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Friday, July 3, 2009

More Economists Point to Recovery Signs

On June 1 we pointed to three clear markers that signified the beginning of US economic recovery. As we enter July more and more economists are also reflecting on the signs that the US economy as a whole is returning to growth.

On Tuesday, Rebecca Wilder in her excellent blog "News N Economics," reflected, "The labor market is almost surely the key to this recovery." She goes on to illustrate the "lagging peak" in initial jobless claims and it's correlation to the end of the recession. Robert Gordon published that back in April and we also pointed to his article in early May. Gordon's striking association between a GDP contraction trough and the final peak in unemployment claims for a recessionary cycle seems increasingly likely at this point in history as well.

Wilder highlights more encouraging signs: "once claims do peak, they tend to fall rather quickly. Therefore, history suggests that [jobless] claims should start to drop off sharply in the second half of 2009 (coming months)."

On Wednesday, James D. Hamilton (Professor of Economics at the University of California, San Diego) examines an excellent paper by James C. Morley, Associate Professor, at the University of Washington. Summarizing the Morley paper, Hamilton notes in his Econbrowser blog that "often a sharp economic downturn is followed by an equally sharp economic recovery." Hamilton continues, "So why would anyone predict anything other than a robust rebound? Will we see a robust recovery? I can't rule it out."

And on Wednesday we heard what was likely the most positive news from Scott Grannis reporting on corporate layoffs. Scott observes that "layoffs have all but vanished." Layoff levels are essentially back to those observed during the growth years of 2004-2007.

Meanwhile the beginnings of recovery in real estate continued this week. "Lower mortgage rates are helping to support the housing market," said Freddie Mac Chief Economist Frank Nothaft. "The 30-year fixed-rate mortgage rate peaked this year over the week of June 11 and is now around a quarter-of-a-percentage point lower this week." The Mortgage Bankers Association reported an increase in mortgage applications even though refinancing activity is at its lowest level since last fall. That means that significantly more applications are now being originated for home sales.

That trend was further corroborated by the National Association of Realtors who reported a modest rise in pending sales of existing homes last month. Pending home sales now show a sustained uptrend, rising for four consecutive months through May.

And as we noted earlier in the week, commercial real estate sales are also showing renewed signs of life.

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