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Economic Recovery

Poll Today, Gone Tomorrow

The latest employment numbers continue to show significant improvement in the economy. Granted, the recent numbers have been a jumbled mess due to Easter and the Census. But if you look below the misleading headlines and campaign speeches, you will find significant improvement.

It looks like the private sector produced 123,000 jobs in March and 60% of all reporting industries indicated job growth. I think it is now safe to say the economy is growing again and the recession did indeed end in July or August of last year. We have turned a corner and the immediate future is looking better.

Granted, the picture is not completely rosy. Those unemployed less than 26 weeks are likely to get recalled to work. However, those unemployed for more than 26 weeks due to a plant closure will probably remain unemployed for a significant amount of time. 

Moderate GDP growth of 2 to 3 % for 2010 and 2011 is definitely on tap.

One thing to watch out for is the impact of a growing economy on the fall elections. Republicans have partially enjoyed relative strength on most generic polls due to the problems in the economy. As the economy begins to expand, democratic candidates in communities with less structural unemployment (i.e. areas without significant plant closures) will be able to point to the improvement in the economy and make the case that their policies are working.

A key to successfully interpreting research is to realize that polling and market research is a snapshot of today, not tomorrow. When assessing the results of any project, you have to include other inputs and information (such as economic data) to really understand what is happening and most importantly what you will face tomorrow or in November.

Postive Economic Signs Ahead

Looks like the economic turn has started. Here are a few signs that July may be the turning point.

First, owners of small businesses say they see signs of economic improvement. The Discover Small Business Watch, the card company's monthly survey, found that 30% of small businesses believe the economy is getting better, up from 26% a month earlier.

Second, the “clunker credit” has done more for auto sales than I think anyone expected. Who knew that the program would be this effective at wiping out excess auto inventories?

Third, while we are facing a jobless recovery, it looks like the continuing losses are beginning to ameliorate. More people are being recalled to work and we should start seeing lower new claims for unemployment in the next few weeks.

I’m guessing that we will see positive 3rd quarter economic growth. The clunker program virtually confirms positive news. It looks like we can mark July or August as the inflection point for recovery.

I do have a feeling that this will be one of the weakest recoveries in history. Employers will squeeze out significant productivity gains (read longer work hours) and try to hold down wages ( read continued losses in personal income) to bolster improved profits. The economy is about to grow, just a slower than we all would like.