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Last year at about this time the word "recovery" was on everyone's lips. This year, not so much. The lesson has been learned, it seems. The pattern of late 2010 to mid-2011 was a cruel lesson of dashed hopes. Financial firms were looking stronger; corporate profits were rising. Hiring was building momentum.
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By late spring, however, hiring was losing traction. Gains in the manufacturing sector, it turns out, were a reflection of how bad things had gotten; it was not growth so much as gasping for breath -- inhaling after having the wind knocked out of the economy by a sudden body-blow.
Talk about once bitten, twice shy.
This year's hiring binge, right on time, began in the fall and still looks relatively healthy. The number of first-time unemployment benefit claims fell this week to 359,000, a four-year low. The unemployment rate has dropped since August, from 9.1 percent to 8.3 percent. That is nothing to scoff at. Those are solid numbers.
Or are they? Home prices, down nine consecutive months, are 34 percent below their April 2006 peak as of January. Manufacturing, which was on a roll due to encouraging sales during the holiday season, suddenly looks lethargic again.
Worse, it turns out much of what looks like gains in employment is made up of people dropping out of the labor market, rather than those who have found a job. The pace of manufacturing growth slowed in January across the country.
The holiday binge, at this point, looks to be stalling and stocks are reflecting the sudden shift. On Wall Street, it feels as if someone left the door open and a cold breeze is sifting through, tapping investors on the shoulder. The Dow Jones industrial average made a stunning breakthrough in late February, hitting 13,000 points for the first time since 2008. Now it looks like it will be doing so again. That is to say, it's poised to hit 13,000 again, but this time on its way down.
It's time to look at what's really not fixed, after all. Just as China relies too much on its export-oriented economy, in the United States the opposite is true. Our red, white and blue eyes are bigger than our stomach. A trade deficit of $48 billion a month says it all. Here, we rely too little on our exports and too much on domestic demand.
Yes, this is a poor time to bring this up. As the financial crisis in Europe continues, the U.S. recovery in exports is hurt in two critical ways. First, Europe is not exactly in a spending mood. Secondly, with the euro weak, the dollar is relatively strong, which makes U.S. exports more expensive abroad.
With figures out this week, the Organization of Economic Cooperation and Development signaled Britain may have already begun a double-dip recession. In Copenhagen Friday, financial ministers from Europe will hear a rundown on the economic situation in Spain. After that, they will, more than likely, pass around the aspirin. Here's what everyone agrees on: The mess is not over yet.
In international markets Friday, the Nikkei 225 index in Japan slipped 0.31 percent while the Shanghai composite index in China added 0.47 percent. The Hang Seng index in Hong Kong lost 0.26 percent while the Sensex in India rose 2.03 percent.
The S&P/ASX 200 in Australia was flat, off 0.06 percent.
In midday trading in Europe, the FTSE 100 index in Britain climbed 0.57 percent while the DAX 30 in Germany gained 0.91 percent. The CAC 40 in France rose 1.2 percent while the Stoxx Europe 600 gained 0.87 percent.
