The Economy Has To Be Getting Better, Doesn't It?
RENEE MONTAGNE, host:
Federal Reserve Chairman Ben Bernanke says he sees some - I'm quoting him now here - green shoots in the economy. Another top White House economic advisor, Larry Summers, also says he spotted sprouts of green. To find out if it is spring time for the economy, we turn to David Wessel, economics editor of The Wall Street Journal. Good morning, David.
Mr. DAVID WESSEL (Wall Street Journal): Good morning, Renee.
MONTAGNE: Do you hear any birds tweeting behind your - over your shoulder? What would you make of this positive gardening rhetoric?
Mr. WESSEL: I think what Mr. Bernanke and Mr. Summers are saying is that after a period of relentlessly bad news a few months ago, where the economy seemed to be in a free fall, the news is not as bad as it was before and there are some signs of things leveling off. We think the first quarter economy shrank at a rate of five or six percent at an annual rate, and now they think the economy might shrink only two percent in the current quarter. So it's kind of like that Nancy Sinatra song, we've been down so long, it looks like up.
(Soundbite of laughter)
MONTAGNE: Well, and what are the things - you're talking about shrinking, but what are the things that they see coming up, the green shoots and sprouts of green?
Mr. WESSEL: Oh, well, I want to make clear that I don't think they're wildly optimistic, but they see things like consumer spending seems to have stopped falling, and so has consumer confidence. Car sales were up a little bit in March, and that was the first time in four months. With low mortgage rates, sales of existing homes have turned up. There's some signs that factories are beginning to see an upturn in orders, and, of course, there's the fact that the stock market is up 20 percent or so in the last four weeks.
MONTAGNE: Well, one other thing that has been up is the unemployment rate, already to 8.5 percent. It doesn't seem to be spring time for a lot of American workers.
Mr. WESSEL: No, it isn't. The job market remains very weak. One of the early warning indicators is the number of people who filed new claims for unemployment benefits, and that's been running at the highest level since 1982, which was a very deep recession, and that's not a good sign. But we know that the job market often continues to deteriorate even after the economy stops contracting and starts growing again, so it doesn't mean that things aren't getting better, but it does mean that for a lot of workers it still is awful out there.
MONTAGNE: Well, how will we know if the recession is ending?
Mr. WESSEL: Well, that's a good question. You know, you really only know in hindsight. At the time when the recession is bumping along the bottom, we see lots of mixed signals, and that's what we are seeing now. We know that the recession is already at 17 months, the longest since World War II, and we know that economic forecasters, whose record is a little spotty, or very spotty, say we could have another six months before it's over, before the economy's growing again. And even then, they tell us that we should expect prolonged period of painfully slow growth, so slow that the unemployment rate might keep rising.
MONTAGNE: You know, David, after all the surprises and virtually all of the bad over the past year and a half, what makes anyone so sure the economy will turn up even later this year?
Mr. WESSEL: Well, some of it is a kind of innate optimism that at some point, the U.S. economy is so resilient, that it'll bounce back. Larry Summers, for instance, points out that it takes about 14 million car sales to replace cars that are wearing out or breaking down usually, and we're only selling nine million cars at an annual rate now. So eventually, people will stop buying cars. Eventually, with companies selling more stuff than they're producing now, inventories will run down and things will stop - start buying. And, of course, we know that a lot of the government stimulus - the tax cuts, the big government spending that President Obama pushed soon after taking office…
Mr. WESSEL: …is only now beginning to show up in people's paychecks.
MONTAGNE: Well, David, thanks as always for joining us.
Mr. WESSEL: A pleasure. Thank you, Renee.
MONTAGNE: David Wessel is economics editor of The Wall Street Journal.
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