Economic Outlook: Confidence first

By ANTHONY HALL, United Press International  |  Dec. 24, 2010 at 9:09 AM
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It's the darnedest thing, but some economists say the U.S. economy is in some kind of recovery.

That may be hard to believe and for anyone unemployed, the concept may be as remote as a winning lottery ticket. Unemployed at Christmas is no recovery no matter how far you stretch the definition.

Further, the unemployment rate ticked higher in November, climbing from 9.6 percent to 9.8 percent -- even with jobs added to the economy. In part, when the economy improves those who have stopped looking for work start again, skewing the statistics. (Put another way, the unemployment rate is artificially low because it stops counting those who have given up.)

But consumer confidence, oddly, is showing gains. That's a strange fundamental, granted: How much is confidence worth? Retailers can tell you confidence is worth its weight in gold, especially near the holidays with sales beating expectations.

Disposable income has risen, as have incomes, and savings fell in October, the Bureau of Economic Analysis said Thursday. Confidence might be measured, for example in personal savings falling from $622.8 billion in September to $614.8 billion in October. When people are scared, they save. When they are not, they spend.

The jury is still out on the U.S. Federal Reserve's $600 billion bond purchasing program, which raised the level of criticism to a din not only in Washington but around the world. The stuttering recovery that looked solid in the early part of the year needed a push, or appeared to. The Fed gave it one, continuing its full-tilt reaction to the downturn.

"The policy response, in its totality, has been very aggressive and I think ensures that the recovery will evolve into a self-sustaining expansion early in 2011," said Mark Zandi of Moody's, a frequently quoted oracle of all things economic.

So far, of course, this has been a recovery that shows a toddler must walk before he can run, which puts hiring near the end of a train of events that must occur first. Consumers are confident, so why not corporations? Good question.

Phillip Swagel, the Treasury Department's chief economist during the George W. Bush years told The New York Times, "The recovery in 2011 will be strong enough for us to see sustained job creation that will finally give Americans a tangible sense of an improving economy."

That's what's needed: Confidence with a floor under it.

In international markets Friday, the Nikkei 225 in Japan lost 0.65 percent, while the Shanghai composite index in China fell 0.7 percent. The Hang Seng index in Hong Kong lost 0.2 percent while the Sensex in India rose 0.45 percent.

Australia's S&P/ASX 200 was off 0.5 percent.

In Europe the London FTSE 100 index was 0.1 percent lower and the CAC-40 in Paris was down 0.3 percent. Frankfurt was closed.

U.S. markets also were closed.

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