Are We There Yet?

Are We There Yet?

Identifying turning points in the economy is crucial for economists. Since producers can't make operational decisions in a vacuum, they rely on economic data to help determine whether they should increase production, deploy new capital and/or hire workers. At the earliest stages of a recovery (or downturn), this can be especially difficult to pull off when key economic indicators are sending mixed signals. Moreover, making the call on where the economy is headed based on a few data points can lead you in the completely wrong direction.

Unfortunately, it appears some analysts are doing just that, as better-than-expected readings on a handful of indicators (e.g., factory orders and home sales), not to mention a healthy rally in equity markets, have some marking this as the beginning of an economic recovery. Uh, not so fast. This morning's print on the labor market, in addition to the looming threat of the commercial real estate sector sinking into a deep recession, and the credit markets proving difficult to thaw, offer up a sobering reminder of how tenuous conditions are and highlight the risk that the U.S. economy will remain under significant stress going forward.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.