Economic recession takes a step toward recovery
Sunday, 12 April 2009
There are hints the most severe recession since the Great Depression could be bottoming out - banks finally earning profits, a solid rally on Wall Street, shrinking wholesale supplies, according to Internet.
Indeed, good signs all.
But almost every expert will tell you a solid, sustaining economy is months down the road.
"The credit crisis ... I believe the biggest problem is behind us," said David Jones, a professor at Florida Gulf Coast University and a veteran of Wall Street.
Jones is slightly more optimistic now than a couple of months ago.
"You take one step at a time," he said. "The first step is to say we have stopped falling. And I think we can conclude that.
"It looks like we are starting to see the early stages of a comeback. You see it with Wells Fargo's profits."
That bank announced Thursday it would earn about a US$3.0 billion profit in the first quarter.
Some other economists around the country echo Jones' stance.
"The end of the decline isn't the beginning of the recovery," said David Resler of Nomura Securities in New York. "It's like a boxing match. Even if you win the fight, it's not going to feel as good when you get out of the fight as when you went in."
Gary Jackson, director of the Southwest Florida Regional Economic Institute at FGCU, says the road to recovery could be bumpy.
"Unemployment will get worse before it gets better," Jackson said.
In Lee County, the unemployment rate hit 12 per cent last month. Nationwide, it is 8.50 per cent.
For now, said Brian Bethune, economist at IHS Global Insight, "I think we can say we've gone through the most terrible part of the recession."
John Silvia, chief economist at Wachovia Corporation, explains it another way.
"Yes, we have probably seen the worst, ... but the shape of the recovery will look more like the Nike swoosh," meaning a gradual - not sharp - rise back to normal, he said.
Even President Barack Obama weighed in Friday.
"What we're starting to see is glimmers of hope across the economy," the president said, although he also noted that the economy is "still under severe stress."
"Whatever we do ultimately has to translate into economic growth and jobs," Obama said.
A majority of 53 economists across the nation surveyed by the Wall Street Journal predicted the recession would end in September, a month earlier than a survey taken in March. It marked the first time since the start of the recession they didn't push the recovery date later.
What signs are economists seeing?
Stock investors, shoppers and homebuyers appear less jittery. Once-frozen credit markets are thawing. And economic indicators that had been going from bad to worse are showing signs of stabilizing - although still at distressed levels.
Jones said Obama's $787 billion stimulus package should jump-start an economy that has been dead.
"We didn't get our first really big dose of the stimulus plan until April 1," he said. "That hits in the second quarter and gives more weight to why I have changed my thinking and am more optimistic."
If consumers are more optimistic, Jones said, they will start spending money again.
"If consumer confidence is going down, no amount of money is going to help," Jones said. "If things start to pick up, they realize they get a good bang for their buck."
In the long run, Jones said, the housing crisis must be solved before the United States can get back on solid financial footing.
"That is absolutely first and foremost, here and in the country. We won't be out of this mess until there is a bottoming out of existing and new home sales and housing starts. I think that will begin happening."
Fueling that speculation is the continuing lowering of interest rates.
"The Fed has pumped so much money into the system lowering mortgage rates there will be a massive amount of refinancing."
Florida - and especially Lee County - have been at the top of the foreclosure list since the housing market imploded. But foreclosures are not rising as quickly as they had in previous months. There were 2,217 in Lee County in March, only about 100 more than in February.
Jackson said there are positive signs in the Southwest Florida housing market.
"I have seen a number of houses sell, plus the affordability of this area has improved," Jackson said.
"It will take time, a year or a couple of years. ... I am optimistic. ... Hopefully, we can learn from it."
Indeed, good signs all.
But almost every expert will tell you a solid, sustaining economy is months down the road.
"The credit crisis ... I believe the biggest problem is behind us," said David Jones, a professor at Florida Gulf Coast University and a veteran of Wall Street.
Jones is slightly more optimistic now than a couple of months ago.
"You take one step at a time," he said. "The first step is to say we have stopped falling. And I think we can conclude that.
"It looks like we are starting to see the early stages of a comeback. You see it with Wells Fargo's profits."
That bank announced Thursday it would earn about a US$3.0 billion profit in the first quarter.
Some other economists around the country echo Jones' stance.
"The end of the decline isn't the beginning of the recovery," said David Resler of Nomura Securities in New York. "It's like a boxing match. Even if you win the fight, it's not going to feel as good when you get out of the fight as when you went in."
Gary Jackson, director of the Southwest Florida Regional Economic Institute at FGCU, says the road to recovery could be bumpy.
"Unemployment will get worse before it gets better," Jackson said.
In Lee County, the unemployment rate hit 12 per cent last month. Nationwide, it is 8.50 per cent.
For now, said Brian Bethune, economist at IHS Global Insight, "I think we can say we've gone through the most terrible part of the recession."
John Silvia, chief economist at Wachovia Corporation, explains it another way.
"Yes, we have probably seen the worst, ... but the shape of the recovery will look more like the Nike swoosh," meaning a gradual - not sharp - rise back to normal, he said.
Even President Barack Obama weighed in Friday.
"What we're starting to see is glimmers of hope across the economy," the president said, although he also noted that the economy is "still under severe stress."
"Whatever we do ultimately has to translate into economic growth and jobs," Obama said.
A majority of 53 economists across the nation surveyed by the Wall Street Journal predicted the recession would end in September, a month earlier than a survey taken in March. It marked the first time since the start of the recession they didn't push the recovery date later.
What signs are economists seeing?
Stock investors, shoppers and homebuyers appear less jittery. Once-frozen credit markets are thawing. And economic indicators that had been going from bad to worse are showing signs of stabilizing - although still at distressed levels.
Jones said Obama's $787 billion stimulus package should jump-start an economy that has been dead.
"We didn't get our first really big dose of the stimulus plan until April 1," he said. "That hits in the second quarter and gives more weight to why I have changed my thinking and am more optimistic."
If consumers are more optimistic, Jones said, they will start spending money again.
"If consumer confidence is going down, no amount of money is going to help," Jones said. "If things start to pick up, they realize they get a good bang for their buck."
In the long run, Jones said, the housing crisis must be solved before the United States can get back on solid financial footing.
"That is absolutely first and foremost, here and in the country. We won't be out of this mess until there is a bottoming out of existing and new home sales and housing starts. I think that will begin happening."
Fueling that speculation is the continuing lowering of interest rates.
"The Fed has pumped so much money into the system lowering mortgage rates there will be a massive amount of refinancing."
Florida - and especially Lee County - have been at the top of the foreclosure list since the housing market imploded. But foreclosures are not rising as quickly as they had in previous months. There were 2,217 in Lee County in March, only about 100 more than in February.
Jackson said there are positive signs in the Southwest Florida housing market.
"I have seen a number of houses sell, plus the affordability of this area has improved," Jackson said.
"It will take time, a year or a couple of years. ... I am optimistic. ... Hopefully, we can learn from it."