by Marjorie Steele, Editor for IQS
It seems to me that getting the economy to recover is a little like trying to fly with fairy dust. Fairy dust doesn't work unless you belive in it; close your eyes, jump on the bed, imagine yourself flying out the window and poof! You're in the air. Of course, there's always the risk that you will end up on the floor instead.
Rather like when former President Bush attempted to rally Americans to go shopping during 2008's holiday season. If Americans would spend their last nickels and dimes – if they just BELIEVE in the economy – it would right itself. Unpleasantly reminiscent of Reagan's "trickle down" economics, Bush's call went largely unanswered; underemployed consumers stayed home, businesses slashed jobs, clients cut orders and executives stopped marketing campaigns. Whether it was the fault of consumers not spending or of corporations spending irresponsibly, unemployment skyrocketed, Wall Street bellied up and the auto industry toppled. During spring's harshest season of job losses, having faith in our economic system seemed absurd.
As the recession has worn on, businesspeople have become increasingly skeptical of "good" news. Most have not been willing to trust in occasional spikes in the manufacturing index or consumer market at the cost of precious dollars and scarce optimism – and understandably. "[I]s it insane to hold off on optimism when you're not sure whether another customer could bite the dust?" asks bag manufacturer Kevin Kelly in a May Newsweek Web Exclusive.
The economy can do a lot in two months, however, and the early signs and tentative predictions of improvement that were made earlier this spring have held steady. Economic reports from July confirm that although the job market probably won't bottom out until mid 2010, the recession is indeed coming to a close.
The ISM manufacturing index for July indicates manufacturing may be out of the red by the end of the month: July's index was 48.9, a full 5 points up from June and 1.1 points away from indicating positive economic growth. Confirming this market trend is a recent Reuters survey finding "large US industrial manufacturers are far more optimistic about domestic and global economics than they were three months ago". 43% of respondents indicated they were optimistic about this upcoming year's economy, a huge rise since last quarter's poll. More respondents also indicated plans for new hires, new investments and business expansions than in previous recession polls. A large number of manufacturing industries saw positive growth last month, among which were mineral products, paper and printing products, transportation equipment and appliances.
Area Development Online and Bloomberg.com report an unexpected decline in July's unemployment rates. Job losses slowed from an unemployment rate of 9.5% in June to 9.4% in July, marking the smallest number of monthly jobs lost since August 2008, far below what had been predicted. With 6.7 million total jobs lost since the recession's beginning in late 2007, this bit of progress is dearly bought, and between continuing layoffs from Boeing, Verizon and others, we probably haven't seen the end of job cuts yet. Just like the slow in manufacturing decline we saw in April, this slow in unemployment is not final – but it's a healthy indicator.
"The basic message," The New York Times quoted IHS Global Insight chief economist, "is that the rate of job cuts is diminishing, and that's good news." President Obama's stimulus packages are predicted to begin making a significant impact in unemployment in 2010, with many thousands of jobs having been already saved by green energy manufacturing initiatives.
Undoubtedly, realistic thinking and hard-headed business have kept many business and jobs afloat during the past 18 months. But could it be time to let skepticism go? Our recovering economy needs all the support it can get, and some confidence from manufacturers – pillars of the U.S. economy – may go a long way in speeding that recovery.