How is our economy doing?

[akuma587]

TheRealMafoo said:

akuma587 said:
We've already hit the bottom in terms of where the DOW is going to go. I'll break this down into three of the most important factors that reflect the health of the economy, the DOW, GDP, and the unemployment rate.

1) DOW - I think we have already hit the bottom. I don't see any facts that suggest to me we will dip back below 6,600. We do need to work on addressing the national debt very soon. But letting the economy stagnant could have potentially caused the debt to sore even higher if we had sunk into another depression. Sometimes you have to spend money to make money.

And frankly deflationary pressures on the dollar recently have been a much bigger threat than inflationary pressures. And I find it extremely disingenuous that many of the same people who are now complaining about the national debt were the ones who were just fine with the Republicans spending like drunken sailors in Congress since 2000.

2) GDP growth. We saw a pretty sharp drop in the 4th quarter, sharper than even a lot of the grim predictions. You are going to see negative GDP growth in Q1 too, but it is hard to say whether it will be as bad as the Q4 numbers. My guess is that in relative terms they will not be. Q2 remains to be seen, but I don't think the market as a whole is as jittery as it was. I don't think they will be as grim as the Q4 numbers even if they are in the negative. My reasoning is that consumer spending has risen slightly, which is a good indicator.

3) Employment. Employment we will probably see drop some more. Its hard to say when it will stop, as employment is kind of a different animal altogether. Its the first to go down and sometimes the last to go up. We may see 10% unemployment, or maybe even 12%. But then again we might not break 9 or 9.5%. This is probably the hardest to predict. Note: We are currently at 8.5% and lost 600,000 jobs last month.

 

1. Why? What indicators give you the feeling that the DOW will not drop bellow 6,600 again? Confidence is up, but not for any real reason. Nothing has improved, only people opinion of the situation. When reality hits again, it will go down again (it's done this 3 times in the recent past, drop, clime, and drop again).
   
2. So the GDP falling slower is a sign of things getting better? No, it's a sign if things getting worse slower.
   
3. nothing currently indicates when this will stop. It's currently unpredictable. Not really arguing with you, just pointing that out.

So, two of the three factors you claim are the most important are getting worse (and no reason the 3rd won't as well), and there is no real reason at the moment to think they are going to get better.

What's your conclusion about the economy again? You forgot to give it.

1)

The banking system is in a significantly better position than it was a few months ago.  Many of the most problematic banks (Citigroup and Bank of America among others) are now posting in the green rather than in the red.  That's an extremely good sign.  The plan to deal with the trouble assets will prevent the bad blood in the market from sending us back down into the doldrums we were in a few months ago.

European countries look like they will implement some stimulus efforts as well.  This will have a spillover effect on the U.S. and help out our economy in many ways.

There are plenty of good reasons for confidence to be up compared to a few months ago.  All the above reasons and the fact that consumer spending has grown some.

2)

Yes, GDP shrinking at a slower year-to-year rate is a good indicator.  Would it be better if the drop in GDP was accelerating?  Its not realistic to expect GDP growth right now. 

3)

I agree with you that this is the hardest to predict.  I think that the injection of stimulus funds and the less dire economic news will help these numbers slow down.  Job losses are going to continue for several months, possibly the rest of the year, but in relative terms I think that you will see them start to slow down significantly.