Let's try some optimism

With all the bad news lately I thought I would try to put in a positive spin every once in a while. Today I was reading an article by Brian Wesbury and Robert Stein from First Trust Portfolios. The National Bureau of Economic Research is the United States' semi official recession arbiter. According to the NBER our current recession began in December of 2007. Mr. Wesbury and Mr. Stein argue that since real GDP grew at 1% from then through August 2008 the recession couldn't have started then.

When Lehman Brothers collapsed and the first $700B bailout was proposed panic ensued. Consumer spending dropped off the face of the earth and the economy shrank at a rate of 5.5%. According to their logic we've only been in an official recession since September of last year.
So how do we know when the recession is coming to an end? One of the best early indicators is new claims for unemployment which usually peaks one or two months before the economy bottoms out. According to current data that peak appears to have happened in March at 658,000 compared to 635,000 in April.

Another good indicator is consumer spending which is one of the major causes of our current recession. Consumer spending grew 2.2% for the first quarter of this year and it appears that it will grow in Q2 as well. At the same time, both measures of consumer confidence shot up in April.

The housing market is starting to show very small signs of life. New home sales bottomed in January at a 331,000 annual rate. In February and March sales averaged 357,000. Excess inventories are starting to shrink and Wesbury and Stein believe a bottom has been reached in housing sales and starts.

According to their data we should see an end to this recession in the third quarter of this year. The recovery will be long and slow, due mainly to the amount of government spending that we are going to have to start paying for.

At this point I'll take any signs of positive growth. Hopefully things will start to turn in the right direction and the panic that has dictated much of the current recession will subside.