The Complex Economy: Down Is The New Up Those who sift through economic tea leaves are looking for clues that the recession may be ebbing. But the forecast remains unclear. For every dark economic cloud, there is a silver lining. And for every silver lining, another dark cloud.
NPR logo The Complex Economy: Down Is The New Up

The Complex Economy: Down Is The New Up

When economic numbers are bad, it can be good. hide caption

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When economic numbers are bad, it can be good.

Economic news these days is like that joke about the guy who fell out of an airplane and landed in a haystack. He was wearing a parachute.

That's good! No, that's bad. His parachute didn't work.

That's bad! No, that's good! He landed in a haystack.

That's good! No, that's bad: There was a pitchfork in the hay.

And on and on.

The story of today's up-and-down economy has a similar good/bad rhythm. Only it's no joke.

For instance, the index of consumer sentiment, compiled by Reuters and the University of Michigan and released Friday, rose from 56.3 in February to 57.3 in March. That's good!

No, that's bad! The average consumer-sentiment number for the past three decades is a whopping 112. In fact, only a few months ago, the index reached a 28-year low of 55.3 in November. In other words, the last time consumers were this pessimistic, Dallas — the petrol-centric soap opera — was the top show on TV and Jimmy Carter was on his way out of office.

Dancing In Place

See how this works? It's like dancing in place, two steps forward and two steps back. Or it's like Tevye in Fiddler on the Roof, who is forever saying, "On the other hand." For every good number that appears, some bad number offsets it. And vice versa.

Richard Curtin, director of the Reuters/University of Michigan Surveys of Consumers, understands the yin-yang of the moment. "The good news is that the free fall in confidence has ended," he said, when the latest consumer confidence numbers were released. "The bad news is that consumers expect their financial situation to remain dismal for the rest of 2009."

An economics professor at the University of Maryland, John Rust, explains the phenomenon this way: "We are a huge society and there are winners and losers. Even though very many people are hurting very badly in this recession, other people are doing quite well."

While many families are feeling the pinch and are cutting back on spending, Rust says, "other families where the breadwinners have secure jobs could be actually spending more and taking advantage of the low prices of many different assets — cars, big-ticket durable goods, stocks and even toxic assets."

One Person's Foreclosure ...

New residential home sales in February were up 4.7 percent from the January rate. So that's great, right?

Wrong. Real estate prices are way down. The national median price of existing homes in February was $165,400 — a 15.5 percent drop from a year earlier, according to the National Association of Realtors. That means people are bargain-hunting and preying on the misfortune of others. That's bad.

No that's good. Like Rust says, it means the system is working. One person's foreclosure is another person's good fortune.

The price of crude oil took a dive Monday, according to the Energy Information Administration. A barrel is selling for less than $50. That's good!

No, that's bad. Oil prices had been rising in recent weeks on the belief that economic activity might be picking up again. The price of oil has become just another indicator: If it's down, things must be getting worse. If it's up, well then things might be getting better.

The bad news: The Bureau of Economic Analysis recently reported that personal income was down 0.2 percent in February. The good news: Personal spending was up 0.2 percent. Go figure.

Meanwhile, the granddaddy of all teeter-totter indicators, the stock market, was in free fall on Monday, losing several hundred points. That's terrible, right?

Not for people who have cash and are looking for undervalued stocks, savvy brokers say. But to find economic solace in that is to be grasping at straws. And that's bad.

No, that's good. The price of straw is one thing that doesn't change much year to year, says Neil Tietz, editor of Hay & Forage Grower magazine. "There's always plenty of it out there."