down 14,000 from the week before. The number of people remaining on unemployment after an initial week of aid also fell 54,000 to 4.65 million in the second week of March. A large part of this is thanks to the 2010 census, but not all. “We believe that the trend in initial claims is signaling that ... job creation is imminent,” economists at Bank of America Merrill Lynch wrote.
2. In a six-month period, 72 U.S. cities gained jobs.
Slowly but surely, a handful of U.S. cities are finding ways to add more employees to the payroll. Although most are still down from a year ago, 72 metropolitan areas had positive job growth from August 2009 to January 2010. Sure, some, like Olympia, Wash., had only 0.1 percent job growth, while having fallen 2.6 percent in the past 12 months, but cities like Austin, Texas had 4.4 percent growth and Nassau-Suffolk, N.Y., 3.1 percent.
3. California, Florida, Phoenix and Las Vegas — four of the hardest hit markets in the mortgage crisis — show modest signs of recovery.
The state of Nevada has a staggering 69.9 percent of mortgages that are underwater — the highest in the country. The sharp boom and bust of Las Vegas is mostly to blame for this number, but Sin City may be at the end of its freefall. In February, foreclosed properties there were at 59.6 percent of total resales, down from 70.6 percent a year ago. Properties in escrow were up 9.8 percent from January, and 6,065 homes in total were sold, the highest since February 2006. In addition to Vegas, Phoenix housing sales were also the highest since 2006, California home prices were up nearly 4 percent from May 2009, and existing home sales in Florida were up 21 percent in February compared to the same time last year. This is all promising, but the real test to the markets will be after the housing stimulus ends on April 30.
4. The probability of a recession in 2011 is low.
The New York Federal Reserve recently calculated the probability of recession through Feb 2011, showing the recession ended sometime in the middle of 2009, and the chances of recession next February is only 0.054 percent, the lowest figure since April 1993. This means the chance of a “double-dip recession”— which happened in the early 1980s — is one in 20. This past fall, Federal Reserve Chairman Ben Bernanke announced the recession was “likely over,” but unfortunately, even the best economic analysts don’t know what the future will hold.
5. Consumer spending was up 0.3 percent in February, rising for the fifth month in a row.
One third of a percentage point might not seem like much, and it’s slightly down from the 0.4 percent growth in January, but the uptick is still promising. For an economy that is so dependent on consumer spending, the continued rise in spending is the key to its recovery. Spending on food and clothing was up 0.7 percent and spending on services was up 0.3 percent. Luxury car sales have been doing surprisingly well, with Porsche sales rising 9 percent in March and Toyota reporting a 42 percent increase in Lexus sales from last March. Consumer confidence is also recovering. After the disappointing 11-point drop in February, it rebounded in March, rising nearly five points. Even with tightened budgets, Americans continue doing what they do best: shopping.
6. 75 percent of Wall Street firms plan to hire more recent grads this year than in 2009.
Things are looking up for 2010 graduates. And on the off chance they still want to go into the field of finance, they are much more likely to be hired this year than last. A survey from the global financial training company 7city Learning, found that three out of four firms plan to hire more grads this year. They may simply be looking for cheaper labor, as layoffs in the industry continue — 2,800 in February for New York state — but with college tuition and enrollment rising, it’s reason enough for all new grads to toss up their caps in June.