There's Good Economic News From Consumers -- Does It Matter If It's Based on Reading Mood Rings and Tea Leaves?

AN ONGOING BUZZFLASH SERIES ON THE GOP ECONOMIC WAR AGAINST AMERICAN WORKING FAMILIES
by Christine Bowman

The improved mood of American consumers that pollsters are reporting today may be more faith-based than reality-based, but why quibble if the people's mood can still rally the stock market by nearly 200 points? Despite a belief in some quarters in "rational markets," it does seem that most of the hard and fast evidence about early 2009 weighs in on the opposite side of the scales -- the bad news side, that is. But don't look a good-mood horse in the mouth. Let's just accept any positive trend and try to keep it going, America. We might even stem the tide of suicides by taking a more optimistic economic view.

Even though the month of May is winding down with a lot of negative economic numbers, consumer confidence has shot up. Go figure. Maybe Americans just can't find it in their can-do personality to stay gloomy forever. Or maybe nobody born since the Great Depression can bring themselves to believe something that bad could be happening again, and to them.

Whatever the underlying reason, Bloomberg reports today: "Consumer Confidence Jumps by Most in Six Years -- Confidence among U.S. consumers jumped in May by the most in six years, fueling speculation the economy will recover later this year. The Conference Board’s sentiment index surged to 54.9, higher than forecast, according to figures from the New York-based research group today ..."

Confidence is good, but it may have to be tempered with patience. As an analyst quoted in another Bloomberg article comments, "History suggests that ... perception of the economy starts to improve long before we see actual economic improvement." In other words, attitudes have improved in advance of real finances in previous instances of downturns.

When consumers feel good, investors tend to follow suit with some optimism of their own. Yes, one good mood can lead to another. This from Bloomberg today: "U.S. stocks rallied, sending benchmark indexes higher for the first time in five days, as the biggest jump in consumer confidence since 2003 spurred optimism the worst of the recession is over."

That's the subjective, feel-good part of today's story. Maybe it's a trend, maybe the people do know best. But what's the rest of the economic news?

We can look at the latest jobs numbers. Over at Forbes, the headline is "The Jobless Recovery." The economic forecasters they cite predict that, even as business seems likely to begin to pick up soon, unemployment will remain at 8-10% until 2011 or 2012. Reuters, too, offers a discouraging view of the unemployment outlook in their report, "Falling profits mean more job loss." Although companies did exceed forecasts for the first quarter of 2009, their actual earnings nevertheless were down nearly 36 percent from a year earlier, and 2.1 million jobs were shed in the first three months of 2009.

Reuters also reported a gloomy job outlook last week. They noted that lost auto making and construction jobs will not be coming back, at least not anytime soon.

How about home values? Should the middle and wealthier classes feel good about "home sweet home"? Not really. The Associated Press reports that home prices dropped in the first quarter by 19.1%, and homes have lost almost 33% of their value from their peak in 2006. Home prices now match 2002 levels, which means most people who bought in the last seven years have a house that's worth less now than they had to pay for it. Not a problem, however, for homeowners who still have their jobs, and can afford to make their payments, and who weren't hoping to move anytime soon. Bargains to be had, for those solvent and brave enough to explore the foreclosed market.

How about construction? Is it starting to come back? Bloomberg says the number of expected "2009 building starts will total about 496,000 homes, the lowest since the end of World War II in 1945 ..." That will hurt many retailers (think Home Depot) as well as contractors and carpenters and countless others for the foreseeable future. Green jobs and stimulus spending coming down the pike might take some of the sting out of it, for those who are adaptable.

What about consumer prices? Gasoline prices are again creeping up, but they're still well below last summer's shocking levels. The Wall Street Journal's headline, "Crude Closes at New 2009 High," shows that the long-term prospects for cheap fuel remain poor. That fact, however, doesn't qualify as news to most Americans.

The Wall Street Journal also reports on the healthcare side of things, a big financial concern for most Americans. "About 10% of small businesses are considering eliminating [healthcare] coverage over the next year, up from 3% in 2005, according to a recent survey by National Small Business Association ... with just 38% of small businesses providing health insurance last year compared to 61% in 1993 ..." Bad news, then, for both business owners and workers. Does anyone think healthcare reform can happen fast enough for those in need of it?

Reuters reports that consumers do expect to start buying more cars again this year, but not many houses. They sum it up the mixed bag of indicators this way:

The data was in line with other evidence suggesting that, while the economy continues to contract in the current quarter, the pace of deterioration has abated.

"The moderation in the rate of decline in economic activity has raised hopes that an actual improvement will take hold in coming months," said Mark Vitner, senior economist at Wachovia. "But there has been little tangible improvement so far. Conditions have merely been not as bad as they had been in previous months."

in a similar vein, DailyFinance.com concludes: " ... three months ago, in February, consumer confidence was at an all-time low around 25, so the attitude trend is positive; if demand increases and job losses slow in the months ahead, look for economists to flesh-out that U.S. economic recovery timetable."

Can Americans will a recovery into being if they stay positive, carry on, and scale back without shutting down? Can the optimistic leadership of everyday people turn the tide?

American workers, business people, and consumers are an undeniably formidable force in the world. Now we are learning also that they like to see the economic indicator glass as half full.

We'll soon see if the people's positive mood can keep on spreading, and if the engines of government and big business can gear up to solidify rather than reverse the incremental progress that has begun.

THE GOP ECONOMIC WAR AGAINST AMERICAN WORKING FAMILIES