Mixed Signals On The Economic Recovery

Between company reports and economic data, we're getting some mixed signals about whether we're in a recovery. Wall Street seems to be pleased with the earnings reports that are coming out; many have been accompanied by optimistic forecasts about sales and profits. But there is still lingering doubt about whether the good news will stick.

Copyright © 2009 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

LINDA WERTHEIMER, host:

This is MORNING EDITION from NPR News. I'm Linda Wertheimer.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

Good morning. Renee Montagne is in Afghanistan.

Those looking for signs that the recession might be ending have mixed signals at best. Stocks are climbing on Wall Street. A survey released yesterday also said that existing home sales are up for the third straight month. Unemployment numbers, though, still look bad. The Labor Department said, yesterday, that jobless claims rose last week. So, where's that leave us?

Here is NPR's Yuki Noguchi.

YUKI NOGUCHI: The Dow Jones Industrial Average, yesterday, crossed the 9000 point mark, and that altitude left some CNBC anchors as breathless as a Tour De France biker.

(Soundbite of newscast)

Unidentified Woman: The market's in full rally mode, as better than expected earnings helped send the Dow above 9000 for the first time since January.

NOGUCHI: Ford reported its first profit in over a year, AT&T's profits beat expectations on the strength of its wireless business, and all that comes on the heels of some very high profit reports out of the banking sector over the last week. But will it stick? And is the market's uptake a good measure of a recovery overall?

Mr. BART NARTER (Senior Vice President, Celent): It's a good news, bad news situation.

NOGUCHI: Bart Narter is a senior vice president of the financial consultancy, Celent.

Mr. NARTER: If you happen to be employed, it's good news for the banks in that you're stocking your money away and putting it in the bank, you're not putting it into Wall Street. But, if you don't happen to have a job or if you happen to own a house that's way under water, you're defaulting on your loans.

NOGUCHI: And indeed, some of the reports coming out late in the day reflected that darker underbelly of some corporate earnings. American Express and Capital One both reported more customers aren't paying their bills. Each company had to write down about 10 percent of their credit card loans. Earlier in the week, Wells Fargo posted record profits but also said more than 11 and-a-half percent of its credit card payments would not be collected. Narter says the sweeping beast lies in the bad loans yet to come.

Mr. NARTER: I don't feel good about it. I don't think, fundamentally, you know, we can have a sound economy when we have 10 percent unemployment.

NOGUCHI: Deutsche Bank's Senior Economist Thorstein Flock says there's another reason it's difficult to assess where the economy is today.

Mr. THORSTEIN FLOCK (Senior Economist, Deutsche Bank): The big discussion is, what is the new normal? What does the world look like on the other side of this crisis?

NOGUCHI: Flock says the economy won't look or behave the way it did prior to the crisis, so it's hard to gauge what to expect. Take the airlines for example. It's not clear how many people will fly, and therefore, how many planes to order or how many pilots to keep on staff. Flock notes that this last quarter, a significant number of companies managed to boost profits by simply cutting their costs. But the measure of a true recovery comes only when consumers start spending again. There, he says, the critical thing to watch is home prices.

Mr. FLOCK: Consumers continue to be under some pressure, in particular environment where one very important asset on the consumer balance sheet, namely home prices, are still declining. So that's why a bottom in the housing market continues to be the key to the economic recovery.

NOGUCHI: Home sales have started to bounce back, but overall, Flock says that with foreclosure still on the pipeline the bottom in home prices won't be coming for another six to nine months. And that is why many economists say they'll wait a while longer to bust out the champagne and party hats.

Yuki Noguchi, NPR News.

Copyright © 2009 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.