Is That the Light or Just Another Train?


The recession grinds on, but there are strange doings in the darkest corners of the economy.

Some consumers have actually started revisiting the malls and vehicle dealerships. Businesses have seen a glimmer of hope on the orders front. Realtors are starting to see not only interest in homes, but a few hardy souls have actually made offers that were accepted.

Even investors seemed to get into the swing of things. Yes, the challenges are many and there will be surprises ahead, but it's possible that conditions are starting to change.

As usual, the news about the economy was dominated by the monthly jobs numbers. And once again, we discovered that firms are better described as un-employers rather than employers. The 8.5 percent unemployment rate is the highest since November 1983, and a 10 percent rate is possible.

Clearly, this is the worst economic climate we have experienced since the wrenching back-to-back recessions in the early 1980s.

I have argued that even if the unemployment rate hits double-digits, the consumer can still lead us out of this mess. Ultimately, my "Dr. Strangelove Syndrome" theory should start kicking in. Indeed, people already appear to be learning to live with the recession. They are starting to buy the little things again.

Retail sales have been okay for the past two months. In February, demand rose for the second consecutive month if you exclude motor vehicles. And it looks as if people have started kicking the tires again as vehicle sales were up solidly in March.

Any amount of up is an awful lot better than down. Although housing will likely reduce first-quarter growth sharply, it may not do so going forward. And because this sector had taken about 1 full percentage point out of GDP for the past two years, even stability would be good news.

Finally, there is the stock market, which actually seemed to defy gravity by rising. Whether it was only a hot-air balloon that will run out of gas or it is the start of a longer-term rally is hardly clear yet. But the gain could turn the recent stabilization in consumer confidence into an upward trend.

The economy is hardly out of danger, and the risks are great. Problems in both the financial and vehicle sectors persist. But the negative responses to bad news are having smaller impacts, and that tells me we are adjusting.

That is the start of changing the course of the economy.

Joel L. Naroff is chief economist for TD Bank. 



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